Eleventh Circuit Court Rules Again in Favor of Medicare Advantage Plans: Contract of Insurance Demonstrates Responsibility to Pay
Heather Sanderson
September 16, 2016

A decision issued out of the Eleventh Circuit Court of Appeals this week, MSP Recovery, LLC v. Allstate, et. al, 2016 U.S. App. LEXIS 15984 (August 30, 2016) has found that Medicare Advantage Plans (MAPs) may sue a primary plan for a double damages private cause of action under the Medicare Secondary Payer (MSP) Act, without a judgment or settlement finding the primary plan responsible. The “demonstrated responsibility” prerequisite can be satisfied simply by the allegation of the existence of the primary plan’s contractual obligation to pay. This decision is groundbreaking and understanding the how this decision may affect no-fault claims wherein the claimant is also a Medicare beneficiary is important.

This appeal involved seven consolidated cases which were brought by assignees of Medicare Advantage Plans. Plaintiffs MSP Recovery LLC (“MSP Recovery”) and MSPA Claims 1, LLC (“MSPA Claims 1”) were the assignees in this matter on behalf of a MAP. The defendants are all insurance companies that provide personal injury protection (“PIP”) no-fault insurance to automobile owners and operators in Florida. In each case, a person covered by a defendant’s PIP no-fault insurance was injured in an automobile accident and were also enrolled in a MAP provided by Florida Healthcare Plus (“FHCP”). The Plaintiffs alleged that under the MSP, FHCP was a secondary payer and that Defendants were primary plans with obligations to pay some of their insureds’ medical costs. The Plaintiffs filed suit in the Southern District of Florida seeking double damages under 42 U.S.C. § 1395y(b)(3)(A); The assertion was that the Defendant’s responsibility to pay was demonstrated by the insurance contracts the injured persons entered into with the Defendants.

All of the cases were initially dismissed. In each case, the district court relied on local precedent from the Glover v. Liggett Group, Inc. which found that in liability claims, a primary plan’s responsibility to pay must be demonstrated through a judgment or settlement. Here, on appeal in the Eleventh Circuit, the Plaintiffs urged the Court to hold that Glover should only apply when the responsibility to pay arises from tort, and that alleging the existence of a contractual obligation to pay suffices to demonstrate a primary payer’s responsibility under the MSP Act private cause of action.

The Defendants asserted a number of defenses. One of the primary defenses asserted by the Defendants was that the MSP Act does not extend to MAPS such as FHCP. The Court found that this argument was foreclosed by their recent decision in Humana Medical Plan, Inc. v. Western Heritage (for our blog on this case, please click here).

The other primary/main defense and main issue to be addressed by the Court was the demonstrated responsibility issue: Have the Plaintiffs adequately demonstrated the Defendants’ responsibility for payment by alleging an obligation pursuant to the insurance contracts, or must Plaintiffs first obtain a judgment against Defendants by suing for enforcement of those contracts prior to bringing suit under the MSP Act?

The Court recognized that the MSP permits demonstration of a primary plan’s responsibility to pay “by a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 U.S.C. § 1395y(b)(2)(B)(ii).

The question then for the Court was whether the phrase “by other means” permitted demonstration of responsibility by a contractual obligation. A fundamental principle of contract law, the Court found, is that a contract imposes enforceable rights and obligations. Once a contract is entered, the parties’ rights and obligations are binding under the law. Furthermore, for a contractual obligation to not demonstrate “other means” would render the statutory phrase meaningless. If the Defendants were correct that a contract must always be reduced to a judgment, then a “contractual obligation” could never demonstrate responsibility; only a judgment could. Requiring that such a contractual obligation be reduced to a judgment would render superfluous the phrase “by other means.”

For the reasons discussed above, the Eleventh Circuit vacated and remanded the cases for further proceedings not consistent with the opinion.

Franco Signor Commentary: While this Opinion is only binding in the Eleventh Circuit- Alabama, Florida and Georgia, clearly the tide is turning in favor of Medicare Advantage Plans having the same rights as Medicare in various decisions.

This particular case tells us that simply a contract of insurance binds the primary plan to responsibility for reimbursement of conditional payments if a MAP has been paying for treatment. Prompt reimbursement of those conditional payments need to be made or a private cause of action for double damages could be sustained against the primary payer. No settlement, judgment or award needs to occur for the MAP to sustain a double damages private cause of action. It is imperative for payers to be responsive to any correspondence requesting reimbursement for Medicare conditional payments, particularly those asserted by Medicare Advantage Plans.

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