Sixth Circuit Allows Medicare Advantage Plan to Pursue MSP Private Cause of Action for Double Damages against No-Fault Insurance Carrier
Heather Sanderson
September 24, 2015

In an opinion out of the United States District Court for the Eastern District of Tennessee, Cariten Health Plan, Inc. v. Mid-Century Insurance Company, 2015 U.S. Dist. LEXIS 126887 (September 1, 2015 decided; September 24, 2015 published), we have another example where a Medicare Advantage Plan (MAP) has sought to establish its right to an MSP private cause of action (PCOA) for double damages against a non-group health plan (NGHP) which allegedly failed to pay as a primary plan and where the MAP made conditional payments. Cariten Health Plan (“Cariten”), a MAP, was granted the ability to pursue an MSP PCOA for double damages against the no-fault insurance carrier, Mid-Century Insurance Company (“Mid-Century”) pursuant to 42 USC §1395y(b)(3)(A).

Cariten alleged in its Complaint that when an individual who has enrolled in one of its Medicare Advantage Plans is also eligible to receive payment for medical expenses pursuant to an insurance policy with Mid-Century, then Mid-Century becomes a primary medical benefits payer and Cariten becomes a secondary payer by operation of federal law. Despite this, Cariten alleged that Mid-Century routinely refused requests by Cariten for Mid-Century to make primary medical expense payments, or to reimburse Cariten for medical expense payments that Cariten has made prior to learning that Mid-Century in fact had a primary obligation to make the payment.

Cariten specifically cited one of its enrollees, referred to in the decision as “Enrollee 1,” where it made over $55,000 in conditional payments and Mid-Century failed to reimburse these payments as primary payer. Cariten initiated this action seeking a declaration that the no-fault insurance coverage issued by Mid-Century is primary to Medicare benefits advanced by MAPs such as Cariten, and that when an MAP such as Cariten has advanced benefits in which its payments are secondary to Mid-Century’s payment obligations, Mid-Century is obligated to make appropriate reimbursement to the MAP. Ironically, Mid-Century did not dispute being a primary payer for Enrollee 1, even though no settlement, judgment or award had been issued for Enrollee 1. Cariten also claimed that it was entitled to double damages from Mid-Century for the payment of $15,799.43 it made to discharge Enrollee 1’s medical bills, pursuant to the private right of action provided by 42 USC §1395y(b)(3)(A)  or in the alternative, recovery of the entirety of the $55,378.70 in charges submitted by Enrollee 1’s medical providers, pursuant to a Federal common law right of action.

Cariten brought three counts within its Complaint: 1) an MSP PCOA pursuant to 42 USC §1395y(b)(3)(A) or in the alternative a Right of Action under Federal Common Law; 2) a Claim for Restitution or Unjust Enrichment; and 3) a Claim for an Accounting. Mid-Century filed a Motion to Dismiss the Complaint, and the Court ultimately granted Mid-Century’s Motion to Dismiss all counts, except for only the MSP PCOA pursuant to 42 USC §1395y(b)(3)(A). For the purposes of this blog, only the remaining count which Cariten is allowed to pursue, the MSP PCOA, will be discussed.

In deciding whether to allow Cariten’s MSP PCOA pursuant to 42 USC §1395y(b)(3)(A) to proceed, the Court looked to the In Re Avandia case, and found it to be persuasive. As the court in Avandia noted, the term “subchapter” refers to the entire Medicare Statute, including Part C governing MAPs. Therefore, as cross-referenced in the “[o]rganization as secondary payer” provision of Medicare Part C, 42 U.S.C. § 1395w-22(a)(4), the language of § 1395y(b)(2)(A)applies to MAPs. Additionally, the private right of action provision of § 1395y(b)(3)(A) specifically refers to the secondary payer scheme by citing paragraph (2)(A), but not the conditional payments scheme of paragraph (2)(B). Thus, § 1395y(b)(3)(A) provides a private right of action that extends to MAP plans for violations of § 1395y(b)(2)(A). Therefore, since § 1395y(b)(3)(A) provides Cariten with a Federal right of action, Cariten may proceed and has a plausible claim for relief.

Franco Signor Commentary: This decision is monumental as we now essentially have three Circuits in agreement on this issue. Recall that in the case of In Re Avandia out of the Third Circuit, a MAP was granted the right to the MSP PCOA (the writ of certiorari of this case to the U.S. Supreme Court was denied). Additionally, Humana Medical Plan v. Western Heritage case out of the U.S. District Court for the Southern District of Florida (11th Circuit), granted Humana the right to an MSP PCOA, although the case is currently on appeal at the 11th Circuit (oral arguments are expected early 2016). This decision, Cariten, out of the Sixth Circuit, now brings the tally to three Circuits allowing the MSP PCOA to proceed by a MAP against an NGHP. However, we do have one Circuit that has disagreed. Recall that previously in the Ninth Circuit in the Parra v. PacifiCare of Arizona case, a Medicare Advantage Plan was denied the right to the MSP PCOA.

The tide seems to be heading in favor of MAPs having the same rights as Medicare as we now have three Circuits in agreement on this issue. Of course we will wait to see what happens with the Western Heritage case and what courts decide in other jurisdictions, but as of now, it is becoming abundantly clear that NGHP payers need to be cautious where a MAP has made conditional payments and is seeking reimbursement. Prompt reimbursement of these payments to the MAP will avert an MSP PCOA for double damages; MAP conditional payment demands should not be ignored!

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer