11th Circuit Issues Two
Important Rulings on the
Medicare Secondary Payer Act
In August, 2016, the U.S. Court of Appeals for the Eleventh Circuit issued significant rulings on two important Medicare Secondary Payer Act (“MSP”) provisions. Both rulings involve cases originally filed in Florida.
I. Humana Medical Plan Inc. v. Western Heritage Insurance Company
“This case requires the Court to decide as a matter of first impression in this circuit whether the MSP private cause of action permits a Medicare Advantage Organization (“MAO”) to sue a primary payer that refuses to reimburse the MAO for a secondary payment.”
The Court, after stating the above, said “yes.” This is not a particularly surprising decision except when the facts of the case are considered.
Mary Reale was injured at Hamptons West Condominiums. She was treated for those injuries by several medical providers. Ms. Reale was insured under a Medicare Advantage Plan issued by Humana. The providers billed Humana who paid $19,155.41 to those providers.
A year later, Ms. Reale sued Hamptons West Condominiums. Humana somehow learned of the suit and a pending settlement and therefore sent their demand for reimbursement of the $19,155.41 per the MSP.
Another year passed. At that time, Hamptons West Condominiums and their liability insurer, Western (the Defendant) settled Ms. Reale’s liability claim for $115,000.00. The Reales stated in their settlement agreement there was no Medicare lien and agreed to indemnify Hamptons West and Western against any Medicare lien. (emphasis added). But, that did not happen. So, interestingly enough, Humana first sued the Reales and their attorney for reimbursement. Yet, Humana voluntarily dismissed that action. No reason is given for that decision.
Western also attempted to protect itself by making Humana a payee on the settlement check. That did not work because the Reales objected and a lower Court ultimately issued a “stipulated” Order that Humana would not be named as a payee on the check. BUT, the Order also required the Reale’s attorney to hold the $19,155.41 in trust.
Another suit was filed, this time with the Reales suing Humana, asking the Court to determine what they owed Humana. But that case was dismissed because of jurisdictional issues.
Another year passes. In 2011, Humana sues Western, not only for the original $19,155.41 but double damages as allowed under the MSP. The lower Court ruled Humana had standing to bring the private action and awarded double damages.
The Eleventh Circuit decision upheld that lower Court’s ruling. More importantly, the Court gave a detailed analysis of the MSP, finding that:
1. The MSP made Medicare benefits an “entitlement of last resort, available only if no private insurer was liable;”
2. Western was the primary plan under the MSP.
What about Western’s good faith attempt to protect itself by first attempting to place Humana as a co-payee on the check and then paying $19,155.41 into a trust account per a Court Order? The Court said 42 CRF 411.24 (i)(1) specifically says the primary plan “must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” It also mandates the award of double damages by using the term “shall.”
Some unanswered questions remain. Does Western have any remedy against the Reales or their attorney? Would the remedy be for the initial $19,155.41 or double damages? How do liability insurers protect themselves on Medicare liens when settling liability claims?
These, and many other questions linger. But, the Court’s decision reaffirms one important provision of the MSP: All potential payers, including liability insurers, are primary to Medicare payments.
II. MSP Recovery LLC v. Allstate Ins. Co., et al
The question presented in this case was “whether a contractual obligation, without more (specifically, without a judgment or settlement agreement from a separate proceeding), can satisfy the “demonstrated responsibility” requirement of the private cause of action provided for by the Medicare Secondary Payer Act…”
The Eleventh Circuit ultimately held that it does. For providers, this ruling may seem somewhat irrelevant. However, two important parts of this decision must be noted by all providers and auto insurers:
First, the Court reaffirms, once again, that the MSP mandates that Medicare be a secondary payer to all other payers, including automobile coverage.
Second, personal injury protection (PIP) no-fault insurance is a primary payer under the MSP.
All of the named Defendants were alleged to have provided PIP benefits under auto policies for numerous individuals injured in some way which would trigger PIP coverage. It is not stated in the decision why Medicare made conditional payments to providers before payments were made by the auto insurers. However, it is significant to note one insurer stated that they had exhausted their PIP coverage thus were no longer obligated to pay anything. The Plaintiff asserted that the MSP states repayment is required if the primary plan “has or had” responsibility to make payment. The Court sent this issue back to the District Court for further consideration.
Case # 15-11436 decided August 8, 2016.
It is not clear from the decision if the providers initially sought payment from any potential liability insurer as required by the MSP.
Case # 15-12398 decided August 30, 2016.