Medicare Advantage Plan on the Offensive

The “private cause of action” (PCA) provision of the Medicare Secondary Payer Act (MSP) has been the subject of several of our recent blogs. This provision allows private parties to bring a private cause of action for double damages when a primary plan fails to provide for primary payment or appropriate reimbursement of Medicare’s payments (42 USC Section 1395 y(b)(3)(A)). Since Medicare is a secondary payer, Medicare is prohibited from making payment of medical items or services when “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” An exception to this occurs when the primary plan “has not or cannot reasonably be expected to make prompt payment”. When a payment is made by Medicare, the payment is conditioned upon reimbursement. (42 USC Section 1295 y(b)(1) and (2)(A)).

Medical providers, injured workers and Medicare Advantage Plans (MAP) have successfully used the PCA provision to seek reimbursement of payments made by Medicare and Medicare Advantage Plans. The claims have been made against group health plans, non-group health plans, workers’ compensation plans and settlement proceeds.

The Humana Medical Plans have been at the forefront of the reimbursement movement under the PCA provision of the MSP. This movement began with the In Re: Avandia Marketing Sales Practice and Products Liability Litigation GlaxoSmithKline, LLC and GlaxoSmithKline PLC Humana Medical Plan, Inc and Humana Insurance Company, 685 F.3d 353 (3d Cir.2012) litigation. In Avandia, Humana argued that GlaxoSmithKline had to reimburse Humana for expenses that it incurred treating its’ insureds injuries from the use of Glaxo’s drug, Avandia. The Third Circuit Court of Appeals held that the MSP provides MAOs, such as Humana, with the same right to recover as Medicare.

Humana Insurance Company continued with its reimbursement attempts under the PCA in Humana Insurance Company vs. Farmers Texas County Mutual Insurance Company, No:13-CV-611-LY, decided by the U. S. District Court for the Western District of Texas Austin Division in September 2014. In this case, Humana argued that as an MAO, it had a right to bring a PCA under the MSP. The Court reviewed the MSP and Avandia decision noting that the Fifth Circuit had not yet addressed the issue. It found the Third Circuit’s analysis persuasive and allowed Humana to bring the PCA against Farmers Texas for double damages.

The Humana Medical Plan vs Western Heritage Insurance Company, No:12-20123, decided by the U.S. District Court for the Southern District of Florida in March of 2015 is the most recent victory in Humana’s quest for reimbursement. Humana brought this action against Western Heritage Insurance to recover conditional payments made for medical treatment expenses incurred by Mrs. Reale, a Medicare beneficiary and enrollee in the Humana plan.

By way of background, Mrs. Reale slipped and fell at the Hamptons West Condominium (Hamptons West) on or about January 21, 2009. Her medical treatment was paid by Humana’s Medicare Advantage Plan. After Mrs. Reale filed suit on June 1, 2009, Western Heritage Insurance Company, the liability insurer for Hamptons West, reached a settlement agreement to resolve all issues with Mrs. Reale for the sum of $115,000.00. In the settlement agreement, Mrs. Reale attested that she had no outstanding Medicare liens. A December 3, 2009 letter from CMS confirmed that it had no record of processing any Medicare claims on behalf of Mrs. Reale.

Western Heritage became aware of Humana’s lien rights prior to making payment of the settlement. Although Western Heritage attempted to add Humana as a payee on the settlement draft, the state court judge ordered Hampton West to tender full payment without the lien holder on the check. The judge also ordered Mrs. Reale’s counsel to withhold sufficient funds in a trust account to resolve all of the medical liens. Humana’s conditional payments amounted to $19,155.41. Western Heritage issued full payment of the settlement under the terms of the state court’s order with the understanding that Mrs. Reale and her attorney would reimburse Humana.

Mrs. Reale disputed the amount of Humana’s reimbursement claim. She filed suit against Humana in the Circuit Court for the Eleventh Judicial Circuit seeking a declaration of the exact amount that she owed Humana for its lien. In this action, Mary Reale et al vs Humana Medical Plan, No. 10-31906CA30 (Fla. 11th Jud.Cir.Ct. June 4, 2010), the state court determined that Humana was entitled to a reimbursement of $3,685.03. This was based on a finding that Ms.
Reale had only recovered 33.75% of the full value of her claim and had therefore recovered
33.75% of the total benefits paid by Humana. It also found that Humana should contribute a 43% pro-rata share of fees and costs. Humana appealed this decision and also filed suit against Western Heritage to recover its conditional payments on May 7, 2010.

In the instant case, Humana presented a Motion for Summary Judgment seeking a declaration that Western Heritage remains liable to Humana under the MSP Act even though it already settled all claims with Mrs. Reale. It also sought double damages. Western Heritage opposed the Motion arguing that under the Parra case, 715 F.3d 1154, the MSP Act did not allow a MAP to bring a private case of action claim. It also argued that it was unaware of any payments made by Medicare at the time the case was settled. Since the amount that Humana may recover involved a question of fact, Western Heritage argued that the Motion for Summary Judgment should be denied.

The Court in granting Humana’s Motion, found that Western Heritage’s settlement with Ms. Reale supported a finding that Western Heritage was a “primary plan” under the MSP Act. It also noted that a “primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party” (42 C.F.R Sections 411.24 (i)(1). Double damages were determined to amount to $38,310.82. The Court found the Parra case distinguishable since it involved a MAP action against the wrongful death benefits paid to the survivors in the claim.

This case leaves several questions unanswered. The first pertains to the lower court’s determination of the percentage of the settlement that would be allocated towards Humana’s conditional payment claim. Had the lower court used the full healthcare provider billed charges of $74,636.17 in determining the “full value” of Mrs. Reale’s claim, Humana’s reimbursement proportion would likely have been greater. Would Humana have accepted anything less than full reimbursement at this point of the process? The other question pertains to strategy at the lower level. Would a delay in disbursing the settlement funds until the Humana issue was resolved have resulted in financial penalties that exceeded double damages to Humana?

This case as well as the prior Humana cases continue to highlight the need for parties to investigate the existence of coverage and injury related payment under Medicare Advantage Part C and D Plans. These secondary payers may be identified through a claimant’s deposition testimony or recorded statement. Other sources of information may include the claimant’s medical bills, the claimant’s physicians billing offices and the different plans Coordination of Benefits Contractor.

Once the secondary payers are identified, it would be prudent to negotiate the conditional payment reimbursement with the secondary payers prior to settlement funds being paid out. Given this recent Humana decision, insurance carrier should also consider withholding funds from the settlement to ensure reimbursement of conditional payments as opposed to leaving the obligation to the plaintiff. Settlement terms should also clearly identify the consequences for failure to reimburse the conditional payments. We will continue to keep you advised of further developments.

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