California Federal Court: CMS May Not Seek Reimbursement for Conditional Payments That are Unrelated to the Claim

January 12, 2017

On January 5, 2017 in the matter of California Insurance Guarantee Association (CIGA) v. Burwell(i), a Federal Court granted CIGA’s Motion for Partial Summary Judgment and ruled that the Centers for Medicare and Medicaid Services (CMS) may not seek reimbursement for items or services unrelated to work injuries claimed by beneficiaries who were also covered by CIGA’s policies. This case pronounces that CMS may only seek reimbursement for items and services related to the claim, which may be separate from other items and services billed by a provider under a date of service.

This case also reminds stakeholders that state law is not wholly preempted by the Medicare Secondary Payer Act (MSPA) and the regulations promulgated by CMS. State law plays an integral role in establishing CMS’ right to recover conditional payments, since it may govern coverage in underlying insurance policies, like CIGA’s policies in this case.


ExamWorks Clinical Solutions (ECS) will continue to work tirelessly on behalf of clients to dispute CMS reimbursement demands for unrelated charges. This case is a welcome addition to our toolkit. Ultimately the utility of this case, however, depends on whether this decision is appealed and the outcome of any appeal. As it stands now, this case provides precedential value in the 9th Circuit and persuasive value more broadly throughout the country. ECS will closely monitor any appeal in this case in order to provide appropriate updates.


Finally, it is notable that this case commenced prior to CMS’ implementation of an appeals process for insurers. CMS now requires insurers (primary plans) to participate in its administrative appeals process. The process requires insurers to exhaust all administrative rights (a costly and time-consuming endeavor) prior to filing suit against CMS.


Case Background and Analysis

CIGA is a statutorily-created association of insurers that provides a fund from which insureds can obtain financial and legal assistance in the event their insurers become insolvent. CMS paid health benefits on behalf of beneficiaries due to work-related injuries, and those beneficiaries were also covered by CIGA for those injuries. CMS sought reimbursement from CIGA for the conditional payments prior to CMS’ implementation of an appeals process for insurers. CIGA argued the statements of reimbursement from CMS were over-inclusive as they contained dates of service with diagnosis codes that both parties agreed were unrelated to the claimed work injuries.


The Court sought to determine (1) whether CIGA offered prima facie proof (i.e. basic facts) to CMS to show that the reimbursement requests were erroneous; and (2) whether CMS’ blanket practice of seeking full reimbursement for dates of service containing at least one diagnosis code related to the work injury is permissible under the MSPA and corresponding regulations.


The Court found CIGA’s identification of a list of unrelated diagnosis codes was sufficient to shift the burden to CMS to prove the reimbursement requests were not erroneous. The Court then reviewed the validity of CMS’ blanket practice, which focused the analysis on the definition of “an item or service” under the MSPA. The MSPA 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 responsibility to make payment with respect to such item or service(ii).”

CMS argued that “the term ‘item or service’ refers to whatever (and however many) medical treatment(s) a provider lumps into a single charge, and that CIGA has a ‘responsibility to make payment with respect to such item or service’ if the provider lists one or more diagnosis code(s) that are covered by the CIGA-administered policy.” The Court disagreed and stated that it was “unconvinced that CIGA has a ‘responsibility to make payment’ for a treatment not covered by its policy just because the treatment is lumped together with other covered treatments on a line-item charge.”

The Court relied upon Caldera v. Ins. Co. of the State of Pa.(iii) and found that state law generally governs whether a compensation carrier has a responsibility to make payment with respect to an item or service. California law clearly indicates that “where a patient received multiple treatments for multiple conditions, the compensation carrier is not responsible for the treatments that are not attributable to an industrial accident – at least to the extent they are separable from the treatments that are so attributable.” The Court found the plain language of the MSPA contemplates that a primary plan could be responsible for paying only a portion of an item or service, and that CMS did not point to anything in the Act showing that CIGA must reimburse CMS for more than what CIGA is otherwise responsible for paying.



(i) 2017 U.S. Dist. LEXIS 1681 (January 5, 2017)

(ii) 42 U.S.C. 1395y(b)(2)(B)(ii)

(iii) 716 F.3d 861, 863-65 (5th Cir. 2013)