In a surprising decision, the Third Circuit of the United States Court of Appeals overturned a District Court’s opinion which found that MAPsMedicare Advantage Plans 1 could not recover against a primary payer through a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act. 2 For PMSI’s June 30, 2011 Legal Bulletin on the District Court opinion, please click here.
This case involved GlaxoSmithKline (GSK), a pharmaceutical corporation that was sued by thousands of individuals alleging that they suffered personal injury from the use of GSK’s diabetes medication, Avandia. Humana, which has several MAPMedicare Advantage Plan plans, filed a complaint to enforce its claimed rights as a secondary payer under the MSPMedicare Secondary Payer Act, specifically seeking a PCOAprivate cause of action right for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A), for reimbursement of costs that Humana incurred to cover treatment for Avandia-related illnesses and injuries on behalf of settling MAPMedicare Advantage Plan enrollees.
The Third Circuit took a completely different view than the District Court, finding that the plain text of the PCOAprivate cause of action provided under the MSPMedicare Secondary Payer Act sweeps broadly enough to include MAPsMedicare Advantage Plans and even if the court found the MSPMedicare Secondary Payer Act to be ambiguous on this particular point, that deference to CMSCenters for Medicare and Medicaid Services regulations would require the Court to find that MAPsMedicare Advantage Plans have the same right to recover as the Medicare Trust Fund. The Third Circuit even went so far as to find that the PCOAprivate cause of action was not limited to MAPsMedicare Advantage Plans, and could be used by any private party: “[t]he plain text of the MSPMedicare Secondary Payer Act private cause of action lends itself to Humana’s position that any private party may bring an action under that provision. It establishes ‘a private cause of action for damages’ and places no additional limitations on which private parties may bring suit.” (emphasis added)
GSK argued points to the contrary in defense of the District Court’s opinion, asserting that no rights to reimbursement are granted to an MAPMedicare Advantage Plan directly under the MSPMedicare Secondary Payer Act. Essentially, although an MAPMedicare Advantage Plan may be considered a primary payer under the MSPMedicare Secondary Payer Act and have the right to reimbursement of conditional payments, it must recover these payments through any contractual rights it had with the beneficiary in state court. GSK cited case law to support its position, but the Third Circuit found none of the case law to be on point and persuasive in this matter.
As further backing to their opinion, the Third Circuit dove into a discussion regarding legislative history and policy surrounding MAPsMedicare Advantage Plans (even though it concluded the MSPMedicare Secondary Payer Act to be unambiguous on this point), finding that MAPsMedicare Advantage Plans were created by Congress to create a more efficient and less expensive system, and that by essentially allowing MAPsMedicare Advantage Plans to “faithfully pursue and recover from liable third parties” they will have lower medical expenses and as a result will be able to provide additional benefits to their enrollees. The Court additionally noted that it would put MAPsMedicare Advantage Plans at a competitive disadvantage if Medicare could threaten primary payers with a right to double damages but MAPsMedicare Advantage Plans could not, and that it did not believe it was the intent of Congress to “hamstring” MAPsMedicare Advantage Plans in this manner.
The Court also gave Chevron deference3 to CMSCenters for Medicare and Medicaid Services regulations, specifically 42 C.F.R. § 422.108, which provides that MAPsMedicare Advantage Plans “. . . will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercise under the MSPMedicare Secondary Payer Act regulations…” A recent memorandum from CMSCenters for Medicare and Medicaid Services dated December 5, 2011 also clarified that CMSCenters for Medicare and Medicaid Services understood § 422.108 to assign MAPsMedicare Advantage Plans the right to collect from primary payers using the same procedures available to traditional Medicare and that the same applies to Part D prescription drug plan sponsors via 42 C.F.R. § 423.462. To view this memorandum, please click here.
This decision by the Third Circuit should be carefully considered by primary payers when settling a case with a Medicare eligible individual. MAPMedicare Advantage Plan demands should be given priority for reimbursement just as traditional Medicare conditional payment demands are given, or the primary payer may be subject to a PCOAprivate cause of action for double damages from the MAPMedicare Advantage Plan as happened in this case.
Additionally, primary payers may not be aware that during a March 22, 2012 teleconference call, CMSCenters for Medicare and Medicaid Services stated that they are sharing MMSEAMedicare Medicaid and SCHIP Extension Act Sec 111Section 111Section 111 of the Medicare Medicaid and SCHIP Extension Act stating requirements for mandatory insurer reporting
of the Medicare Medicaid and SCHIP Extension Act stating requirements for mandatory insurer reporting data with MAPsMedicare Advantage Plans. Therefore, MAPsMedicare Advantage Plans are now being armed with settlement information concerning Medicare beneficiaries in the same manner as traditional Medicare.
MAPMedicare Advantage Plan demands are issued from the MAPMedicare Advantage Plan directly; i.e., if the MAPMedicare Advantage Plan is Humana, the demand will be issued on Humana letterhead. This is unlike traditional Medicare conditional payment demands which will be issued directly from CMSCenters for Medicare and Medicaid Services and are currently on letterhead from the MSPRCMedicare Secondary Payer Recovery Contractor - responsible for verification of conditional payments. Primary payers should become familiar with some of the major MAPMedicare Advantage Plan plans on the market so they will recognize these MAPMedicare Advantage Plan demands when they are received.
Because MAPMedicare Advantage Plan demands are issued from the MAPMedicare Advantage Plan plan, primary payers should be proactive in determining whether an MAPMedicare Advantage Plan demand exists. The primary payer may want to seek MAPMedicare Advantage Plan enrollment/benefit history from claimants/plaintiffs prior to settling cases. Once the primary payer is availed of this information, it should consider contacting the MAPMedicare Advantage Plan for conditional payment information prior to settlement.
Beyond the affect this decision may have on MAPsMedicare Advantage Plans, the court’s statement that any private party may pursue a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act for double damages is dubious and sure to confuse primary payers even further as to which parties may pursue a PCOAprivate cause of action under the MSPMedicare Secondary Payer Act (double damages apply) if they fail to protect Medicare’s interests.
If it is any consolation to the industry, within the text of Third Circuit’s opinion, the Court refers to the MSPMedicare Secondary Payer Act as “the most completely impenetrable texts within human experience.” Due to the opaque nature of the MSPMedicare Secondary Payer Act, we can be certain that the courts will be called to the task of interpreting the bounds of the MSPMedicare Secondary Payer Act into the infinite future until Congress reforms and clarifies this federal law.
1. [MAPs, also sometimes known as Medicare Part C, allows Medicare enrollees to obtain Medicare benefits through private insurers instead of receiving benefits from the government under Parts A and B. Many MAPs also offer Part D prescription benefits to Medicare enrollees.]↩
2. [In Re Avandia Marketing, 2012 U.S. App. LEXIS 13230 (June 28, 2012).]↩
3. [Chevron Deference is a well-known two-part test established by the Supreme Court for determining when a federal court ought to defer to the interpretation of a statute by the federal agency charged with implementing that statute.]↩