Horton, et al v. Healthcare Recoveries, et al, 2012 U.S. Dist. LEXIS 181839 (SDNY Dec. 26, 2012)
Jeff Signor
December 27, 2012

Facts:

A class of plaintiffs filed suit in state court against 40 Medicare Advantage (MA) Plans.  Defendants removed the action to federal court.  Plaintiffs allege that the MA reimbursement claims violate Section 5-335 of the NY General Obligations Law.  Plaintiffs’ action seeks restitution of all monies wrongfully collected by defendants and a permanent injunction “directing defendants to cease and desist from continuing to assert and collect liens, subrogation rights, and/or reimbursement rights” against anyone covered by a MA Plan who settles a New York personal injury or wrongful death claim.

Defendants moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted.  Defendants also argue that plaintiffs have not exhausted their administrative remedies, as well as the argument that the Medicare Act preempts plaintiffs’ state law claims.

Issues:

Whether Congress, in enacting the Medicare Advantage Program, intended to provide Medicare Advantage Plans with a statutory right of reimbursement for medical benefits paid to an enrollee who subsequently recovers a settlement from a third party tortfeasor.  Specifically, this case turns on the Court’s interpretation of the secondary payer provision of Medicare Part C, 42 U.S.C. § 1395w-22(a)(4), and whether it provides a statutory right of reimbursement for MAOs that preempts the provisions of GOL § 5-335.

Opinion:

Defendants, MA Plans, win.  The Medicare Secondary Payer Act preempts the New York General Obligations Law.  Therefore the prohibition against recovery is not enforceable because of the Medicare Secondary Payer Act.

The court in Horton followed similar reasoning to the court in Potts v. Rawlings Co., LLC, No. 11 CV 9071, 2012 WL 4364451 (SDNY Sept. 25, 2012).

Franco Signor Commentary:

Courts are increasingly finding on behalf of Medicare Advantage Plans when the lien recovery rights of such MA Plans are challenged.  We believe such decisions are a direct result of Medicare issuing a Policy Memo, dated December 5, 2011, regarding the reimbursement rights of MA Plans.  The Memo’s intent is to convey Medicare’s support for regulations giving Medicare Advantage Plans the right to collect for services.  The CMS Memo is attached to this blog for ready reference.  It goes on to reference the fact that “several courts have challenged Federal regulations governing these collections.”  The Memo also reinforces the rights of MA Plans to utilize the MSP Statute when enforcing their right of recovery, “Notwithstanding these recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of the Medicare Part C [Medicare Advantage] and Part D (Prescription Drug] programs.”

Our blog history contains a line of cases that was referenced by the December 5, 2011 CMS Memo.  In those cases, federal courts ruled on behalf of plaintiffs challenging the recovery rights of MA Plans.  The reasoning employed by the courts in those decisions that a contract existed between the plaintiff (patient) and MA Plans which was governed by state law.  The reasoning goes that the patient was paying premiums and the recovery rights afforded traditional Medicare did not extend to MA Plans.  However, since the CMS Memo was issued, federal courts have taken a cue from CMS and issued decisions much in keeping with Horton and Potts.

At Franco Signor we have been advising our clients to be extremely mindful of the fact that Medicare Advantage Plans have a strengthened position.  Importantly, MA Plans are increasingly pushing for their complete recovery rights, up to and including commencing suit under the private cause of action contained in the MSP Statute.  See 42 U.S.C. Sec. 1395y(b)(3)(A), See also In Re: Avandia Marketing, Sales Practices and Products Liability Litigation GlaxoSmithKline, LLC & GlaxoSmithKline, PLC Humana Medical Plan, Inc. and Humana Insurance Company, 2012 U.S.App. LEXIS 13230 (3rd Cir. Court of Appeals, June 28, 2012).

Will Mandatory Insurance Reporting have a streamlined affect on the MA Plans’ ability to identify and seek recovery of settlements, judgments and awards involving Medicare beneficiaries?  We believe traditional Medicare will share the data supplied by Responsible Reporting Entities with MA Plans.  Now that Reporting involves all settlements, judgments and awards over $5K, private Medicare will most likely share the data collected with MA Plans so both entities can seek recovery from both sides — from the claimant and the defendant primary plan.  Such claims could be made months after the case has been closed.

It is a best practice to be proactive in dealing with both MA Plans and traditional Medicare.  Such early intervention and identification of reimbursement amounts will go a long way to mitigate exposures on this growing hot topic.  Contact Franco Signor LLC for help!

CLICK HERE TO READ CMS MEMO ON MEDICARE SECONDARY PAYMENT SUBROGATION RIGHTS