Tag Archives: GlaxoSmithKline

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.

Third Circuit Finds Medicare Advantage Plans have a Private Cause of Action Right under the MSP

In a surprising decision, the Third Circuit of the United States Court of Appeals overturned a District Court’s opinion which found that MAPs 1 could not recover against a primary payer through a PCOA under the MSP. 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 MAP plans, filed a complaint to enforce its claimed rights as a secondary payer under the MSP, specifically seeking a PCOA 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 MAP enrollees.

The Third Circuit took a completely different view than the District Court, finding that the plain text of the PCOA provided under the MSP sweeps broadly enough to include MAPs and even if the court found the MSP to be ambiguous on this particular point, that deference to CMS regulations would require the Court to find that MAPs have the same right to recover as the Medicare Trust Fund. The Third Circuit even went so far as to find that the PCOA was not limited to MAPs, and could be used by any private party: “[t]he plain text of the MSP 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 MAP directly under the MSP. Essentially, although an MAP may be considered a primary payer under the MSP 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 MAPs (even though it concluded the MSP to be unambiguous on this point), finding that MAPs were created by Congress to create a more efficient and less expensive system, and that by essentially allowing MAPs 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 MAPs at a competitive disadvantage if Medicare could threaten primary payers with a right to double damages but MAPs could not, and that it did not believe it was the intent of Congress to “hamstring” MAPs in this manner.

The Court also gave Chevron deference3  to CMS regulations, specifically 42 C.F.R. § 422.108, which provides that MAPs “. . . will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercise under the MSP regulations…” A recent memorandum from CMS dated December 5, 2011 also clarified that CMS understood § 422.108 to assign MAPs 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. MAP 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 PCOA for double damages from the MAP as happened in this case.

Additionally, primary payers may not be aware that during a March 22, 2012 teleconference call, CMS  stated that they are sharing MMSEA Sec 111 data with MAPs. Therefore, MAPs are now being armed with settlement information concerning Medicare beneficiaries in the same manner as traditional Medicare.

MAP demands are issued from the MAP directly; i.e., if the MAP is Humana, the demand will be issued on Humana letterhead. This is unlike traditional Medicare conditional payment demands which will be issued directly from CMS and are currently on letterhead from the MSPRC. Primary payers should become familiar with some of the major MAP plans on the market so they will recognize these MAP demands when they are received.

Because MAP demands are issued from the MAP plan, primary payers should be proactive in determining whether an MAP demand exists. The primary payer may want to seek MAP enrollment/benefit history from claimants/plaintiffs prior to settling cases. Once the primary payer is availed of this information, it should consider contacting the MAP for conditional payment information prior to settlement.

Beyond the affect this decision may have on MAPs, the court’s statement that any private party may pursue a PCOA under the MSP for double damages is dubious and sure to confuse primary payers even further as to which parties may pursue a PCOA under the MSP (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 MSP as “the most completely impenetrable texts within human experience.” Due to the opaque nature of the MSP, we can be certain that the courts will be called to the task of interpreting the bounds of the MSP 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.]

Pennsylvania District Court – Medicare Advantage Plans Do Not Have Recovery Remedies under the MSP

In the past, it was unclear if Medicare Advantage Plans (MAPs) had recovery rights under MSP. MAPs would issue lien demands claiming that they had recovery rights under the Medicare Secondary Payer Act (MSP) in an effort to obtain reimbursement of payments made by the MAP. Due to the ambiguity surrounding MAPs recovery rights, primary payers would yield to the demands of MAPs to avoid a Federal cause of action by the MAP for recovery before satisfying other lien holders. However, an increasing recent amount of case law is depicting a trend that MAPs do not have direct recovery rights under the MSP in Federal court, and that MAPs must pursue reimbursement of payments in State court just like other traditional lien holders. This holding was brought about again in the case of In Re Avandia Marketing, 2011 U.S. Dist. LEXIS 63544, United States District Court, Eastern District of Pennsylvania. Continue reading