Illinois District Court Gives Green Light to MSP Private Cause of Action Litigation for Medicare Advantage Plan Conditional Payments Despite Exhaustion of No-Fault Policy Limits
Heather Sanderson
July 17, 2018

Earlier this year, we blogged about an action by MSP Recovery LLC against State Farm being dismissed. Recall that MSP Recovery LLC is an entity out of Miami, Florida that has been filing litigation and class actions nationwide on behalf of Medicare Advantage Plans (MAPs) against primary plans for the alleged failure to reimburse conditional payments to the MAP. For our prior blog on the dismissal, click here.

This particular litigation has been revived after MSP Recovery LLC filed a Second Amended Complaint and MSP Recovery LLC has now survived State Farm’s subsequent Motion to Dismiss the Second Complaint.

While there are numerous lawsuits like these by MSP Recovery across the country, and this particular action is still in progress as it is not a final decision, the Court’s commentary on why it chose to allow the litigation to progress is not only telling about how the Seventh Circuit Court of Appeals may view future MSP Private Cause of Action litigation, but this decision also stands to potentially expand MAPs’ ability to recover payments despite exhaustion of policy limits. We’ll focus this blog solely on the noteworthy points of this decision.

The representative Medicare beneficiary referenced in this action (referred to as “O.D.”) had filed an auto claim with State Farm. MSPA Claims (an affiliated entity of MSP Recovery LLC) according to the Court had a valid assignment from the Medicare Advantage Plan that made payments relative to O.D.’s injury. However, State Farm had made medical payments for O.D., as well. In fact, a Team Manager for State Farm had notified The Centers for Medicare & Medicaid Services (CMS) that its insured, O.D., 1) was involved in a car accident and sustained injury; 2) State Farm paid a series of medical bills under O.D.’s car insurance policy and those payments exhausted the coverage limits under the insurance policy.

As a result, State Farm alleged in its Motion to Dismiss that no subject matter jurisdiction existed since State Farm exhausted its policy on O.D.’s medical expenses. The court noted that the ultimate question was whether State Farm failed to reimburse the MAP for conditional payments made. The court noted that policy exhaustion was irrelevant. The simple question is: If MSP Recovery/MSPA Claims assignor (the MAP) paid for O.D.’s expenses as well, but was not reimbursed, then MSP Recovery is entitled to reimbursement.

Further, the court noted that 42 CFR § 411.24(e) states that “the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” Additionally, the Court deferred to the Eleventh Circuit’s findings that to allege an MSP Private Cause of Action pursuant to 42 USC §1395y(b)(3)(A), “a plaintiff is entitled to summary judgment on a 1395y(b)(3)(A) claim when there is no genuine issue of material fact regarding 1) the defendant’s status as a primary plan; 2) the defendant’s failure to provide for primary payment or appropriate reimbursement; and 3) the damages amount.”

The court also determined that MSP Recovery could maintain its 1395y(b)(3)(A) private cause of action in addition to an additional action pursuant to 42 CFR § 411.24(e). The court noted that in review of the regulatory history of § 411.24 demonstrates that CMS understands that these actions could be enforced together.

Franco Signor Commentary: This action has the potential to exponentially broaden the scope of the MSP Private Cause of Action to allow for MAPs to recover beyond even traditional Medicare’s recovery rights. Historically, we have seen the private cause of action separately and not in addition to an action under 42 CFR 411.24.

Further, typically with traditional Medicare, Medicare will not pursue recovery where the primary plan can demonstrate exhaustion of the policy. Chapter 5 of the Medicare Secondary Payer (MSP) Manual provides that once the contractor determines that no-fault benefits have been exhausted, the contractor shall terminate ongoing responsibility for medicals (ORM), and Medicare will start paying for treatment related to the injury. As such, we have witnessed that where the primary plan can demonstrate exhaustion of policy limits, Medicare will withdraw its demand for recovery.

This court’s decision is therefore seeming to lend a greater ability to recover conditional payments to MAPs than traditional Medicare. This logic by the Illinois District Court is majorly flawed. A primary plan is primary only up to its policy limits. Medicare cannot recover beyond a primary plan’s policy. We will continue to monitor this alarming decision.