The Medicare Advantage Plan (MAP) system continues to grow; according to the Kaiser Family Foundation, as much as 31% of the Medicare population in the United States is also enrolled in a Medicare Advantage Plan. Recently, we have seen a great deal of case law where courts have had the difficult to task in deciphering whether MAPs and MAP beneficiaries can seek to benefit from the MSP private cause of action, 42 USC §1395y(b)(3)(A), which was previously only thought to exist for traditional Medicare conditional payment recoveries. Also, a continued discussion and debate is whether MAP plans should be considered as part of the traditional Medicare system or whether they should be treated like private insurance plans. The ultimate determination as to whether these plans are to be considered to have the same rights and role of traditional Medicare or not has an extremely meaningful effect on rights under the MSP.
Two cases recently published cases which decipher MSP Medicare Advantage recovery rights:
In MSP Claims 1, LLC v. Liberty Mutual Insurance, 2015 U.S. Dist. LEXIS 99188 (United States District Court for the Southern District of Florida, July 22, 2015), Plaintiff, a Medicare beneficiary, held coverage through a Medicare Advantage Plan (MAP) when she was involved in a car accident. Because of the accident, Plaintiff’s related medical bills should have been paid through her PIP coverage with Liberty Mutual; however, Liberty Mutual denied coverage and the MAP made payments for the Plaintiff’s medical care.
Plaintiff, who was assigned the MAP’s right to reimbursement, filed suit against Liberty Mutual seeking 1) a declaratory judgment as to Liberty Mutual’s obligation to reimburse Medicare benefits; 2) a private cause of action for double damages under 42 USC §1395y(b)(3)(A); 3) accounting; 4) breach of contract under Florida law; and 5) equitable subrogation. Liberty Mutual filed a motion to dismiss arguing that the complaint should be dismissed for various procedural reasons and also that 42 USC §1395y(b)(3)(A) does not create a private cause of action for a MAP.
The court’s primary analysis around whether the Plaintiff had a right to a private cause of action in this case was well done. Recognizing that a private cause of action for double damages typically would not exist unless a settlement, judgment, or award takes place, the court also recognized that this court and other federal courts have applied the reasoning from Glover v. Liggett Grp., Inc., that an alleged responsibility to pay can arise out of a contractual obligation, such as where an insurance contract exists. Therefore, theoretically the Plaintiff in this case could have a private cause of action simply based upon her contract with Liberty Mutual. However, the court noted that the Florida PIP statute recognizes that an insurer should be able to “assert that the claim was unrelated, was not medically necessary, or was unreasonable.” Fla. Stat. § 627.736(4)(b). Therefore, even as a no-fault/PIP insurer, Liberty Mutual should have the ability to contest payment of claims without facing double damages.
The next case to have come down just in this past week regarding MSP and Medicare Advantage Plans is Honey v. Bayhealth Medical Center, Inc., 2015 Del. Super. LEXIS 378 (Supreme Court of Delaware, July 28, 2015). Recall our recent blog on Stayton v. Delaware Health Corporation– click here to read the prior blog. In Stayton, it was held that a Plaintiff’s damages stemming from the costs of medical treatment are limited to amounts actually paid by Medicare, rather than the amounts billed by Medicare. During the Supreme Court’s consideration of that issue, medical providers (Bayhealth Medical Center and Dr. Eric Hitchcock) filed a motion in limine in the case at bar, seeking to prevent the Plaintiff, who was enrolled in a MAP, from presenting evidence of medical expenses above that which her MAP actually paid.
The court noted that while the Supreme Court’s ruling in Stayton resolved the question regarding collateral source rule and Medicare write-offs, it did not specifically address situations in which a plaintiff is enrolled in a MAP. Therefore, the Supreme Court had to further decide whether the Plaintiff in this case was insured under traditional Medicare, and therefore is subject to Stayton’s limitation on the collateral source rule, or was instead covered by a private health insurer.
The Delaware Supreme Court ultimately decided that MAPs are within the larger Medicare system and therefore the Plaintiff was insured by Medicare and Stayton’s ruling applies. The following factors were persuasive in the Supreme Court finding MAPs to be part of the “broader Medicare system”: MAPs are closely regulated by Medicare and have to bid for approval and then subsequently be licensed in each state it operates; MAPs must abide by national coverage determinations provided by CMS; MAPs must utilize the traditional Medicare appeals process for coverage disputes and Medicare appeals decisions are binding on the MAP. While the Supreme Court did recognize the differences in how MAPs provide and pay for services versus how Medicare may provide coverage and pay for services, ultimately MAPs are Medicare and the Stayton decision applied to this case.
Franco Signor commentary: With regard to the MSP Claims 1, LLC case, the Southern District of Florida made the right decision in determining that the MAP had the right to contest coverage under state law and that the mere existence of a contract for coverage should not subject a PIP insurer to a cause for double damages alone (in Florida). This decision is in line with the Glover decision as well as the recent MSP Recovery, LLC v. Progressive decision (click here for our prior blog on the MSP Recovery, LLC case).
Regarding the second case, Honey, this decision has greater implications beyond that of just collateral source. We now have a decision out of the Supreme Court of Delaware which finds that MAPs are essentially Medicare. The Supreme Court in Honey deferred to the In Re Avandia Mktg. decision noting that MAPs “have their recovery rights determined statutorily, just as traditional Medicare. Additionally, the court noted that “[t]here is no such thing as a [M]edicare Advantage insurance policy. Medicare Advantage is, instead, a federal program.” Therefore, the Honey case will have a profound impact on future decisions involving whether MAPs have the same rights under the MSP as traditional Medicare.
In summary, MSP Medicare Advantage Plan Recovery right actions is rampant in current case law. Because arguably it is unclear clear whether the MSP should apply the same to MAPs as it should to traditional Medicare recoveries in various regards, we will continue to see case law such as the above continue. It is vital for payers to understand how MSP Medicare Advantage Plan case law may affect claims being handled in all jurisdictions.
The best defense against MSP liabilities is to consult with an expert who understands this complex area of the law and who accounts for all of the MSP obligations present at the time of settlement.
Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer
Franco Signor LLC