The Medicare Secondary Payer (MSP) Private Cause of Action (PCOA) provides for double damages when a primary plan fails to pay for Medicare’s conditional payment. See 42 USC §1395y(b)(3)(A). How to trigger the primary plan’s responsibility under this law has been at the forefront of recent MSP decisions that have come down as of recent. The MSP PCOA is a potential threat for primary payers (insurers) for several reasons: 1) Double damages, even where Medicare has already been reimbursed (see our prior blog on McDonald v. Indemnity Insurance here); 2) inconsistency of decisions across multiple jurisdictions are unclear when and who may bring a MSP PCOA; and 3) There is a chilling effect on how to settle a claim with a Medicare beneficiary with outstanding conditional payment obligations to Medicare and Medicare Advantage Plans.
Two cases recently published illustrate insurer’s concerns involving the MSP PCOA:
In MSP Recovery, LLC v. Progressive Select Insurance Company, 2015 U.S. Dist. LEXIS 47784 (11th Cir. April 1, 2015), Plaintiff, a Medicare beneficiary, held coverage through a Medicare Advantage Organization (MAO) when he was involved in a car accident. Because of the accident, Plaintiff’s related medical bills should have been paid through his PIP coverage with Progressive; however, because Progressive does not pay “promptly” his medical expenses were covered conditionally by the MAO. MSP Recovery, LLC sought recovery, through assignment by the MAO, and filed for PCOA recovery against the PIP coverage from Progressive because of the failure to provide reimbursement. Progressive prevailed on its procedural Motion to Dismiss, because no facts were alleged that Progressive’s responsibility had been demonstrated, a requirement under the MSP law. A critical condition precedent to such lawsuit was whether there was a settlement, judgment, or award.
The next case to have come down that adds to the uncertainty for insurers is Plante v. Dake, 2014 U.S. Dist. LEXIS 183345, out of the U.S. District Court for the Northern District of New York (decided in August of 2014, but not published April 2015). In Plante, a pro se litigant (no attorney involved), filed suit against Stewart’s Shops for a slip and fall. As part of her complaint, she included allegations that as a Medicare beneficiary, the defendant failed to notify Medicare and pay the outstanding conditional payment obligation and sought PCOA double damages. Defendants won their motion to dismiss because there was no demonstrated responsibility as the underlying claim was still being investigated.
Franco Signor commentary: With regard to the first case, had MSP Recovery LLC alleged that Progressive’s responsibility was demonstrated, which in this case possibly through “other means” language of the MSP because of the contract of PIP insurance, then the PCOA may have likely survived the Motion to Dismiss. We have previously seen this in MSP PCOA cases such as Michigan Spine and Brain Surgeons, PLLC v. State Farm. While those cases did not present the “other means” argument, those courts concluded that the MSP would be rendered ineffective as no-fault matters do not involve a settlement, judgment or award, and elected to ignore the requirement. However, it would seem that the MSP PCOA could be successfully argued based on the MSP “other means” language and the obligation to pay exists via a contract of insurance.
With regard to the Plante case, it demonstrates that in the cases of liability insurance, a necessary condition precedent to a MSP PCOA requires demonstrated responsibility by way of settlement, judgment or award. Insurers must make certain to manage the conditional payment reimbursement responsibility after a settlement, judgment, or award. Otherwise, they may be held accountable in a future claim for double damages.
In summary, the envelope is certainly being pushed with regard to the MSP PCOA. Companies such as MSP Recovery LLC now exist solely to assist in MSP recoveries, and potentially to exploit the MSP PCOA. We have seen every type of litigant under the sun seeking to bring a MSP PCOA at this point, from healthcare providers, to MAOs, to recovery agencies, to pro se litigants trying to use this arguably ambiguous and powerful clause within the MSP. We will likely continue to see the MSP PCOA being utilized in MSP recoveries.
HEATHER SCHWARTZ SANDERSON, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer, Franco Signor LLC