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United States District Court for the Central District of California Finds that Medicaid Cannot Seek Reimbursement from Primary Plan for Payouts Not Related to the Claim

California Insurance Guaranty Association v. Sylvia Matthews Burwell
No. 2:15-cv-01113-ODW (United States District Court for the Central District of California)

by Marie Claire Langlois, Law Clerk
Semmes, Bowen & Semmes (

Available at:

California Insurance Guaranty Association (“CIGA”) is a statutorily created association of insurers which provides a fund from which insureds can obtain financial and legal assistance upon their insurer becoming insolvent. CIGA brought this case against Sylvia Matthews Burwell, former Secretary of the United States Department of Health and Human Services, the United States Department of Health and Human Services, itself, and the Center for Medicare and Medicaid Services (“CMS”), seeking a judicial declaration and permanent injunction which would bar CMS from seeking payment on services or codes not related to the claim under which CIGA was paying out.

CIGA is generally required to pay insurance claims that are covered under policies issued by insolvent insurers, with few exceptions. Cal. Ins. Code §1063.2. Moreover, in cases where Medicare has paid benefits for a loss that is covered under another insurance plan (“primary plan”, the Medicare Secondary Payor Statute (“MSP”), specifically 42 U.S.C. § 1395y(b)(2)(A)(ii) and (B)(ii), requires insurers of these other plans to reimburse Medicare. To determine whether a benefit it covered under a plan, CMS will look to the medical diagnostic billing codes (“codes”) recorded by the provider of care. This sounds simple, yet sometimes, multiple codes will appear under a single charge. In those cases, CMS will generally look to whether any of those codes are covered by the primary plan, then seek reimbursement for the entire charge and all its related codes.

CIGA wanted to contest this system, believing that it should not have to pay out for treatment which is not covered under its plan. For instance, in the related claim, CMS sought reimbursement from CIGA for coverage related to three separate (3) worker’s compensation policies. While CIGA would cover the costs related to the injury under their plan, for example, anything that came as a result of the employee’s slip and fall at work, CMS was also seeking payment on codes related to diabetes, insulin use, and bereavement, simply because they appeared under the same charge.

42 U.S.C. § 1395y(b)(2)(B)(ii) states that “a primary plan . . . shall reimburse [Medicare] for any payment made . . . with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.”

The Court believed that the key terms needed to understand the nature of this responsibility were “item or service.” “Item or service” is defined in 42 C.F.R. § 1003.101 as “any item, device, medical supply or service provided to a patient (i) which is listed in an itemized claim for program payment or a request for payment . . .” The Court very plainly stated that CMS’s belief that “item or service” covered multiple treatments solely because they appeared under one charge, was erroneous. The singular use of the words “item” and “service,” as well as other references to the terms within the C.F.R. made that clear.

The Court also found issue with CMS’s interpretation of the terms “responsibility to make payment.” It stated that California law is unambiguous in its assertions that when a patient receives multiple treatments for various unrelated conditions, the insurer who covers worker’s compensation claims is not responsible for treatments not related to the industrial accident, so long as they are separable from the treatments attributed. See e.g. S. Coast Framing Inc. v. W.C.A.B., 61 Cal. 4th 291, 297 (2015).

As a result, the Court granted CIGA’s motion for partial summary judgment but not without noting the limits of its decision. Judge Wright stated:

The Court simply holds that if a single charge contains multiple diagnosis codes—some which relate to a medical condition covered by CIGA’s policy and some of which do not— the presence of one covered code does not ipso facto make CIGA responsible for reimbursing the full amount of the charge. Instead, CMS must consider whether the charge can reasonably be apportioned between covered and uncovered codes or treatments . . . the Court takes no position on how CMS should [conclude or not conclude that apportioning the charge is unreasonable.]