On May 10, 2016, the United States District Court for the Eastern District of Virginia, Richmond Division, published its opinion on Humana Insurance Co. v. Paris Blank LLP and Keith Marcus, finding that based on the Medicare Secondary Payer Act, its private cause of action provision, CMS’ regulations and policy memos, and In re Avandia’s analysis allowing Medicare Advantage Organizations to seek double damages just like government, Humana is allowed to seek reimbursement of any conditional payments it paid regarding enrollee’s treatment related to the settled motor vehicle claim. The court makes it clear that since the plain language of the MSP Act fails to limit the parties against whom suit may be maintained, and CMS has previously promulgated regulations specifically allowing recovery of conditional payments from attorneys, Humana may maintain its suit against the law firm and attorney for recovery of conditional payments it made related to the claim.
Humana contracted with the Centers for Medicare and Medicaid Services (CMS) to administer Medicare benefits for those electing to receive their benefits through the Part C Medicare Advantage Organization (MAO) program. Enrollee elected to obtain Medicare Advantage benefits through Humana. On October 11, 2013, Enrollee suffered injuries as a passenger in a motor vehicle accident. As a result, Humana made conditional payments in the amount of $191,612.09 on Enrollee’s behalf to cover medical expenses. Enrollee engaged Keith Marcus (Attorney) and Paris Blank, LLP (Law Firm) (collectively Defendants) to represent him. As a result of a lawsuit initiated by Defendants, Enrollee received payments from several insurance companies totaling approximately $475,600.
On April 17, 2014, Rockingham Casualty Company issued to Humana and Paris Blank a check for $20,000. Attorney ultimately deposited the check without Humana’s endorsement. Humana contends a portion of these funds were distributed to Enrollee. Additionally, Donegal Mutual Insurance Company issued a check to Paris Blank for $250,000 under Enrollee’s underinsured motorist coverage. Humana pleads that companies issued checks to Paris Blank, Enrollee, or both, in the amount of $100,000 from State Farm Insurance Company, $100,000 from Rockingham Mutual Insurance Company, and another $5,600 from Donegal Mutual Insurance Company under Enrollee’s no fault policy.
On January 15, 2015, Humana communicated to Enrollee that he owed Humana $191,612.09 in reimbursements for the conditional payments it made for Enrollee’s medical expenses related to the settled motor vehicle claim. The communication sought payment within sixty (60) days and included information regarding the request of a waiver or the filing of an appeal. Attorney sent a request for waiver to Humana on Enrollee’s behalf. The request contained correspondence between Attorney and CMS purportedly showing that Enrollee did not owe any conditional payments or have any obligations under Medicare Part A and Part B. However, the correspondence did not address any obligations to any MAO.
Claims and Defenses
On April 23, 2015, Humana denied Enrollee’s request for waiver and, as of the filing of its Complaint here, had not received any reimbursement for the conditional payments. As a result, Humana here seeks reimbursement of the $191,612.09 conditional payments it made related to treatment associated with the settled motor vehicle claim directly from Attorney and Law Firm. Because Defendants have denied reimbursement, Humana seeks double that amount pursuant to MSP private cause of action double damages provision.
Defendants lodge several challenges to Humana’s Complaint. These challenges rest upon the assertion that “no private right of action exits permitting Humana to pursue recovery for any conditional payments.” Defendants therefore contend, this Court “should dismiss Humana’s Complaint in its entirety.” Without any binding Fourth Circuit precedent on point, Humana responds that this Court “should follow the reasoning of In re Avandia Marketing, Sales Practices, &Products Liability Litigation (In re Avandia), 685 F.3d 353 (3d Cir. 2012), in which the Third Circuit found that MAOs indeed could maintain a private right of action to recover conditional payments made on behalf of a beneficiary.”
The MSP authorizes the Secretary of HHS to make conditional payments—premised upon reimbursement—if the workmen’s compensation plan, liability plan, or no fault insurance plan has not made or cannot be reasonably expected to make payment for those items or services. §1395y(b)(2)(B)(i). The government may then bring an action for recovery of any conditional payments in the amount of double damages. §1395y(b)(2)(B)(iii). The statute also generally “establishes 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).” §1395y(b)(3)(A).
In In re Avandia, the Third Circuit addressed the precise question presented here: “whether §1395y(b)(3)(A) created a private right of action which a MAO could use to pursue recovery for conditional payments.” The Third Circuit found that the plain language of the statute “is broad and unambiguous, placing no limitations upon which private (i.e., non-governmental) actors can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer.” In re Avandia, 685 F.3d at 359. The Third Circuit also found that “even if the court had found the statute’s language to be ambiguous, Chevron deference would have required the court to find MAOs could pursue recovery just as the government could, as regulations clarified that a MAO exercised the same right of recovery against a primary plan, entity, or individual as the Secretary did under the MSP law.” 42 C.F.R. §422.108. In addition, the Third Circuit also found that “a later memorandum from CMS further specified that CMS understood §422.108 to assign MAOs the right (and responsibility) to collect from primary payers using the same procedures available to traditional Medicare.” (Ctrs. for Medicare &Medicaid Svcs., Dep’t Health & Human Svcs. Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011)).
Court Relies on In Re Avandia
Although not binding precedent, the Court here finds persuasive the Third Circuit’s determination that a MAO may pursue recovery pursuant to the private right of action in §1395y(b)(3)(A). “Section 1395y(b)(3)(A)’s plain language establishes a private right of action to recover double damages where a primary plan fails to pay. Absent from the plain language of the statute is any restriction upon who may utilize that private right of action.”
The Court further indicates that “even if the Court were to find the language ambiguous, CMS regulations afford MAOs the same rights to recover from a primary plan, entity or individual that the Secretary exercises under the MSP regulations.” In re Avandia, 685 F.3d at 366 (quoting 42 C.F.R. § 422.108). “This regulatory promulgation is a permissible interpretation of the MSP statute. This interpretation allows the MAO—an entity providing Medicare benefits under Part C—to exercise the same right to recovery as the government—an entity providing Medicare benefits under Parts A and B—for any conditional payment made for which the MAO ultimately should not have been responsible.”
Defendants describe In re Avandia as “aberrational” and note that the Third Circuit “is the only Circuit Court of Appeal decision holding that §1395y(b)(3)(A) provides a MAO a private cause of action for reimbursement.” Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146, 1154 (9th Cir. 2013). “This does not diminish the persuasiveness of the Third Circuit’s thorough and well-reasoned opinion. Moreover, other district courts outside of the Third Circuit have found In re Avandia’s reasoning persuasive and allowed MAOs to pursue a private right of action under the statute.” See, e.g., Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 94 F. Supp. 1285, 1290-91 (S.D. Fla. 2015); Collins v. Wellcare Healthcare Plans, Inc., 73 F. Supp. 3d 653, 664-65 (E.D. La. 2014); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F. Supp. 3d 983, 986 (W.D. Tex. 2014). Accordingly, “although a dearth of courts may have decided the issue, the Court here hardly is the first to follow the Third Circuit’s well-reasoned opinion in In re Avandia.”
Defendants next aver that “Humana may not maintain suit against Defendants as a law firm and an attorney representing Enrollee.” Specifically, Defendants argue they “are not primary payers and, therefore, fall outside the scope of recovery provided by any private right of action.” Humana, on the other hand, argues the “statute’s language reaches broadly enough to allow recovery from any entity—including law firms and attorneys—receiving payment from a primary plan.” The Court here determines that “contrary to Defendants’ position, the law does not carve out exceptions for attorneys and law firms.” The statute generally establishes a private cause of action “in the case of a primary plan which fails to provide for primary payment.” 42 U.S.C. §1395y(b)(3)(A). Much like who may bring an action pursuant to the statute, “the plain language fails to limit the parties against whom suit may be maintained.”
The Court also explains that “to the extent the language is ambiguous, regulation dictates that MAOs exercise the same rights to recovery 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.” 42 C.F.R. § 422.108(f). In addition, “CMS has promulgated regulations identifying attorneys as an entity from which recovery may be sought under the MSP law by the Secretary.” §411.24(g). Accordingly, the Court concludes “Humana may maintain suit against Defendants for recovery of conditional payments.”
Defendants ask the Court to dismiss Humana’s request for declaratory judgment. Defendants contend that because Humana has “failed to adequately plead any cognizable federal claim, declaratory judgment is inconsistent with the law.” Defendants additionally seek to dismiss Humana’s state law claims, arguing that this Court “should decline to exercise jurisdiction over those claims in the absence of original, federal question jurisdiction.” Defendants premise both of these argument on “the absence of a private cause of action pursuant to §1395y(b)(3)(A).” However, the Court here finds that “because Humana can maintain a private right of action and Defendants pursued no alternative avenues in attacking declaratory judgment or jurisdiction over the related state law claims, the Court denies Defendants’ Motion to Dismiss on those grounds and finds that Humana may pursue recovery pursuant to 42 U.S.C. §1395y(b)(3)(A).”
Much like US v. Harris in 2009 in which a West Virginia federal district court found plaintiff’s attorney responsible for reimbursement of conditional payments made by Medicare, seven years later, this Virginia federal district court similarly finds that plaintiff’s attorney and law firm are responsible for reimbursing conditional payments made by a Medicare Advantage Plan. This time however because the claim was brought under the MSP’s private cause of action provision, plaintiff’s attorney and law firm are looking at double damages, close to $400,000.
If there are any doubts that reimbursement of conditional payments is a big deal, this case should be a reminder to everyone involved in a settlement, judgment, award, or payment, or who may have simply accepted ongoing responsibility for future medical care in a claim, that whether a Medicare beneficiary, or their attorney and law firm, a corporate defendant, or their insurer, an employer, or their carrier, a self-insured, or their third party administrator, reimbursement of conditional payments to Medicare or to a Medicare Advantage Plan, or to a Prescription Drug Plan is serious business.
Whether dealing with Medicare’s Coordination of Benefits Recovery Center, the Commercial Repayment Center, an Advantage Plan, or a Prescription Drug Plan, Optum Settlement Solutions can help with every aspect of conditional payment resolution. From investigating whether conditional payments have been made, to reviewing each payment to determine whether they are related to the underlying claim, to disputing and appealing such payments, to dealing with US Treasury, our team of attorneys, claims specialists, and clinical experts can help you navigate the process to timely and cost-effectively resolve reimbursement of conditional payments.