Medicare Advantage Plans Have No Private MSP Cause of Action for Reimbursement
Roy Franco
February 3, 2011

Before today, it was unclear what rights, if any, a Medicare Advantage Plan had under the Medicare Secondary Payer Act. Most felt that recovery rights of a Medicare Advantage Plan were the same as traditional Medicare under Parts A & B. That’s because 42 C.F.R. §422.108 granted Medicare Advantage Plans the same rights as the Secretary which was thought to include the authority to file a recovery lawsuit under 42 U.S.C. §1395y(b)(2)(B)(iii). However, Humana Medical Plan, Inc. v. Reale, 2011 U.S. Dist. LEXIS 8909 found that right to sue did not belong to the Secretary and therefore dismissed Humana’s suit for failing to state a cause of action.

The decision took away an extremely powerful tool recently wielded by Medicare Advantage Plans seeking reimbursement from liability and workers’ compensation settlements, judgments and awards. No longer should Medicare Advantage Plans make claim in its demand letters that their recovery rights are on par with those of the United States. The Humana Court made a distinction regarding the rights of Secretary and those of the United States. While the Court in its ruling recognized the express grant of power by the Secretary to Medicare Advantage Plans, it also noted that under the Medicare Secondary Payer Act, it’s the United States and not the Secretary that has the authority to file suit. As the Secretary cannot grant beyond her powers, the Court determined that Humana’s claim must fail.

This is an important ruling made by this Court as the Federal government is based on limited powers and the Secretary’s jurisdiction to adjudicate claims on behalf of the Federal Government is also limited. See 31 U.S.C. §3711. Only the United States, through the Department of Justice is able to file suit for reimbursement. That’s exactly the way the Medicare Secondary Payer Act is written, vesting power with the United States to file a lawsuit, not the Secretary for the Department of Health & Human Services, which proved fatal to Humana’s action.

Nonetheless, the decision does confirm the Secretary’s grant of her MSP power to Medicare Advantage Plans. While the Secretary according to this decision does not have the power to file suit, it does have other MSP powers which include:

1. The power to suspend benefits when there is a reasonable expectation of payment or payment has been made by a primary plan related to a medical item or service;

2. The power to make conditional payments when there is no reasonable expectation of primary plan payment;

3. The right to be repaid conditional payments when a primary plan’s responsibility is demonstrated;

4. The power to make a demand for payment;

5. The power to charge interest at the legal rate (11.75%+) beginning 60 days after notice; and

6. The power to waive a claim for conditional payment reimbursement if its in the best interests of the program.

Medicare Advantage Plans will more than likely take advantage of these other powers, , but it appears enforcement will most likely have to occur in state court. There is no original jurisdiction in Federal Court, unless this case is appealed and Medicare Advantage Plans will have to negotiate as it claims may be subject to claim defenses. This is a good case to arm counsel with when planning for negotiations of these liens.

Franco Signor, LLC is a nationally-recognized leading expert on Medicare Secondary Payer (MSP) compliance. Please visit us @ www.francosignor.com or contact us via email @ engage@francosignor.com or by phone @ 1-716-877-4MSP (4677) for any assistance we can provide.

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