In Humana Medical Plan, Inc. v. Western Heritage Insurance Co., No. 12-20123, 2015 U.S. Dist. LEXIS 31875, the U.S. District Court for the Southern District of Florida granted Humana’s Motion for Summary Judgment and held that Humana’s right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable and Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A). The 11th Circuit will now have the opportunity to decide if this break from precedent is appropriate.
Under the MSP Act’s private cause of action, the Southern District of Florida found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. The Court concluded that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan, it had an obligation to independently reimburse Humana. The Court ruled that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and was therefore, entitled to $38,310.82 in damages.
Western Heritage’s position is that the district court’s holding departed from the plain language of the Social Security Act giving a privately run Medicare Advantage Organizations (“MAOs”) a new cause of action for double damages against primary plans. This holding is contrary to the decisions of several circuit courts and ignores the law’s carefully crafted scheme that permits MAOs to assert (state court) subrogation claims or otherwise bill providers or insurers for health care claims for which MAOs are “secondary,” but does not permit federal court claims, much less for double damages.
Western Heritage arguesthat there is a distinction between Medicare, which has a cause of action for double damages against parties who fail to reimburse conditional payments, and MAOs, who have no such cause of action. This distinction is clearly reflected in the MAO statute, the Medicare Secondary Payer (MSP) Act, the SMART Act amendments to the MSP Act, and the implementing regulations promulgated by the Centers for Medicare and Medicaid Services (“CMS”).
The gist of this position is contained in the following four arguments.
- First, the secondary payor provisions that are specifically applicable to MAOs do not contain any direct cause of action by MAOs against primary payors, let alone an action for double damages. (See, 42 U.S. § 1395w-22(a)(4)). Had Congress intended to grant MAOs a right of action against primary payors, such right would have been included here. However, the right simply does not exist in the MAO statute.
- Second, the provision of the MSP Act that does provide for a private right of action, on which the district court relies, makes no mention at all of MAOs. (Id. 1395y(b)(3)(A)). Again, had Congress intended MAOs to have the right to sue, it could easily have included MAOs expressly in this provision, but did not.
- Third, it is also clear based on the mechanics of the overall MSP statutory and regulatory scheme that neither Congress nor CMS, in its implementation of the MSP Act, intended to grant MAOs a private right of action. Had Congress and CMS intended to bestow such a benefit on MAOs, either would have imposed upon MAOs the same disclosure obligations already imposed on CMS, without which, the MSP payment system does not work. More specifically, CMS administers a program that permits settling parties to ascertain any potential reimbursement obligation following a settlement, judgment, award or other payment in which Medicare beneficiaries are involved. However, no such program exists for MAOs.
- Fourth, under the newly enacted SMART Act amendments to the MSP Act, CMS is required to provide claims and repayment information to primary payors during settlement discussions so that they can account for Medicare reimbursement in their settlements with beneficiaries. In other words, the statute and regulations provide a mechanism to mitigate the possibility that a primary plan will be sued by Medicare for double damages as a result of entering into a settlement with a Medicare beneficiary. However, neither Congress (in the statute) nor CMS (in regulation or guidance), imposed similar requirements on MAOs, or comparable protections for primary payors considering settling beneficiaries’ claims, clearly signaling that they did not intend a right of action in favor of MAOs. With rights come obligations — given that Medicare has the right to sue primary payors for conditional payments, so Medicare has the obligation to inform primary payors of the claims and repayment information at and following settlement. That MAOs have no such obligation further bolsters the conclusion that they have no right to anything more than a subrogation claim.
The district court’s decision permitting a cause of action by MAOs against primary payors, in addition to being incorrect as a matter of law, creates a severe impediment to settlement. As the present case illustrates, primary plans are unable to ascertain whether the party with whom they are negotiating is an MAO plan member and to what extent payment was made to the plan member by the secondary payor, a private MAO. As a result, if the underlying decision stands, primary plans will need to think twice before settling claims and thereby risking a double damages cause of action; even if, like Western Heritage here, they acted in the utmost good faith to learn of any reimbursement obligation. This impediment to settlement runs counter to the longstanding objectives of judicial economy and stands to harm Medicare beneficiaries, primary payors and the Medicare Advantage (“MAO”) plans, whose cases will now be more likely to proceed through trial.