Case Law Update: Victories and Defeats: Medicare Advantage

The Florida Federal Courts have recently issued three decisions regarding a Medicare Advantage Organization’s (MAO) right to recover conditional payments related to its claim.

A Contract May Demonstrate Responsibility for Conditional Payments:

In MSP Recovery LLC v. Allstate Ins. Co., (11th  Cir. 2016)[1] the United Stated District Court of Appeals held that a contract between an injured person and a no-fault personal injury protection (PIP) insurance carrier may demonstrate an insurance carrier has a responsibility to reimburse conditional payments made by a Medicare plan under the Medicare Secondary Payer Act (MSP).  The Appellate Court overturned a lower court’s dismissal of seven suits against the no-fault PIP insurance companies of: Allstate Insurance, Progressive Insurance, IDS Property Casualty and Infinity Auto Insurance.

In this case, two companies, MSP Recovery, LLC and MSPA Claims 1, LLC, were assigned recovery rights from Florida Healthcare Plus (FHCP).  These two companies filed suits against PIP insurance companies for payments made related to automobile accidents.  For simplicity, this article will refer to these two companies as an MAO.  The PIP companies insured the injured parties that received the MAO benefits.

The MAO’s suit argued that the contract between the injured person and the PIP demonstrated that the PIP had a responsibility to make payments related to car accidents and that the MSP required the PIP insurance companies to reimburse payments made by the MAO.

The Appellate Court consolidated the seven suits against the PIP companies as it determined that the suits were dismissed by the lower court based upon a misunderstanding of a prior Appellate Court decision in Glover v. Liggett Grp., Inc., 459 F.3d 1304 (11th Cir. 2006).

The lower court dismissed the claim because it believed that prior to filing a recover suit under the MSP the Glover case required a judgment or settlement of a claim independent from the MSP suit that “demonstrated responsibility” for payment by a primary plan.  Based upon Glover, the lower court believed that the MAO would first need a judgment or settlement based upon a breach of contract for failure to reimburse the MAO. However, as noted by the Appellate Court, Glover only determined that the MSP suit itself does not demonstrate a primary plan’s responsibility for conditional payments and that a settlement or judgment may demonstrate responsibility for conditional payments.

The Appellate Court further noted that the MSP, Section1395y(b)(2)(B)(ii) and regulation 42 CFR §411.22(b), support its determination that the PIP contracts may demonstrate responsibly for the MAO payments. Section 1395y(b)(2)(B)(ii) of the MSP states: “responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.”

The Appellate Court found that “or by other means” is ambiguous language and therefore deference would be given to regulation 42 CFR 411.22(b), which states that other means includes but is not limited to a settlement, award, or contractual obligation as such interpretation of the MSP was reasonable. The Appellate Court remanded the case back to the District Court for further hearing.

What is important about this case is that the Appellate Court has ruled that a contract between two parties absent a payment, settlement, judgment or award may demonstrate responsibility for reimbursement of conditional payments. The Plaintiffs however would still have to prove that the Defendants’ valid insurance contracts with the Plaintiffs MAO plan enrollees actually make the Defendants responsible for payment of the medical expenses that form the basis of the MSP recovery actions.  This case also stresses the importance of obtaining and negotiating Medicare payments as soon a PIP insurer learns the claimant is a Medicare beneficiary.

Invalid Assignment of Recovery Rights Precludes Recovery:

In MSP Claims 1, LLC v. Infinity Auto Ins. Co., 16-cv-20320 (S.D. Fla. 2016) and MSP Claims 1, LLC v. National Specialty Insurance Co., 16-cv-20401 (S.D. Fla. 2016), the District Court found that MSP Claims 1 was not properly assigned the rights to recovery of MAO payments by a company called La Ley Recovery “La Ley” and dismissed MSP Claims 1 suits for recovery of conditional payments.  MSP Claims 1 argued that they were properly assigned the recovery rights from La Ley, who obtained the recovery rights from FHCP, a MAO.

In reviewing the contract between La Ley Recovery and FHCP, the District Court noted that in the event La Ley assigned the recovery rights to another entity, the terms of contract required approval by FHCP.  Because MSP Claims 1 did not allege or provide evidence that FHCP approved the assignment, the suits were dismissed.

As these two cases show, it is important to determine whether the entity demanding recovery for conditional payments has a valid right to recovery.  This information may be obtained through proper subpoenas or evidence depositions.

As more case law develops, we will keep you posted.

[1] Consolidated Docket Numbers of: 15-cv-21532-JLK, 15-cv-20213-UU, 15-cv-20208-UU, 15-cv-20616-FAM, 15-cv-21687-JLK, 15-cv-21504-JLK, 15-cv-20732-RNS.

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