By Rafael Gonzalez, Esq.
Vice President, Stragetic Solutions
On September 1, 2015, the United States District Court for the Eastern District of Tennessee published its opinion on Cariten Health Plan, Inc. v. Mid-Century Insurance Company, concluding that since MAP has pleaded sufficient facts to support an inference that PIP carrier violated §1395y(b)(2)(A) when it failed to pay Enrollee’s medical expenses as a primary payer under the Medicare Statute and thereafter refused to reimburse MAP for payment of those expenses, because §1395y(b)(3)(A) provides for a federal right of action in this instance, the MAP has stated a plausible claim to relief, thereby allowing MAP’s claim to move forward.
Plaintiff, Cariten Health Plan, Inc., is a Medicare Advantage Organization (MAO) that provides benefits to Medicare beneficiaries who elect to enroll in privately-administered Medicare Advantage Plans (MAP). Defendant, Mid-Century Insurance Company, is a no-fault insurance provider that offers Personal Injury Protection (PIP), Medical Payments (Med Pay), and Guaranteed Benefits Coverage (GBC) to individuals in accordance with its insurance policies.
Plaintiff alleges that Enrollee 1 received Medicare benefits through a MAP administered by plaintiff and held a no-fault insurance policy with defendant. Plaintiff alleges that on or about October 17, 2012, Enrollee 1 was injured in an automobile accident in Greeneville, Tennessee, and received medical treatment for those injures. Enrollee 1 was charged at least $55,378.70 by her medical service providers as a result of this medical treatment. Plaintiff discharged the medical providers’ bills with a payment of benefits in the amount of $15,799.43.
Plaintiff further alleges that after making these medical payments, plaintiff learned that defendant held a no-fault insurance policy with defendant, which was effective at the time of the accident. Plaintiff notified defendant on multiple occasions of plaintiff’s payment of the medical charges for Enrollee 1’s injuries and requested reimbursement from defendant. Defendant responded to these requests with a form letter from the Farmers National Document Center in Oklahoma City, Oklahoma, stating that its no-fault coverage of Enrollee 1 was first party coverage, and therefore, plaintiff had no subrogation rights.
Plaintiff initiated this action on October 8, 2014, seeking a declaration that the no-fault insurance coverage issued by defendant is primary to Medicare benefits advanced by MAOs such as plaintiff, and that when an MAO such as plaintiff has advanced benefits in which its payments are secondary to defendant’s payment obligations, defendant is obligated to make appropriate reimbursement to the MAO. Plaintiff also claims that it is entitled to double damages from defendant for the payment of $15,799.43 it made to discharge Enrollee 1’s medical bills, pursuant to the private right of action provided by 42 U.S.C. §1395y(b)(3)(A), or in the alternative, recovery of the entirety of the $55,378.70 in charges submitted by Enrollee 1’s medical providers, pursuant to a federal common law right of action. Additionally, plaintiff brings a claim for restitution or unjust enrichment pursuant to Tennessee law. Finally, plaintiff seeks an equitable accounting of the amounts that defendant owes plaintiff for medical claims that plaintiff paid, but which defendant’s no-fault insurance coverage made defendant a primary payer. Defendant’s motion to dismiss followed.
The Court here indicates that although most Medicare-eligible individuals receive Medicare benefits directly from the government, individuals can elect instead to receive their benefits through private insurance companies that contract with the government to provide Medicare Advantage plans. In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 355 (3d Cir. 2012) (citing 42 U.S.C. §1395w-21(a)(1)). These plans are governed by Part C of the Medicare Statute. 42 U.S.C. §§1395-1395lll (Medicare Statute); 42 U.S.C. §§1395w-21-1395w-28 (Part C).
The Court also points out that Plaintiff, however, is not always required to provide primary payment for covered medical services. In 1980, Congress enacted the Medicare Secondary Payer Act as part of an effort to counteract escalating healthcare costs. Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787, 789-90 (6th Cir. 2014). Under the Medicare Secondary Payer Act, in most situations where an individual is covered by both Medicare and another payer, Medicare serves as the secondary payer rather than the primary payer. Put differently, when payment is available from a primary plan, the primary plan and not Medicare is responsible for paying the costs of the individual’s medical treatment.
The Court correctly points out that Congress incorporated the principles of this secondary payer scheme into privately-administered MA plans when it enacted Part C in 1997. 42 U.S.C. §1395w-22(a)(4); Balanced Budget Act of 1997, Pub. L. No. 105-33, §§1851-1859, 111 Stat. 251, 276-327. As set forth in the organization as secondary payer provision of Part C: Notwithstanding any other provision of law, a MAO may in the case of the provision of items and services to an individual under a MA 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).
Section 1395y(b)(3)(A) provides: 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). Paragraph (1) governs the requirements of group health plans in providing medical coverage for individuals who also are eligible for Medicare, 42 U.S.C. § 1395y(b)(1), and paragraph (2)(A) establishes the Medicare as secondary payer scheme that Congress cross-referenced in the MAO secondary payer provision, §1395y(b)(2)(A); §1395w-22(a)(4).
The Sixth Circuit has interpreted the private cause of action provision of §1395y(b)(3)(A) to permit medical service providers to recover payment for medical services from a group health plan designated as a primary payer under §1395y(b), when the group health plan denied payment on behalf of an enrollee because the enrollee was eligible for Medicare. Bio-Medical Applications of Tenn., Inc. v. Cent. States Southeast & Southwest Areas Health & Welfare Fund, 656 F.3d 277, 294 (6th Cir. 2011). In so holding, the panel in Bio-Med. interpreted the phrase “in accordance with paragraphs (1) and (2)(A)” contained in §1395y(b)(3)(A) to mean that a plaintiff seeking to recover against a group health plan must show that the group health plan violated the provisions of both §1395y(b)(1) and §1395y(b)(2)(A).
The Sixth Circuit has since found §1395y(b)(3)(A) to be ambiguous with respect to the statutory obligations of primary payers that are not group health plans. Mich. Spine, 758 F.3d at 792. Therefore, the court in Michigan Spine deferred to the interpretation of the statute contained in regulations promulgated by the Centers for Medicare and Medicaid Services (CMS). Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-45, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1985) (explaining that in the face of an ambiguous statute, federal courts must afford deference to and seek guidance from agency regulations). In doing so, the court concluded that a plaintiff seeking to recover against a primary payer that is not a group health plan need only show that the primary payer failed to comply with its obligation to pay under §1395y(b)(2)(A). Thus, the court held that a medical service provider had a federal right of action to recover payment for services rendered to a person covered by an automobile insurance policy, when the automobile insurance policy made the insurance company a primary payer under §1395y(b)(2)(A).
The Sixth Circuit does not appear to have answered the question presented by this case: whether §1395y(b)(3)(A) gives an MAO, rather than a medical service provider, a right of action to recover from a primary payer when the MAO has made medical payments that should have been made by the primary payer. In Avandia, the Third Circuit answered this question in the affirmative. 685 F.3d at 367. Undertaking an extensive review of the statutory text, statutory framework, legislative history, and public policy, the court concluded that §1395y(b)(3)(A) unambiguously provides a federal right of action for an MAO to recover medical payments from a primary payer. Additionally, the court noted that CMS regulations also interpret the Medicare Statute to provide such a federal right of action. Therefore, court explained that even if §1395y(b)(3)(A) were ambiguous, the court would defer to the interpretation of CMS and find that MAOs have a private right of action under §1395y(b)(3)(A) to recover medical payments from primary payers.
The Court here finds the Third Circuit’s analysis in Avandia to be persuasive. Thus, the Court adopts the reasoning and holding of Avandia, also citing to Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 2015 U.S. Dist. LEXIS 31875, at *13-14, 2015 WL 1191208, at *5 (S.D. Fla. Mar. 16, 2015) (adopting the reasoning and holding of Avandia); Collins v. Wellcare Healthcare Plans, Inc., 73 F. Supp. 3d 653, 665 (E.D. La. 2014) (same); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 2014 U.S. Dist. LEXIS 166654, at *4-5, 2014 WL 8388619, at *2 (W.D. Tex. Sept. 24, 2014) (same). Accordingly, the Court concludes that plaintiff has a federal right of action in this case pursuant to §1395y(b)(3)(A).
The Court therefore concludes that viewing the allegations in the light most favorable to plaintiff, the Court finds that plaintiff has pleaded sufficient facts to support an inference that defendant violated §1395y(b)(2)(A) when it failed to pay Enrollee 1’s medical expenses as a primary payer under the Medicare Statute and thereafter refused to reimburse plaintiff for plaintiff’s payment of those expenses. Because §1395y(b)(3)(A) provides plaintiff with a federal right of action in this instance, and plaintiff has stated a plausible claim to relief, the Court allows the claim to move forward to trial.
While it was expected the Tennessee District Court would look at and rely upon decisions previously made by the Sixth Circuit Court of Appeals to decide this matter, what is surprising is the fact that the decision does not mention any of the recent decisions made by the Southern District of Florida Court finding that unless there is evidence of primary payer responsibility, such private causes of action under the Medicare Secondary Payer will not be allowed.
On April 2, 2015, the United States District Court for the Southern District of Florida published its opinion on MSP Recovery, LLC v. Progressive Select Insurance Company, finding that since Plaintiff did not allege that Defendant’s responsibility to pay had been demonstrated by settlement, judgment, award, or any other means, the court granted Defendant’s motion to dismiss, dismissing the claim without prejudice, thereby allowing Plaintiff to reassert its claim after Defendant’s responsibility to pay under Section 1395y(b)(3)(A) has been demonstrated. The court followed the findings of the 11th Circuit in Glover v. Liggett Group and Phillip Morris, USA, in which that court concluded that a primary plan has a duty to reimburse a secondary payer MAO for conditional payments only “if it is demonstrated that such primary plan has or had a responsibility to make payment.”
On July 22, 2015, the same court published its opinion on MSPA Claims 1, LLC, v. Liberty Mutual Insurance, concluding that a claim for double damages under the MSP private cause of action does not accrue until the primary payer’s responsibility to pay has been demonstrated. The court found that even where an insurance contract exists between two parties, an insurer should still be able to contest contractual liability without being exposed to double damages. The Florida PIP statute, upon which Plaintiff relied to argue that Defendant is contractually and statutorily obligated to pay, recognizes that an insurer should be able to assert that the claim was unrelated, was not medically necessary, or was unreasonable. Therefore, the court holds that a contractual primary payer, such as a no-fault/PIP insurer, should have the ability to contest payment of claims without facing MSP private cause of action double damages.
On August 28, 2015, the same court published its opinion on MSPA Claims 1, LLC v. IDS Property Casualty Insurance Company, concluding again that because Plaintiff’s allegations failed to demonstrate Defendant’s responsibility to pay through “a judgment, a payment conditioned upon the recipient’s compromise, waiver, release, or by other means,” the Amended Complaint must be dismissed without prejudice to Plaintiff to reassert its claim after Defendant’s responsibility to pay under section 1395y(b)(3)(A) has been demonstrated.
As always, Helios Settlement Solutions will continue to monitor MSP private cause of action legal opinions throughout the country and report on them here for you. If we can help you with this or any other Medicare Secondary Payer compliance issue or matter, please contact us at 888.672.7674, or at firstname.lastname@example.org.