Louisiana Federal Court Finds Beneficiary Failed to Exhaust Remedies, Also Concludes MAP Has Private Cause of Action, But Denies Double Damages

29106aeOn December 16, 2014, the United States District Court, for the Eastern District of Louisiana, published its opinion on Collins v. Wellcare Healthcare Plans, Inc., concluding that because the plaintiff, Collins (hereinafter referred to as Collins), did not exhaust the administrative remedies available under the MAO/MSP, the Court lacks subject matter jurisdiction to entertain her claim. The Court further finds that Wellcare has a private cause of action under the MSP and is entitled to reimbursement from Collins’ tort settlement. But the Court denies double damages because it remains a disputed material fact as to whether Collins’ tort settlement provided compensation for her medical expenses and as to whether the settlement released the tortfeasor from all liability.

Collins was injured in an automobile accident on August 21, 2009 and required medical treatment as a result of that accident. Collins claims that Wellcare, a Medicare Advantage Organization (MAO), provided a Medicare Advantage Private-Fee-For-Service health insurance plan to her and that Wellcare paid medical expenses on her behalf to several providers. Collins instituted an action against the tortfeasor and recovered damages.

Her attorney then deposited the amount paid by Wellcare into a special account. Collins sought a declaratory judgment that Wellcare is not entitled to subrogation or reimbursement for the amounts paid. Wellcare removed the case to federal court pursuant to the Court’s diversity jurisdiction. Wellcare filed an Answer and a Counterclaim, claiming that the Medicare Advantage Plan at issue has a statutory right of reimbursement and subrogation which expressly pre-empts contrary State Law. According to Wellcare, Collins has not exhausted her administrative remedies and her declaratory action should be dismissed. In its Counterclaim, Wellcare claimed that it paid a total of $181,261.97 for medical care and treatments received by Collins and is entitled to reimbursement from Collins’ tort settlement.

Wellcare argued that the Court should dismiss Collins’ claim because she failed to exhaust the mandatory Medicare exhaustion requirements pursuant to §405(g), and the Court therefore lacks subject matter jurisdiction over her claim. Wellcare argued that MAOs are secondary payers under the Medicare Secondary Payer Statute (MSP) and “share the same exact rights under the MSP as provided to the United States Government under traditional Medicare.” Wellcare stated that Medicare Part C “specifically gives MAOs a statutory right of secondary payer reimbursement where conditional benefits have already been paid.” Wellcare therefore argued that “congressional intent supports the conclusion that MAO plans are entitled to the same recovery rights as traditional Medicare.”

Collins argued that she is not required to exhaust administrative remedies because she brought the action in state court based on state law causes of action and does not seek any Medicare benefits or services. Collins contended that the contract between the parties stated that the administrative requirement is “invoked only ‘if you have problems getting the Part C medical care or service you request, or payment (including the amount you paid) for a Part C medical care or service.”

Collins did not assert a claim for benefits to the administrative agency and to the Secretary as required by 42 U.S.C. § 405(h). Instead she filed a declaratory action in state court which was removed to USDC. The Court finds that Section 405 (h) of Title 42 is more than an exhaustion requirement; it precludes federal courts from exercising jurisdiction over claims arising under the Medicare Act. The Supreme Court has held that all claims that “arise under” the Medicare Act must exhaust their administrative remedies prior to any judicial review. Heckler v. Ringer, 466 U.S. 602, 605 (1984).

The Court found that while Collins fashioned her claim as a declaratory judgment and invoked Louisiana State Law, she ultimately sought to retain her benefits based on an argument that the Medicare Act does not afford Wellcare a subrogation right. Such a declaration inherently demands an interpretation of the Medicare Act. Therefore, the Court found that Collins’ claim arises under the Medicare Act, and as such the Court lacks subject matter jurisdiction to entertain her claim.

The Court does not answer the question as to whether the MAO Statute provides Wellcare a cause of action because the Court finds that a cause of action exists under the MSP. This Court finds that the Third Circuit’s analysis In Re: Avandia (click here to see our prior blog on this case) is persuasive. The MSP’s statutory text does not include any narrowing language that would exclude MAOs from the private cause of action clause. The text therefore clearly indicates that MAOs are included within the purview of parties who can bring a private cause of action under the MSP.

Although having determined that Wellcare has a private cause of action pursuant to the MSP, the Court also finds that such a cause of action does not automatically afford a right to double damages. Rather, a primary plan must “fail” to provide reimbursement in order to afford an MAO the right to pursue double damages. Failure connotes an active dereliction of a duty, and the award of double damages is intended to have a punitive effect on plans who intentionally withhold payment. The Court here finds that there was no purposeful failure to provide reimbursement. Therefore, the intended punitive remedy of double damages is not appropriate given the facts here.

Collins also argued that Wellcare’s Counterclaim is barred because per 42 U.S.C. § 1395y(b)(2)(B)(vi), Wellcare had a three year period after it paid Collins the conditional payment to seek reimbursement. However, Wellcare urged the Court to apply the six year statute of limitations for government contracts contained within the Federal Claims Collection Act (FCA). This Court however was not persuaded by either party’s position.

President Obama signed the Medicare and Repaying Taxpayers Act of 2012, also known as the SMART Act, in January 2013. Although the 3 year statute of limitations in it specifically applies to a cause of action brought by the United States, the Court finds that the statute of limitations applies to all causes of actions brought under the Medicare Secondary Act. Notably, the statutory language specifies that a cause of action “must be brought within 3 years of the time that a party is notified of a settlement.” Here, Wellcare contends that it sent Collins numerous inquiries about a possible settlement and only learned of her settlement through the filing of this lawsuit. Accordingly, the Court finds Wellcare is within the three-year statute of limitations period.

Collins disputes whether the settlement compensated her for her medical expenses. The MSP provides that a primary plan’s responsibility for reimbursement may be demonstrated by a settlement. The CMS regulations further buttress that statutory language and include regulatory language that mirrors the quoted MSP statutory language. See 42 C.F.R. 411.22(b)(2). Although the Court believed that Collins did likely receive compensation based on the nature of her claim, it remains a disputed material fact. Based on these disputed facts, the Court did not grant summary judgment as to the amount of reimbursement.

This case is yet another example where a court has granted the private cause of action right to a MAO, a trend that has been increasing in the past several years. As MAOs continue to become more aggressive in seeking reimbursement of conditional payments, Helios encourages payers to speak to us about our Part C Medicare Advantage Plans and Part D Prescription Drug Plans conditional payment investigations, analysis, negotiations, and finalization services. Additionally, we encourage you to speak with our area service representatives or regional managers about resolving all conditional payments.

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