Trezza v. Trezza
No. 39553, 2011 WL 2640794
(N.Y. Sup. June 23, 2011)
In this case, the Supreme Court of New York, Kings County (the Supreme Court is actually the lower court in New York) ruled that the subject Medicare Advantage (MA) Plan in this action was not entitled to reimbursement for accident related medical expenses it provided.
This case arose from an automobile accident in which the plaintiff, Janine Trezza, sustained bodily injuries. The plaintiff filed an action against the owners and operators of the vehicles. This case ultimately settled for $75,000, representing exhaustion of the applicable policy limits per each driver.
The plaintiff’s initial accident related medical expenses were covered through her personal injury protection (PIP) policy. Upon exhausting the PIP limits, her accident related medical expenses were paid for by her MA plan, Oxford Health Plans (Oxford).
The Oxford MA plan contained a contractual provision stating, in part, that if any no-fault or liability insurance was available, then benefits under those plans had to be applied to “the costs of health care covered by that plan.” In addition, the policy contained a contractual provision stating that a beneficiary had to reimburse the plan for expenses it paid in connection with his/her accident related medical treatment from any settlement.
The MA plan then served a “notice of lien/claim/right of reimbursement” against the plaintiff claiming reimbursement in the amount of $37,787.64.
Issue Presented & Court’s Ruling
The issue for determination, as framed by the court, involved “whether the Medicare Act preempts [New York] General Obligations Law § 5-335.”
In addressing the issue presented, the court noted that New York General Obligations Law § 5-335(a) creates a conclusive presumption that personal injury settlements do not include compensation for health care costs, except where there is a “statutory right of reimbursement.”
In relation thereto, the court referenced § 5-335(b) noting that this section indicates that, except where there is a statutory right of reimbursement, a benefit provider has “no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.”
The court then had to assess the nature and extent of rights afforded MA plans and balance those against the above statutory provisions to determine whether the Oxford MA plan was entitled to reimbursement in this case.
As part of this analysis, the court first noted that the Medicare Act permitted, but did not require, MA insurers to “contract for subrogation rights.” Citing, Nott v. Aetna, F.Supp.2d 565, 571 (E.D.Pa.2004). The court also noted authority holding that the Medicare Act did not create a private cause of action in favor of MA plans. Citing e.g., Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir.2003).
Based upon the reviewed authority, the court in Trezza concluded that a MA plan does not have a statutory right of reimbursement. On this point, the court stated:
Courts have held that because the Medicare Act did not establish a federal scheme for the civil enforcement of HMO subrogation rights, it did not create a private cause of action (citations omitted). The Medicare Act therefore does not create a statutory right of reimbursement; instead, it allows HMOs to include subrogation rights in its contracts with beneficiaries (citation omitted). Because ‘the Medicare Act permits, but does not mandate, HMO insurers to contract for subrogation rights’ … subrogation in this context remains a state contract law issue. (citation omitted). Trezza, 2011 WL 2640794, at * 2.
With respect to the contractual provisions contained in the Oxford MA plan, the court noted that New York General Obligations Law § 5-335(a) expressly provides that a personal settlement injury does not include compensation for health care costs, and, therefore, the subject settlement did not compensate the plaintiff for health care expenses per statute. The court further noted that this section exempted a settling party from a subrogation or reimbursement claim. Accordingly, the court found that the Oxford MA plan did “not have a subrogation claim for medical expenses against the [the plaintiff].”
Based on the foregoing, the court in Trezza “extinguished” Oxford’s asserted lien of reimbursement.
In reviewing Trezza, it is interesting to note that the text of the court’s opinion did not reference or discuss the possible applicability (or non-applicability) of 42 C.F.R. § 422.108 (f) in regard to the issue presented. This regulation states:
(f) MSP rules and State laws. Consistent with § 422.402 concerning the Federal preemption of State law, the rules established under this section supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to MA plans.
A State cannot take away an MA organization’s right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer. The MA organization will exercise the same rights to recover 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.
Assuming that this regulation was not in fact considered by the court, an interesting question may arise as to how the court would have viewed and addressed this regulation as part of its analysis and decision of the presented issue. While the author is not necessarily suggesting that the court in Trezza would have (or should have) reached a different decision in regard to this regulation, analysis of this regulation in terms of its potential applicability to the overall issue may have been beneficial.
To learn more about Medicare Advantage Plans and other recent court decisions addressing this issue, please see the author’s article entitled Medicare Advantage (MA Plans): Exploring Recovery Rights & Recent Court Decisions as contained in Settlement News, July 2011. This article can be obtained at http://dev.nqbp.com/sites/default/files/July2011SettlementNews.pdf.