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Humana vs. Western Heritage – Double Damages for Medicare Advantage Plans

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. Consequently, Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

In resolving the underlying personal injury action that gave rise to this case, the plaintiff confirmed there were no outstanding Medicare liens against the settlement proceeds. As evidence the plaintiff presented a letter from The Center for Medicare and Medicaid Services (”CMS”) dated December 3, 2009 which confirmed CMS had no record of processing Medicare claims on behalf of the plaintiff.

Eventually Western Heritage, the third party carrier, learned of Human’s Medicare Advantage lien and attempted to include Humana as a payee on the settlement draft. The state court judge ordered full payment to the plaintiff without including any lien holder on the settlement check. The judge simultaneously ordered plaintiff’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens.

While Humana and the plaintiff remained in ongoing litigation, Humana filed this action against Western Heritage seeking double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

The Medicare Secondary Payer Act (MSP) provides for a private cause of action when a primary plan fails to reimburse a secondary plan for conditional payments it has made.

“there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) 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).”

42 U.S.C. § 1395y(b)(3)(A).

42 C.F.R. §422.108(f) extends the private cause of action to Medicare Advantage Plans (Medicare Advantage Organizations “MAO”s).

“MAOs will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.”

Additionally, CMS directors have issued memorandum asserting that:

“notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.”

CMS, HHS Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

While the Eleventh Circuit has not yet addressed the issue of whether a Medicare Advantage Organization, such as Humana, may bring a private cause of action against a primary plan under the secondary provision of the Act, the Third Circuit has addressed the issue and held that it can.   In Avandia II the Third Circuit reasoned that the Medicare statute should be read broadly and that the language of the Medicare Advantage Organization statute (42 U.S.C. §1395w-22(a)(4)) cross references the Medicare Secondary Payer Act’s (“MSP”) language (42 U.S.C. § 1395y(b)(2)(A)) which allows these plans to utilize the enforcement provision of the MSP (42 U.S.C. 1395y(b)(3)(A)).  The Third Circuit added to their opinion that the MAO plans are able to use the MSP. To deny them this ability, would put them at a competitive disadvantage, and moreover that the federal agency had enacted reasonable regulations in 42 C.F.R. § 422.108.  This regulation is relied on by the MAO plans in their recovery actions as it states that the MAO plans have the same recovery rights as traditional Parts A & B

Unlike the Third Circuit the Ninth Circuit in Parra v. Pacificare of Arizona, 2013 U.S. App. LEXIS 7861 was not persuaded that the cross referencing of the MAO Statute (42 U.S.C. §1395w-22(a)(4) ) and the MSP (42 U.S.C. §1395y(b)(2)) created a federal cause of action.  The Ninth reasoned that this cross-reference simply explains when MAO coverage is secondary to a primary plan, but does not create a federal cause of action in favor of a MAO. Here the Court found that “[l]anguage in a regulation may invoke private right of action that Congress through statutory text created, but it may not create a right that Congress has not”.  They elaborated by stating in clear terms that, “It is relevant laws passed by Congress, and not rules or regulations passed by an administrative agency, that determine whether an implied cause of action exists”.

Western Heritage argues that this Court should follow Parra and “interpret the Medicare Act as not providing a private right of action in favor of MAOs such as Humana.” However, as predicted in my last post on this topic the holding in Parra is too narrow to be of any assistance and the Court here finds the facts of Parra distinguishable. The Court found the Third’s Circuit’s analysis regarding the ability of an MAO to bring a private cause of action under the MSP Act to be persuasive.

Pursuant to the MSP Act’s private cause of action, the Court found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. Additionally, “if Medicare is not reimbursed as required by paragraph (h), the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). Therefore, the Court concludes that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan it had an obligation to independently reimburse Humana. Because it didn’t, the Court rules 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 is therefore entitled to $38,310.82 in damages.

The trial attorney should now expect the same treatment of Medicare Advantage claims by defense counsel as is now the case with Medicare A & B.  Defense counsel will likely demand written confirmation that any purported Medicare Advantage has been satisfied, and may be reluctant to disburse funds to the plaintiff based solely on the expectation that the plaintiff will satisfy this obligation.  As a matter of practice it may be more expedient to have defense issue separate settlement drafts to the plaintiff and the MAO rather than a single check with two (2) payees.

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