MAPping Out a Course
Primary plans must consider best practices as courts rule in favor of MAPs recovering double damages
When we last checked in on Medicare Advantage Plan (MAP) litigation, it was in a state of enormous growth and court opinions were varied across the country. MAPs were pursuing a Medicare Secondary Payer (MSP) double-damages private cause of action against primary plans—typically the liability, no-fault, or workers compensation plan/entity—alleging those primary plans failed to reimburse conditional payments to the MAP.
Two years later, primary plans around the nation continue to be threatened with litigation and courts are generally ruling in favor of MAPs.
MAPs are a form of privatized Medicare that are gaining traction in membership. As of 2017, United Healthcare and Humana accounted for 41 percent of enrollments. Since the Affordable Care Act (ACA) was passed in 2010, MAP enrollment has grown by 71 percent. As of 2017, one in three people with Medicare (33 percent, or 19 million beneficiaries) is enrolled in a MAP. There is also an obvious trend toward market consolidation.
MAPs are typically referred to as Medicare “Part C” and generally provide coverage for similar items that traditional Medicare Part A and B would cover. If a Medicare beneficiary desires insurance for prescription drugs, then she must enroll in a Part D Medicare plan to pay for those drugs. Often, a MAP beneficiary will elect her Part D prescription coverage with the same insurance company that provides the Part C coverage, which provides a simple solution as Medicare benefits are rolled up into one plan.
How MAPs tie into Medicare Secondary Payer (MSP) regulations and whether MAPs have similar rights to double-damages recovery of conditional payments just like traditional Medicare have been questions all along.
Two Circuit Courts Set a Precedent
As noted in our 2016 MAP feature, the U.S. Court of Appeals for the 3rd Circuit, in the summer of 2012, became the first appellate court to establish the private cause of action for double damages against primary plans that handle workers compensation, liability, and no-fault cases. The case was In Re: Avandia Marketing, Sales Practices & Products Liability Litigation. The 3rd Circuit includes Delaware, New Jersey, and Pennsylvania.
The In Re Avandia decision was petitioned for review to the U.S. Supreme Court, which declined to hear the matter. As a result, the ability for MAPs to recover double damages under these scenarios was now to be decided among each circuit in the United States.
Our July 2016 feature, “Medicare Advantage & Part D Payments Might Have You Seeing Double,” mentioned another circuit court case, Humana v. Western Heritage Insurance Company, as one to watch. Later that year, it, too, was decided in favor of MAPs.
The case involved an insurance carrier that settled a liability matter and learned after settlement that the claimant was a Medicare beneficiary. In an effort to mitigate its risk, the carrier attempted to add conditions to the release. The plaintiff’s attorney resisted, and the state court required Western Heritage to pay the funds over to the plaintiff, allowing the plaintiff and his attorney to deal with Medicare issues. Regrettably, the claim involved a MAP, and, as the matter progressed regarding the conditional payment, Humana was not reimbursed and continued to file appeals through the district and circuit courts.
The 11th Circuit Court, persuaded by the 3rd Circuit In Re Avandia decision, awarded Humana double damages because Western Heritage was required (in its interpretation of the Medicare Secondary Payer law) to pay Humana when the case settled. The 11th Circuit includes Alabama, Georgia, and Florida.
Now, with both the 3rd and 11th Circuits finding in favor of MAPs being allowed to bring an MSP private cause of action for double damages, the industry is seeing widespread application across the country. The ease with which courts have determined a MAP can allege a sufficient double-damages MSP private cause of action claim is alarming. A recent district court case out of Illinois found that, for a MAP to allege an MSP private cause of action, it simply needs to allege that there is no genuine issue of material fact regarding the defendant’s status as a primary plan, the defendant’s failure to provide for primary payment or appropriate reimbursement, and the damages amount.
A Dissenting Opinion
In January 2018, almost two years after the Western Heritage decision, a dissenting opinion was issued after a majority of judges voted against a rehearing en banc. This dissenting opinion lays out legal reasons why the 11th Circuit’s decision advancing and supporting In Re Avandia, and the right for MAPs to have a right to the private cause of action, may be incorrect.
Judge Tjoflat’s dissenting opinion on why, legally, it makes no sense to extend the MSP private cause of action to MAPs can be summarized in the following points:
• The MSP private cause of action provision was established 17 years before MAPs existed. Clearly, Congress could not have intended it to apply.
• MAP payments for items and services are not payments by the Secretary of Health & Human Services. Hence, such payments are outside the scope that is built into the statute. These payments are from private plans; not from the Medicare Trust Fund.
• MAPs, under the statutory scheme set up by Congress, “may charge” the primary plan, while the government must follow the statutory debt-collection scheme. Thus, a MAP may immediately sue to collect without regard to cumbersome timeframes that require government due process. The subrogation claim is, therefore, codified and preempts any state law prohibiting such.
• Congress did not alter existing MAPs’ rights under state law. MAPs could establish that recovery right in their coverage contracts. Even if no contract existed, most jurisdictions, including Florida, allow for that right to be implied (equitable subrogation).
• The MAP has no legal relationship with the tortfeasor. Its relationship is with its insured—the beneficiary. No independent duty exists under subrogation (equitable or contractual) until there is a judgment or settlement.
The dissenting opinion is carefully crafted and may be cited in the future as persuasive authority by other circuit courts that have yet to rule on this issue, particularly where the circuit court may be leaning toward opining that MAPs should not be entitled to the same private cause of action rights as Medicare. However, as stated previously, this dissenting opinion appears to be an outlier, and most courts are finding in favor of MAPs having double-damages recovery rights.
Currently, there is no clear methodology for identifying MAP beneficiaries other than relying upon the beneficiary to supply this information during the pendency of the claim or prior to settlement. This is a scary predicament, considering that jurisdictions finding in favor of MAPs having a right to double damages are finding that liability is strict, regardless of whether the primary plan had knowledge of the MAP. The Centers for Medicare & Medicaid Services (CMS), when verifying if an injured party is enrolled in Medicare, only returns traditional Medicare enrollment information to the primary plan.
CMS does have MAP enrollment information as well. The Medicare Advocacy Recovery Coalition (MARC) is currently gaining sponsorship of a bill called the Provide Accurate Information Directly (PAID) Act, which would require CMS to provide MAP enrollment data to primary plans. However, as this legislation works its way through Congress, best practices for primary plans are imperative.
For the jurisdictions where MAPs have established a clear right to double damages (Delaware, New Jersey, Pennsylvania, Alabama, Georgia, and Florida), primary plans should identify the Medicare Advantage and prescription drug plan enrollment for the injured party immediately. Additionally, the primary plan should have a strategy in place to address the conditional payments and reimbursement obligations at the time of settlement.
Since primary plans in these jurisdictions can be subject to double damages, it might make sense to notify the court immediately of this concern and how it should be addressed. Additional care must be taken in these jurisdictions because the liability is strict.
For other jurisdictions, it is important to keep a close eye on this issue. Numerous district courts nationwide are finding in favor of MAPs having this right, and circuit courts may follow suit as cases are appealed.