The Court of Appeals for the Ninth Circuit held that an insurance company was not liable under the False Claims Act for initially contesting coverage for the relator’s surgery while Medicare paid the hospital in the interim. See United States ex rel. Mason v. State Farm Mutual Automobile Insurance Co., No. 09-35819, 2010 U.S. App. LEXIS 20385 (9th Cir. Oct. 1, 2010).

The relator, Eugene Mason, was involved in an automobile accident and subsequently had surgery at St. Luke’s hospital. Mason’s primary insurer, State Farm Mutual Automobile Insurance Co., initially denied coverage for the St. Luke’s hospital bills on the basis that Mason had a pre-existing condition. St. Luke’s then submitted an invoice to Medicare, Mason’s secondary insurer. Nine months later, State Farm conceded liability for 60% of Mason’s hospital bill.

Mason brought a False Claims Act suit against State Farm, alleging that State Farm was liable for a “reverse false claim” under 31 U.S.C. § 3729(a)(1)(G). A reverse false claim occurs when a person knowingly makes, or causes to be made, a false statement to avoid or decrease an obligation to pay the Government. The court found that State Farm caused no false statement to be made. The invoice submitted by St. Luke’s to Medicare was not false because Medicare had a statutory obligation to reimburse St. Luke’s under the Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b)(2)(B)(i), since State Farm, the primary insurer, did not appear that it would make payment within 120 days of the service.

The Court further held that even if the invoice were false, State Farm would not have been liable because it had no obligation to make a payment to Medicare at the time the St. Luke’s invoice was submitted. Since State Farm was contesting coverage at the time the invoice was submitted to Medicare, State Farm did not have any legal obligation to reimburse Medicare under the Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b)(2)(B)(ii). This obligation did not arise until nine months later when State Farm conceded liability for 60% of the St. Luke’s bill.