Texas Court Finds Medicare Secondary Payer Act Does Not Preempt State Laws Concerning Workers’ Compensation Preauthorization Requirements

A Texas court was recently asked whether the Medicare Secondary Payer Act (MSP) "preempts a state law that requires a workers’ compensation claimant to obtain preauthorization from the relevant carrier before incurring certain medical expenses." Caldera v. The Insurance Company of the State of Pennsylvania, 2013 U.S. App. LEXIS 9706 (5th Cir. May 14, 2013). The plaintiff in this action injured his back in a work-related accident in 1995, and was receiving Medicare benefits by 1998. The plaintiff had back surgeries in 2005 and 2006, for which he did not seek preauthorization. Texas law states that a workers’ compensation carrier is not liable for services and treatments that require preauthorization unless such authorization is sought and granted by either the carrier or the commissioner. Tex. Lab. Code Ann. § 413.014(d). The plaintiff and carrier disputed the surgeries before the Texas Division of Workers’ Compensation, which eventually found for the carrier. The plaintiff sought review in state court and was successful; however that court did not require any payment from the carrier.

Included in the state action was a private reimbursement claim under the MSP seeking double damages against the carrier. The court noted that the plaintiff had not suffered any out-of-pocket loss related to this claim, and it did not appear that Medicare had sought recovery of these funds from either the plaintiff or the carrier. As readers are likely aware, the MSP contains a private right of action allowing citizens to assist Medicare in recovering funds erroneously paid by Medicare. A beneficiary can seek double damages if the carrier qualifies as a primary plan. The plaintiff argued that even though he did not seek preauthorization for his surgeries, as required by state law, the MSP preempts the state preauthorization requirement. The court replied that "[t]he MSP and its implementing regulations do not, however, extend so far as to eviscerate all state-law limitations on payment." 2013 U.S. App. LEXIS 9706 at *8. The court further noted that Medicare does not usually pay until a beneficiary has exhausted his remedies under the state workers’ compensation plan. MSP’s regulations allow Medicare to recover from a beneficiary when the beneficiary fails to make a proper claim under state law. See 42 C.F.R. § 411.24(l). Therefore, the regulations also "accept that Medicare may be unable to recover from a carrier because a beneficiary failed to file a proper claim under state law." 2013 U.S. App. LEXIS 9706 at *10.

Previous decisions in Texas found that when an individual’s right to recovery is limited by state law, the government’s right to recovery is equally limited. Because the plaintiff failed to meet the state preauthorization requirement, the plaintiff’s preemption argument failed. In conclusion, the court wrote that MSP was not intended to "override a primary payer’s ability to impose medical necessity requirements in accordance with state law." Id. at *15.