In its second major Medicare Secondary Payer (“MSP”) Act decision in a month, the Eleventh Circuit held that an insurer’s contractual obligation, without a judgment or settlement, can provide the “demonstrated responsibility” necessary to allow a claim against the insurer for double damages under the Act. MSP Recovery, LLC v. Allstate Ins. Co., 2016 WL 4525222 (11th Cir. Aug. 30, 2016).
Each of the seven cases consolidated in the appeal was brought by an assignee of a Florida HMO. The HMO, acting as a Medicare Advantage Organization (or “MAO”) under contract with the federal Centers for Medicare and Medicaid Services, had conditionally paid medical expenses for people covered by personal injury protection (“PIP”) no-fault policies issued by the defendant insurance companies. The payments were conditioned on reimbursement to the MAO by each claimant’s primary plan—a term which “covers more than just health insurance plans. The law defines a ‘primary plan’ as ‘a group health plan or large group health plan, . . . a workmen’s compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance. . . .’” 2016 WL 4525222, at *1 (quoting 42 U.S.C. § 1395y(b)(2)(A).) Reimbursement by a primary plan is required “if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to” the item or service at issue—and in an action against a primary plan for non-payment, double damages are available. Id. at *2. (The Eleventh Circuit’s other recent MSP Act decision, Humana Medical Plan, Inc. v. Western Heritage Insurance Co., 2016 WL 4169120 (11th Cir. Aug. 8, 2016), held that a private party with standing, not just the United States, has a cause of action for double damages.) Responsibility may be demonstrated “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) . . . or by other means.” 42 U.S.C. § 1395y(b)(2)(B)(ii).
In each of the consolidated cases, the district court dismissed the MAO’s claims for reimbursement (and double damages) for failure to meet the “demonstrated responsibility” requirement with respect to the defendant insurers. The district court relied on the Eleventh Circuit’s 2006 decision in Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006), in which the defendant was alleged to be a primary payer responsible for payment by virtue of its liability in tort. “When the primary plan’s responsibility to pay arises from tort liability, we held in Glover, liability might be demonstrated by a judgment or settlement, but the tortfeasor’s liability cannot be ‘demonstrated’ through the MSP Act claim itself. . . . In other words, a federal lawsuit under the MSP Act cannot serve as a substitute for determining liability via a standard tort claim; the tortfeasor’s responsibility to pay must be independently established.” The question presented in MSP Recovery was whether “demonstrated responsibility” sufficient to allow a claim under the MSP Act requires a judgment or settlement imposing responsibility when the alleged basis for responsibility is contractual.
In an opinion written by Judge Anderson (and joined by Chief Judge Carnes and by Judge Roger W. Titus, visiting from the District of Maryland), the Eleventh Circuit began its analysis by rejecting one defendant’s claim that the plaintiff, which had been assigned its claims by an MAO, lacked standing because contracts with the federal government are generally non-assignable. “The assumption underlying IDS’s argument appears to be that a Medicare Advantage Organization’s standing to bring a claim under the MSP Act is derivative of its contractual relationship with Medicare. . . . [But the plaintiff] did not undertake to do anything that [the MAO] is obligated to do under its contract with the government. . . . Rather, [the MAO] assigned to Plaintiffs here a claim created by statute, one that is entirely separate from its contract with Medicare.”
Turning to the merits, the court noted that regulations issued by the Centers for Medicare and Medicaid Services explicitly refer to a contractual obligation as a method of demonstrating responsibility for payment, finding Chevron deference appropriate where “other means” is ambiguous “[a]nd a contractual obligation seems to us to be an eminently reasonable method of demonstrating responsibility.” Chevron U.S.A., Inc. v. Nat. Res. Def. Council, 467 U.S. 837 (1984). And “[a] contract imposes obligations on the parties immediately, without any involvement of the courts.” The defendants’ proposed construction of the statute—under which a judgment or settlement would be required to demonstrate primary payer responsibility—would also render the phrase “by other means” superfluous. And after all, the court noted, “a settlement agreement is just a type of contract. . . . We see no reason that other types of agreements—such as insurance contracts—should be treated differently.”
As emphasized at the end of the opinion, the holding is that a contractual obligation is sufficient to demonstrate responsibility “to satisfy the condition precedent to suit under the MSP Act.” A plaintiff still must allege and then prove that a defendant is actually responsible for payment. But under MSP Recovery and Humana Medical Plan, insurers whose PIP, health, liability, or other policies arguably cover amounts paid by Medicare, by an MAO, or by an MAO’s assignee are subject to actions for double damages for non-payment.
Posted by Valerie Sanders.