Texas Supreme Court Appeal on Medicare Secondary Payer Act Clarification

When State Rules Meet Federal Mandates: A Medicare Secondary Payer Case the Insurance Industry Is Watching

A long running Texas workers’ compensation dispute has found its way to the doorstep of the U.S. Supreme Court, and it is raising questions that go well beyond one injured worker and one insurer. At the center of the case is how strictly courts should interpret the Medicare Secondary Payer Act when state workers’ compensation rules were not followed to the letter.

For insurers, claims executives, and compliance professionals, the outcome could influence how Medicare reimbursement disputes are handled for years to come.

A Claim That Started Decades Ago

Guadalupe Caldera’s claim traces back nearly thirty years. In 1995, while working as a store clerk in Texas, he suffered a back injury that qualified for workers’ compensation benefits. Three years later, he began receiving Medicare benefits.

In 2005 and 2006, Mr. Caldera underwent two back surgeries related to that injury. Under Texas workers’ compensation law, those procedures required preauthorization from the carrier. That approval was never obtained. Medicare stepped in and paid the bills, totaling $42,637.

Believing Medicare should not have been the payer, Mr. Caldera sought reimbursement from his workers’ compensation insurer, Insurance Company of the State of Pennsylvania. The insurer denied the claim, and the Texas Department of Insurance upheld that decision.

What followed was a series of legal actions that would ultimately raise a much broader question about the intersection of federal and state law.

Why the Medicare Secondary Payer Act Matters

The Medicare Secondary Payer Act was designed to protect the Medicare Trust Fund by making sure Medicare pays second when another entity is legally responsible. In workers’ compensation cases, insurers and self-insured employers are typically the primary payers.

The statute also includes a powerful enforcement mechanism. A private party can bring an action for double damages when a primary plan fails to make appropriate payment.

That provision is at the heart of Mr. Caldera’s argument.

“The private cause of action under the MSP Act is meant to ensure that primary payers live up to their obligations and that Medicare is not left holding the bag.”
Daniel Horne, Stone & Horne L.L.P.

Mr. Caldera argues that his insurer failed to reimburse Medicare for treatment tied to a compensable injury and that this failure should trigger double damages under the federal statute.

Courts Draw a Line at State Compliance

The Fifth U.S. Circuit Court of Appeals saw the case differently. In a unanimous decision, the court ruled that because Mr. Caldera did not comply with Texas preauthorization requirements, the insurer was never obligated to pay for the surgeries.

From the court’s perspective, failure to meet state workers’ compensation rules meant there was no primary payment obligation to enforce under the MSP Act.

“If a claimant does not satisfy state law requirements, the primary plan has no duty to pay, and Medicare’s role does not automatically shift that responsibility.”
Fifth U.S. Circuit Court of Appeals, opinion summary

This interpretation effectively places state procedural compliance ahead of the federal reimbursement framework, at least in this circuit.

A Timeline That Highlights the Tension

What the Supreme Court Is Being Asked to Decide

Mr. Caldera has now asked the Supreme Court to clarify when a private party can pursue double damages under the MSP Act and whether state law requirements can effectively block Medicare from recovering conditional payments.

At issue is whether Congress intended for Medicare to become the primary payer when state level technical requirements were not met, or whether federal law should still compel reimbursement when treatment relates to a compensable injury.

The petition also points to differing interpretations among federal circuit courts, a factor that often draws the Supreme Court’s attention.

Key Questions Insurers Are Watching Closely

• Can failure to comply with state workers’ compensation procedures eliminate a primary payer’s obligations under the MSP Act?

Why This Matters for the Insurance Industry

For workers’ compensation insurers, the stakes are practical as well as legal. A ruling that strengthens state law defenses could reinforce the importance of preauthorization and utilization controls. A ruling that favors Medicare’s recovery rights could expand exposure under the MSP Act, including the risk of double damages.

Either way, the case underscores the need for tight coordination between claims handling, compliance, and Medicare reporting practices.

“This case sits right at the fault line between federal intent and state level enforcement, and the outcome could reshape how insurers assess MSP risk.”
Insurance compliance analyst

As the industry awaits word on whether the Supreme Court will hear the case, one thing is clear. The balance between state workers’ compensation rules and federal Medicare protections is still evolving, and insurers would be wise to keep a close eye on where it lands next.