Abstract

In Vencor, Inc. v. National States Insurance Co., the U.S. Court of Appeals for the Ninth Circuit held that a Medigap insurance provider was only obligated to pay the rates that Medicare would have paid for the same care.Clarence Rollins purchased a Medigap insurance policy from National States Insurance Company to supplement his Medicare coverage. When Rollins became ill and required care beyond that which Medicare would cover, he received his medical treatment from Vencor Hospital-Phoenix. Upon Rollins's death, NSIC paid Vencor $38,760. Vencor claimed that NSIC owed an additional $132,438 because NSIC was not entitled to the lower care rates established by Medicare. NSIC refused to pay Vencor's higher rates. As a result, Vencor sued NSIC for breach of contract.The U.S. District Court for the District of Arizona held, on a motion for summary judgment, that no breach occurred, and that NSIC was obligated to pay only the lower rates established by Mediare. The Ninth Circuit affirmed this decision.