Caldera v. The Insurance Company Of The State Of Pennsylvania
ORDER DISMISSING CLAIMS FOR WANT OF JURISDICTION re 5 .(Signed by Judge Nelva Gonzales Ramos) Parties notified.(amireles, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
§ CIVIL ACTION NO. C-11-321
THE INSURANCE COMPANY OF THE §
STATE OF PENNSYLVANIA,
ORDER DISMISSING CLAIMS FOR WANT OF JURISDICTION
Before the Court is “Defendant’s Motion to Dismiss for Want of Subject Matter
Jurisdiction, Failure to Join a Required Party and Failure to State a Claim upon Which
Relief Can Be Granted” (D.E. 5). For the reasons set forth below, the Motion (D.E. 5) is
This case involves a workers compensation claim for Plaintiff Guadalupe
Caldera’s (Caldera’s) back injury that occurred in 1995. Defendant Insurance Company
of the State of Pennsylvania (ICSP) originally paid some benefits pursuant to Texas law
based upon Caldera’s compensable injury and impairment rating. Still suffering from the
injury in 1998, Caldera applied for and received Social Security Disability benefits. In
2002, ICSP denied additional medical benefits to Caldera by filing a TWCC-21 with the
Texas Workers Compensation Commission (TWCC)1 claiming that the covered injury
had resolved and any new medical issues were not related.
Now known as Texas Department of Insurance, Division of Workers’ Compensation.
Caldera, while being given notice and an opportunity to further pursue his claims,
chose not to appeal that determination and his continuing medical expenses were instead
paid by Medicare. In 2005 and 2006, Caldera required back surgery and Medicare paid
for those procedures in amounts totaling $42,637.41. On April 12, 2011, the parties
entered into an Agreed Judgment (D.E. 9-2) in state court holding that the condition
requiring back surgery was, in fact, related to the initial 1995 workers compensation
injury. While this established ICSP’s responsibility for medical expenses required to
treat the injury, it did not liquidate any damages or require any payment.
There has been no determination that all or part of the $42,637.41 that Caldera
incurred and that Medicare paid were expenses properly owed by ICSP. ICSP denies any
liability for those charges because Caldera failed to comply with preauthorization
requirements and did not timely submit his medical bills for payment. The parties agree
that the time for doing so has long since passed and there is no longer any administrative
remedy available to require ICSP to pay.
THE QUESTION PRESENTED
Caldera filed this suit for a declaratory judgment pursuant to 28 U.S.C. § 2201 and
Fed. R. Civ. P. 57 to obtain a judgment that ICSP is liable for the full amount Medicare
paid on his behalf. A federal declaratory judgment may be issued “In a case of actual
controversy within [the Court’s] jurisdiction . . . .” 28 U.S.C. § 2201(a). The Fifth
Circuit has made it clear that, “In a declaratory judgment action, the court must determine
if there would be grounds for federal jurisdiction over a hypothetical suit that would have
been brought absent the availability of declaratory relief.” Volvo Trucks N. America, Inc.
v. Crescent Ford Truck Sales, Inc., No. 09-30782, ___ F.3d ___, 2012 WL 19804, *5 (5th
Cir. January 5, 2012) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 67274, 70 S.Ct. 876, 876 (1950)).
Caldera asserts that federal question jurisdiction underlies the declaratory
judgment action pursuant to 42 U.S.C. § 1395y(b), the Medicare Secondary Payer Act
(MSP). 28 U.S.C. § 1331. ICSP has filed its motion to dismiss, in part, stating that the
pleadings do not, and cannot, state a proper MSP claim because Caldera did not exhaust
his administrative remedies. While conceding, as he must, that he did not exhaust his
administrative remedies, Caldera claims that the MSP preempts the unexhausted
remedies, thus conferring jurisdiction. This ambitious theory presents an issue of first
THE MSP REQUIREMENTS
Caldera is entitled to bring an MSP claim as a private cause of action if he can
prove the MSP requirements set out in 42 U.S.C. § 1395y(b)(1) and (b)(2)(A). 42 U.S.C.
§ 1395y(b)(3)(A). Subsection (b)(1) requires group health plans to cover employees
equally and is not at issue here. Subsection (b)(2)(A) provides that payment under the
instant subchapter (Subchapter XVIII: Health Insurance for the Aged and Disabled) can
only be made with respect to services to the extent that “payment has been made or can
reasonably be expected to be made under a workmen’s compensation law or plan of the
United States or a State . . . .” 42 U.S.C. § 1395y(b)(2)(A)(ii) (emphasis added). Where
such a charge qualifies, the Secretary of Health and Human Resources (Medicare) has the
authority to make a “conditional payment” and seek reimbursement.
42 U.S.C. §
ICSP argues that Medicare did not make a “conditional payment” subject to
reimbursement in this case because no payment “had been made or could reasonably
expect to be made” under the Texas workers’ compensation law.
42 U.S.C. §
1395y(b)(2)(B)(i). As the argument continues, no payment was made voluntarily and no
payment could be expected to be made until, at the conclusion of the workers
compensation administrative remedies, ICSP’s objections were overruled and it was
ordered to pay.
The MSP addresses the way in which claimants may show that a payment may
reasonably be expected to be made.
According to 42 U.S.C. § 1395y(b)(2)(B)(ii),
responsibility for such payment may be demonstrated by a
judgment, a payment conditioned upon the recipient's
compromise, waiver, or release (whether or not there is a
determination or admission of liability) of payment for items
or services included in a claim against the primary plan or the
primary plan's insured, or by other means.”
(emphasis added). Caldera argues that “by other means” includes demonstrating that
ICSP has conceded responsibility for the injury, has an obligation to pay medical
expenses for Caldera’s lifetime, and the amount paid by Medicare, which was only paid
because it was reasonable and necessary, is sufficient to liquidate the claim. Thus,
Caldera argues, liquidating the claim through the workers compensation system is
superfluous or so conflicts with the MSP that the requirement must be preempted.
Caldera makes an interesting argument that finding the injury to be compensable is
sufficient indication of a reasonable expectation that payment will be made, even without
liquidating the amount. He points to the choice of words in the statute: it requires a
finding that the primary payer is “responsible,” which, he argues, is not the same as
finding the primary payer “liable.”
He argues that, once the claim is found to be
compensable, the claimant’s burden of demonstrating “responsibility” is met—and the
amount is determined by what Medicare has paid.
As an excuse for his untimely
liquidation of the claim under Texas workers compensation law, Caldera argues that the
duration of ICSP’s “responsibility” is for Caldera’s entire lifetime. Tex. Labor Code §
In other words, according to Caldera, the judgment of compensability is the “other
means” for proving responsibility for payment. See 42 U.S.C. § 1395y(b)(2)(B)(ii). At
the hearing, counsel suggested that the compensability determination authorized Caldera
to don the “gorilla suit” of Medicare to then go and collect from ICSP the full amount
that Medicare had paid because Medicare had already determined that the amount was
reasonable and necessary. In this regard, Caldera relies on United States v. Baxter
Internat’l, Inc., 345 F.3d 866 (11th Cir. 2003), cert. denied, 542 U.S. 946, 124 S.Ct. 2907
In Baxter, manufacturers of breast implants entered into a settlement agreement
that included payment of an amount intended to compensate for at least some of the
medical expenses incurred by claimants. Because some of those expenses had already
been paid by Medicare, Medicare intervened. The manufacturers professed ignorance of
Medicare’s interest in defending against its subrogation claim. The trial court ruled in
favor of the settling manufacturers.
The Eleventh Circuit reversed, holding that
Medicare’s claim adequately pled actual or constructive knowledge of its subrogation
Baxter, supra at 900-01.
Thus Medicare would be permitted to seek
reimbursement of medical payments made from the settlement proceeds through its
timely filed interpleader.
According to Caldera, Baxter stands for the proposition that ICSP’s actual or
constructive knowledge of the payments made by Medicare is sufficient to satisfy the
necessary “utility” review of what amounts are recoverable after “responsibility” was
conceded in the Agreed Judgment. While this is an impressively creative argument, it
overlooks an important premise in Baxter:
that the tortfeasor had entered into a
settlement whereby it agreed to pay damages and the allocation of those damages
between plaintiffs and Medicare as subrogee was not yet barred by limitations.
While ICSP has agreed that Caldera’s injury is compensable, it has not agreed to
pay any damages (medical or otherwise) as a result. It is further undisputed that the
opportunity to liquidate those damages is barred by limitations. ICSP is not a tortfeasor.
Its liability for payment of medical expenses (specified or generalized) has not been
conceded in settlement but must be determined by workers compensation law and the
terms of coverage, which include the preauthorization requirement and the timely
submission of medical bills.
Medicare’s statutory obligation to pay only those medical expenses that are
reasonable and necessary is not necessarily equivalent to medical expenses that are
preauthorized, timely submitted for ICSP’s review, and payable pursuant to the workers
compensation system. Because of Medicare’s determination of the amount, Caldera
argues that he only needs to prove ICSP’s “responsibility” (as opposed to “liability”), and
that “responsibility” is equivalent to a “compensable injury.” However, it takes the
convergence of “compensable injury” as applied to ICSP’s liability and “covered
amounts” as applied to ICSP’s liability to get to the type of “responsibility” that is
demonstrated by a judgment, settlement, or “other means.”
The statutory reference to “other means” does not open up the liability of ICSP to
a free-for-all of legal theories. One of the traditional canons of construction, noscitur a
sociis,2 dictates that words grouped in a list should be given related meanings. Dole v.
United Steelworkers of America, 494 U.S. 26, 36, 110 S.Ct. 929, 108 L.Ed.2d 23 (1990).
Under the doctrine of noscitur a sociis, the court “avoid[s] ascribing to one word a
meaning so broad that it is inconsistent with its accompanying words, thus giving
unintended breadth to the Acts of Congress.” Gustafson v. Alloyd Co., 513 U.S. 561,
575, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995) (internal citations and quotations omitted).
Any “other means” for demonstrating ICSP’s liability to pay must involve an
enforceable obligation such as a judgment or settlement. A theory of liability that has not
been pursued before imposing MSP collection provisions does not qualify as “other
means.” This is confirmed by another case out of the Eleventh Circuit as well as Fifth
“A word is known by the company it keeps.” In re Hickman, 260 F.3d 400, 403 (5th Cir. 2001).
Circuit precedent. The Eleventh Circuit, after the Baxter case, dismissed an MSP claim
because the alleged primary payer’s liability was not already liquidated.
Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006) (per curiam).
The Glover opinion stated compelling reasons for refusing to allow litigants to
liquidate the claim in the course of the MSP action. Those reasons include: (1) that
Congress could not have intended such a drastic expansion of federal court jurisdiction
over traditional state law claims; (2) that a defendant should be permitted to contest
liability without risk of an automatic doubling of liability pursuant to the MSP penalty
provisions; and (3) that MSP actions should not be capable of turning claims of multiple
plaintiffs into class actions. Id. at 1309. ICSP adds that a finding that the administrative
remedies need not be exhausted would create havoc in the workers compensation system
by providing an incentive for claimants to fail to comply with its requirements. Instead, a
plaintiff must demonstrate the alleged primary payer’s exact liability as a condition
precedent to making an MSP claim. Id. In other words, liquidating the primary payer’s
obligation is not a federal question that triggers federal jurisdiction.
The Fifth Circuit also made it clear that state workers compensation systems do
not conflict with, and are not preempted by, the MSP statutory provisions. Instead, they
are incorporated into the MSP statute and must be exhausted.
Under either provision—an independent statutory right under
§ 1395y(b)(2)(B)(ii) or supreme subrogation under §
1395y(b)(2)(B)(iii)—the government stands to recover from
the interpleader fund exactly what [the Medicare beneficiary]
should recover under the interpleader fund.
If the individual's right to payment under the primary plan is
limited by the terms of the plan or by operation of state law,
then the government's subrogated claim is equally limited.
Waters v. Farmers Texas County Mut. Ins. Co., 9 F.3d 397, 400-01(5th Cir. 1993). Rather
than Caldera donning Medicare’s gorilla suit, Caldera’s private right of action requires
squeezing Medicare’s gorilla body into Caldera’s workers’ compensation overalls.
ICSP provides coverage under the terms of Texas workers compensation law. If
the workers’ compensation administrative remedies are not exhausted and if ICSP does
not voluntarily agree to pay, then Caldera has not demonstrated ICSP’s “responsibility”
by a judgment, settlement, or other means.
For these reasons, Defendant’s Motion to Dismiss for Want of Subject Matter
Jurisdiction (D.E. 5) is GRANTED. The Court does not reach the alternate grounds for
dismissal based on lack of joinder or failure to state a claim upon which relief can be
ORDERED this 2nd day of February, 2012.
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE