Since at least 1980, federal law has permitted Medicare to recover payments made for medical care provided to beneficiaries when there is liability or workers' compensation insurance that would otherwise be available to the beneficiary. Practitioners and claims professionals are (or should be) familiar with the process of requesting information concerning the amount of these payments and Medicare's claims for reimbursement through the Center for Medicare and Medicaid Services ("CMS") when finalizing the terms and conditions of settlements involving Medicare beneficiaries. However, CMS claims information does not include information concerning payments made by certain private health insurers administering Medicare Advantage Plans. This article will discuss a recent decision in the Eleventh Circuit holding that such plans also have a right to reimbursement under federal law that should be considered when negotiating settlements involving plan members.
Medicare is entitled to reimbursement for certain medical payments made to beneficiaries when other insurance is available.
Before 1980, "Medicare paid for all medical treatment within its scope and left private insurers merely to pick up whatever expenses remained." Bio–Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 278 (6th Cir. 2011). In 1980, in an effort to curb the rising costs of Medicare, Congress enacted the Medicare Secondary Payer Act ("MSP"), which "made private insurers covering the same treatment the 'primary' payers and Medicare the 'secondary' payer." Id.
The MSP, 42 U.S.C. § 1395y(b), is located in Part E of the Medicare Act, and establishes Medicare's status as a secondary payer to a primary plan. Id. § 1395y(b)(2). Paragraph (2)(B), entitled "Conditional payment" describes the circumstances and procedures under which Medicare can make a conditional payment notwithstanding its status as secondary payer. Id. § 1395y(b)(2)(B). Under paragraph (2)(B), when the primary plan does not fulfill its duties, the Secretary of Health & Human Services may make a payment conditioned on reimbursement. Id. § 1395y(b)(2)(B)(i). If the Secretary makes a conditional payment, the primary plan must reimburse the Secretary. Id. § 1395y(b)(2)(B)(ii). Paragraph (2)(B) also establishes and defines a cause of action by the United States to recover from a primary plan. Id. § 1395y(b)(2)(B)(iii); see also 42 C.F.R. § 411.24 (describing a Government cause of action against a primary plan or any other person that received a primary payment). However, paragraph (2)(B) does not mention Medicare Advantage plans or whether such a plan may have a cause of action to recover for payments made by a Medicare Advantage Plan.
The Medicare Advantage program.
Part C of the Medicare Act, also known as the Medicare Advantage program, was enacted in 1997, 17 years after the MSP. "Congress's goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system." In re Avandia, 685 F.3d at 363 (citing H.R. Rep. No. 105-217, at 585 (1997), 1997 U.S.C.C.A.N. 176, 205-06 (Conf. Rep.)). Under the Medicare Advantage program, a private insurance company administers the provision of Medicare benefits pursuant to a contract with CMS. See 42 U.S.C. §§ 1395w-22(a), 1395w-23. In 2017, 33% of people (19 million beneficiaries) enrolled in Medicare were enrolled in a Medicare Advantage plan. Medicare Advantage 2017 Spotlight: Enrollment Market Update, Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-2017-spotlight-enrollment-market-update/ (last visited April 13, 2018).
There is a dispute between federal courts regarding whether Medicare Advantage plans may recover from primary insurers under the MSP.
Part C of the Medicare Act establishing the Advantage program includes a reference to the MSP, entitled "Organization as secondary payer," which states as follows:
Notwithstanding any other provision of law, a [Medicare Advantage] organization may (in the case of the provision of items and services to an individual under a [Medicare Advantage] plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section—
(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.
42 U.S.C. § 1395w-22(a)(4).
There is a split among federal courts regarding whether § 1395w-22(a)(4) creates an implied federal cause of action for a Medicare Advantage plan to recover secondary payments. Some courts addressing this question have held that there is no such right of action under Part C. See, e.g., Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146, 1153, 1154 (9th Cir. 2013) (explaining that the Medicare Advantage right-to-charge provision "describes when [plan] coverage is secondary to other insurance, and permits (but does not require) a [plan] to include provisions allowing recovery against a primary plan.... [It] does not create a federal cause of action in favor of a[n] MAO"); Care Choices HMO v. Engstrom, 330 F.3d 786, 790 (6th Cir. 2003) (reaching a similar conclusion as to 42 U.S.C. § 1395mm(e)(4), which addresses secondary payment by Medicare-substitute HMOs).
Eleventh Circuit held that a Medicare Advantage plan has the right to recover from a primary payer under the MSP.
In Humana Medical Plan v. Western Heritage Insurance Company, 832 F.3d 1229 (11th Cir. 2016), the court of appeals heard a case of first impression in the circuit regarding whether Humana was entitled to bring a private cause of action against Western Heritage for payments made by Humana to a beneficiary for personal injuries sustained at a condominium insured by Western Heritage. Id. at 1232. While the beneficiaries claim was in suit, Humana notified the beneficiary and Western Heritage that it believed it was entitled under the MSP to recover approximately $19,000 paid on behalf of the beneficiary. Id.
The beneficiary and Western Heritage settled the claims against the condo and included language in the settlement agreement that there was no Medicare or other lien or right to subrogation. The beneficiary also agreed to indemnify Western Heritage and its insured against any Medicare or other lien or right to subrogation. Id.
Initially, Humana sued the beneficiary and her attorney in the Southern District of Florida seeking reimbursement of the $19,000. Id. On the defendants' motion, the district court dismissed Humana's complaint for lack of subject matter jurisdiction, holding that a Medicare Advantage plan does not have a private cause of action to recover reimbursement from a beneficiary under the MSP. Id. The district court later vacated its order after Humana moved the district court to correct or amend the order. Id. The district court scheduled a hearing to consider Humana's motion. On the date of the hearing, Humana voluntarily dismissed its action against the beneficiary and her attorney. Id.
Humana then demanded that Western Heritage reimburse Humana's secondary payment and brought an action in federal court to enforce its right to such recovery. Id. at 1233. The district court granted Humana's motion for summary judgment holding that the MSP created a private right of action for a Medicare Advantage plan to recover for payments made on behalf of beneficiaries. See Humana Med. Plan v. W. Heritage Ins. Co., 94 F. Supp.3d 1285 (S.D.Fla. 2015). Western Heritage then appealed the grant of summary judgment to Humana.
The Eleventh Circuit affirmed the grant of summary judgment to Humana and held that the MSP created a private right of action through which a Medicare Advantage plan could seek reimbursement for payments made to plan members. Humana, 832 F.3d at 1236. The court explained that the MSP private cause of action is available "in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A)." Id.; 42 U.S.C. § 1395y(b)(3)(A). Paragraph (2)(A) defines "primary plan" and bars any Medicare payment—including a Medicare Advantage payment—when there is a primary plan. 42 U.S.C. § 1395y(b)(2)(A). The sole exception to the prohibition in paragraph (2)(A) is the conditional payment scheme in paragraph (2)(B). See id. The court further explained that paragraph (3)(A), the MSP private cause of action, grants private actors a federal remedy when a primary plan fails to fulfill its payment obligation, thereby undermining the secondary-payer scheme created by paragraph (2)(A). Id.
With respect to Medicare Advantage plans, the court explained that paragraph (2)(A) unambiguously refers to all Medicare payments, which include both traditional Medicare and Medicare Advantage plans. Humana, 832 F.3d at 1237. The court held that a plain reading of paragraph (2)(A) and the Medicare Advantage right-to-charge provision demonstrate that Medicare Advantage payments are made secondary to primary payments pursuant to the MSP, and therefore the MSP does not limit the cause of action in paragraph (3)(A) to cases in which traditional Medicare is the secondary payer.
Practitioners and claims professionals negotiating settlements of claims by individuals who are or could be eligible for Medicare should make sure they determine whether the individual participates in any Medicare Advantage plan. If so, the fact of the claim/suit and amount of proposed settlement should be communicated to the insurer to determine if the insurer will seek to be reimbursed for any payments made on behalf of the plaintiff or claimant.
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