Medicare Advantage Plans MSP Private Cause of Action Gains Momentum
Roy Franco
December 22, 2014

The 31 page written decision by U.S. Federal District Court Judge Eldon Fallon advances Medicare Advantage Organizations (MAOs) on a number of fronts.  This 5th Circuit opinion in Amie Collins v. Wellcare Plans, Inc. from the Eastern District of Louisiana makes a number of key findings for Parties to consider when resolving tort claims that involve payment for medical items and services by a MAO.

This case involved an automobile accident.  Plaintiff settled her claim with the allegedly negligent third party but held in trust the money that was disputably owed to the MAO.  She filed a declaratory lawsuit against the MAO to determine her rights to the funds held in trust.  The MAO, Wellcare Plans, Inc., filed a counterclaim and sought summary judgment.  The decisions made by Judge Fallon are as follows:

  1. Plaintiff’s claim is dismissed for failure of jurisdiction.  Pursuant to the 405(g) bar, she could not assert a claim without first exhausting her administrative rights.  Her claims essentially was for determination under the Medicare Act, and attempting to couch it in terms of collateral damages fails.  Since the ultimate objective by plaintiff is to retain her benefits, it is an interpretation of the Medicare Act.
  2. The statute of limitations is 3 years.  Under the SMART Act, the U.S. v. Stricker standard of 6 years is inapplicable.  The Court was unequivocal about this.  The fact that plaintiff did not respond to any inquiries from the MAO tolled the limitation period.  As settlements, judgments, awards or other payments are not reported under 42 U.S.C. §1395y(b)(8) to MAOs but to Medicare, MAOs do not gain knowledge accept through contact with their beneficiaries.  Hence, the non-responsive nature of plaintiff and her counsel tolled the limitation period, allowing MAO’s claim to proceed.
  3. MAO’s claim is not limited to one of subrogation; but rather a claim under the MSP private cause of action, 42 U.S.C. §1395y(3)(A).
    • MAO’s are entitled to bring the claim, because of the clear statutory language.  However, even if the language were vague, the same conclusion would be drawn because of the Chevron deference to the Centers for Medicare & Medicaid Services that advocates MAO’s have the same rights in at least two memos.
    • Resolution with a Non-Group Health Plan (NGHP) by plaintiff does not defeat MAO’s right to pursue a private cause of action.  Some courts have interpreted the private cause of action to strictly apply to Group Health Plans (GHPs) because of the use of a conjunctive “and” in this particular area of the statute.  However, the statute pre-dates the amendments in 1997 adding the MAOs, as well as the updated definition of primary plans.  The Court, along with a string of other Courts (See In Re Avandia) believe that Congress never intended to create a law in which most of the language would have no meaning or effect.  Hence, the conjunctive is ignored and the MAO allowed to bring the action.
    • MAO’s make conditional payments.  In order to apply the private cause of action, there has to be conditional payments.  This court categorizes payments by a MAO as conditional payments, and does not place a burden on the MAO to actively seek out and identify a primary plan before such payments are classified in that manner.  Citing U.S. v. Hadden, the conditional payments are made on the condition of reimbursement.  There are no exceptions for any reductions, including the concept of pre-identification of potential NGHPs.
  4. The MAO defendant in this case is not entitled to double damages.  The Court assigns for the first time under this provision a negligence standard to trigger the double damages.  Because plaintiff set aside the money into a trust, the court felt compelled that punishment was not justified.  Logically this makes sense, however, it makes just as much sense that there is no other third party making the claim.  Since it is the carrier presenting the claim, they are being made whole by recovering what is owed, arguably less attorney’s fees and costs.  However, the rationale is to promote such claims as it improves fiscal health of Medicare.  If the beneficiary or a provider brought the claim, a strong argument would be made for double damages as there is no basis to reward the party bringing the claim.

The written decision summarize the law well.   A link is included with this blog.  The important take-away is to take seriously Medicare Advantage claims.  It’s far easier to deal with these claims during the pendency of the litigation then after.  To do so, discover all aspects of the claimant’s coverage, because not only is the claimant responsible as demonstrated here, but the primary plan payer is also a target, which is the only possible defendant in a private cause of action.  As a deep pocket, NGHPs should and must proactively manage these issues to conclusion when resolving tort claims.