Medicare Secondary Payer and False Claims Act Allegations Dismissed

by P. Czuprynski

In the unpublished decision of Stillwell v. State Farm Fire & Cas. Co.^[1], the U.S. District Court of Appeals, Eleventh Circuit, determined that a liability insurance carrier was not responsible for post-settlement treatment and medical expenses associated with a slip and fall incident.

While the outcome appears straightforward, the Court needed to determine if the Medicare Secondary Payer Act and False Claims Act applied to the post-settlement medical expenses.

In 2010, the claimant fell at a living community in Indiana. The claimant (and their spouse) alleged negligence, loss of consortium, and past and future medical expenses against the liability insurance carrier. The claimants filed suit in 2011.

A settlement recap demonstrated the claimants agreed to settle the claim in 2016. The recap identified that the lump sum was for full settlement of all claims which included Medicare conditional payments. The claimants signed a memorandum agreeing that the case was settled and a formal release would be signed.

Medicare was notified of the settlement and in December 2016, Medicare issued a demand for reimbursement for $19,672.99. It appears that after the demand was issued, the insurance carrier sent a proposed formal settlement agreement and a check to the claimants for the full amount.

The formal settlement agreement included terms that placed the burden on the claimant to reimburse Medicare and closed any rights to medical care from the insurance carrier in the future.

The claimants refused to sign the proposed formal agreement and argued that the insurance carrier was required to reimburse Medicare for medical expenses occurring after settlement. The insurance carrier asked the Indiana Trial Court to enforce the agreement based on the settlement recap and proposed formal agreement.

The Indiana trial court granted the insurance carrier ’s request and agreed that the terms of the proposed formal agreement were enforceable. On appeal, the Indiana Court of Appeals affirmed the decision.

However, after the trial court’s decision enforcing the settlement, the claimants filed suit in Federal Court and alleged that the insurance carrier violated the Medicare Secondary Payer (MSP) Act  and False Claims Act (FCA) by failing to do the following:

• • Reimburse Medicare for payments made post settlement
  • Identify themselves as a primary payer for the post-settlement medical expenses

Medicare Secondary Payer Act

One of the factors requiring reimbursement for Medicare conditional payments is a “demonstrated responsibility for repayment”. The MSP Act states that responsibility for repayment can be demonstrated by:

[A] judgement, 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.”

In the circumstances of this case, the Court held that there was no judgement, settlement or release that demonstrated the Insurance carrier had a responsibility for post-settlement medical expenses. The Court explained:

[T]he insurers could not have been responsible to make hypothetical and speculative future payment obligations that had not yet been incurred. And the settlement agreement that the Indiana trial court enforced establishes the opposite. It says the [claimants]—not the insurers—are responsible for post-settlement accident-related medical expenses. So, when Medicare paid for [claimant’s] post-settlement medical expenses, the insurers had no duty to reimburse Medicare. And once the settlement agreement was approved, the insurers no longer had a responsibility to pay for medical expenses. [claimant] did.

Because the claimants could not point to a “demonstration of responsibility” for the insurance carrier to reimburse post-settlement payments made by Medicare, the insurance carrier had no obligation to make post-settlement payments. The Court affirmed the dismissal of this argument for failure to state a claim.

False Claims Act (FCA)

The FCA claim was premised on the argument that the insurance carrier had a responsibility for post-settlement medical expenses. The claimants argued that the insurance carrier’s inaction in reporting responsibility for post-settlement medical expenses defrauded the government.

Because the Court found there was no responsibility for post-settlement medical expenses, the insurance carrier’s inaction in reporting primary payer status did not defraud the federal government. There was no obligation for primary payment.

Take Aways

Although this case did not set a precedent, the case demonstrates the continued movement around including FCA claims when arguing whether Medicare expenses require reimbursement. The penalties for FCA violations can be significant and increase potential exposure. Although the Court did not find FCA violations in this case, defending these allegations will likely become common under such suits.

In this circumstance, the insurance carrier had no obligation for repayment of post-settlement medical expenses. But this case identifies the importance of understanding Section 111 reporting obligations for Ongoing Responsibility for Medicals (ORM) and settlements with Medicare beneficiaries (commonly referred to as Total Payment Obligation to Claimant or TPOC reporting).

If you have questions about this case or any other Medicare Secondary Payer matters, please contact us at [email protected].

^[1] 2026 U.S. App. LEXIS 15087 (Eleventh Cir.) Unpublished decisions are not precedent or binding on other courts.