In Cupp vs. Humana, the Federal District Court granted Humana, a Medicare Advantage Plan, dismissal of the complaint against it.   The Medicare beneficiary was involved in an automobile accident and injured. He presented a claim against the responsible driver, and its insurer (State Farm), agreed to settle for $25,000.  Shortly, after such resolution, Humana, the Medicare beneficiary’s health plan, asked for prompt reimbursement of payments for treatment it made as a result of the accident. Since Humana provided medical benefits under a Medicare Advantage Plan it advocated that it’s right to reimbursement was not based on state subrogation law, but rather Federal law known as the Medicare Secondary Payer Act and it’s related regulations. Such law per Humana would allow it to claim the entire amount of the settlement because it’s benefit payments had exceeded the settlement amount. As the Medicare beneficiary was not represented there was no issue presented for set off for attorney’s fees and costs, typically allowed by Medicare.

Shocked by this change in fortune, the Medicare beneficiary amended his state law complaint pending for the automobile accident to include Humana as a defendant.  He had hopes to enlist the State court’s assistance to arrive at an equitable resolution. Regrettably, his action was moved by Humana to Federal District Court since Federal jurisdiction under the law was triggered.  Humana then promptly moved the District Court for dismissal of the Medicare beneficiary’s complaint based on jurisdictional grounds.  Humana took the position that it’s Medicare Advantage Plans are treated exactly the same as traditional Medicare programs administered by the U.S.  These programs do not allow a Medicare beneficiary to file a claim in the Courts to resolve a reimbursement issue, unless the Medicare beneficiary first exhausts all of his administrative remedies. This prohibition is for the protection of Medicare, passed by Congress to insulate the program from unwarranted litigation and expense.  The District Court held that Medicare Advantage Plans has this same protection and is consistent with other similar court decisions on this issue.

The Medicare beneficiary lost which is why it is important to identify these issues before settlement and seek clarification as to the potential vales being sought by such Plans.  Equally important to understand is that the win here continues to support Humana’s position that it is allowed prompt reimbursement from the primary plan or State Farm in this case.  Under the Medicare Secondary Payer law a primary plan is responsible to pay Medicare, even if it has already paid claimant.  Humana  is working hard to make that connection and has achieved success in the Third Circuit.  However, equally important is that Humana must accept both the benefits and burdens of being treated the same as the Government. It must comply with SMART provisions once it is made aware of a loss. It is subject to a limitations period for 3 years and it’s decisions can be appealed. Moreover, as Medicare issues thresholds or adopts safe harbors, the Medicare Advantage Plan cannot escape its responsibility to adhere to those standards.  Bottom-line it is a two way street that must be managed.

We expect Medicare Advantage Plans to continue to perfect its rights under the Medicare Secondary Payer law.  What is so concerning that if successful, it is hard to know when such Plan is involved. Traditional Medicare has a tool for primary plans to become aware of Medicare involvement.  That tool does not provide any information about Medicare Advantage involvement. To be fair and just like Medicare, Medicare Advantage Plans are going to be dinged if there reimbursement claims come as a surprise to Parties involved. A method is needed from these plans to bring a sense of fairness to the process.

We provide MSP compliance services that include management of Medicare Advantage Plan reimbursement claims. We welcome your calls on this topic or any other compliance issues you may have.

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2 responses to “Medicare Advantage Plan Prevails Against Beneficiary”

  1. Gary Reed says:

    Thanks for noticing the win in Cupp v. Johns and Humana Insurance Company. A number of personal injury counsel in Arkansas were telling Humana that all they had to do was file suit in State court, or threaten to do so, and Humana would fold its tent and go away. We think the law is now clear that challenges to MSP determinations must go through the Medicare appeals process — no mater which Medicare option the Medicare beneficiary selects.

  2. Ranelle M Meroney says:

    Thanks, Roy.
    Are you aware of any authority for the second part of your third paragraph? I have a client who needs to know if the fixed percentage option and the recovery threshold ($1000) apply to Medicare Advantage Plans.
    Are you aware of any case law? I am in Texas.



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