A divided panel of the Eleventh Circuit has joined the Third Circuit in holding that not only the government, but also a private insurer acting as a Medicare Advantage Organization (“MAO”), has a right of action for double damages when a primary payer fails to reimburse the MAO for payments the MAO has made. The case includes analysis of several provisions of the Medicare Act and a collection of acronyms specific to the Medicare context, but the upshot is that a health or liability insurer that does not reimburse payments made by another insurer acting as an MAO may be liable to the MAO for double the amount at issue.
The case is Humana Medical Plan, Inc. v. Western Heritage Insurance Co., 2016 WL 4169120 (11th Cir. Aug. 8, 2016). The majority opinion, written by Judge Susan Black and joined by visiting Second Circuit Judge Barrington D. Parker, Jr., is grounded in Part (3) of the Medicare Secondary Payer Act, or “MSP.” The MSP was enacted in 1980 “in an effort to curb the rising costs of Medicare.” Among other things, the MSP made private insurers “primary” payers for amounts covered by their policies—including liability as well as health policies—and Medicare the “secondary” payer, such that Medicare is available only in the absence of primary insurance.
Part (2)(A) of the MSP “is a general prohibition against making Medicare payments for items or services for which a primary plan has paid or can reasonably be expected to pay.” Part (2)(B) provides that the Secretary of Health & Human Services may make a conditional payment, conditioned on reimbursement, when a primary payer does not fulfill its duties; that “the United Sates may bring an action” against a primary payer; and that the United States may seek repayment within three years, “[n]otwithstanding any other time limits that may exist for filing a claim under an employer group health plan.” MSP Part (3)(A) of the MSP, “Private cause of action,” provides:
There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) or (2)(A).
42 U.S.C. § 1395y(b)(3)(A). The question before the Humana court was whether or how a “Medicare Advantage Organization”—a private party administering Medicare benefits under contract with the government—fits into this framework.
Medicare Advantage Organizations (“MAO”s) were created as part of Medicare Part C, enacted in 1997. The goal was “to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system.” A private insurance company, operating as an MAO, administers Medicare benefits under contract with the Centers for Medicare and Medicaid Services (“CMS”). The insurance company must provide at least the same benefits as the government would, and receives from the government a fixed fee per enrollee. Part C also includes the following “right-to-charge” provision:
[An MAO] may (in the case of the provision of items and services to an individual under [an MAO plan] under circumstances in which payment under this subchapter is made secondary pursuant to [Part (2)(A) of the MSP]) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in [Part (2)(A)]–
(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.
42 U.S.C. § 1395w-22(a)(4). Several courts, including the Courts of Appeals for the Sixth and Ninth Circuits, have held that the “right-to-charge” provision does not create a private cause of action for an MAO seeking reimbursement. See, e.g., Care Choices HMO v. Engstrom, 330 F.3d 786, 790 (6th Cir. 2003); Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146, 1154 (9th Cir. 2013).
Against this backdrop, the district court and then the Eleventh Circuit considered Humana’s claim for reimbursement of $19,155.41 Humana had paid to medical providers for Mary Reale, an enrollee in Humana’s MAO. Ms. Reale was injured at a condominium in Florida. She sought medical treatment; her providers billed Humana, and Humana paid $19,155.41.
Thereafter, Mrs. Reale and her husband sued the condominium association in Florida state court. In light of that action and its pending settlement, Humana issued to Ms. Reale an “Organization Determination” requesting $19,155.41 in reimbursement. She and her husband settled with the association and its insurer—Western—for $115,000. The Reales also represented in the settlement agreement that there was no Medicare or other lien or right to subrogation.
After unsuccessfully trying to obtain payment from the Reales, Humana demanded payment from, and then sued, Western. The complaint included three counts: for reimbursement of the $19,155.41 under the MSP private cause of action (Part (3)(A) of the MSP); for a declaration of Humana’s entitlement to payment under the Medicare scheme; and state law claims. Following dismissal of the state law claims, Humana moved for summary judgment on the federal claims. The district court granted the motion, holding that Part 3 of the MSP created a private cause of action available to an MAO. Western appealed.
On appeal, the panel majority began its evaluation of the case by noting that “Humana’s contention appears to comport with CMS regulations, which provide that an MAO ‘will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations,’” which provide among other things that the Secretary may sue a primary payer or any other entity (including a beneficiary) that receives a primary payment. The court also observed that Humana did not rely on the “right-to-charge” provision included in Part C, or on Part (2)(B) of the MSP, which establishes a right of action for the government. “Rather, Humana argues that the MSP private cause of action is unambiguous and broadly permits any private party with standing (including an MAO) to sue a primary plan. The district court concurred with the Third Circuit’s analysis of the MSP private cause of action and held that ‘[t]he statutory text of the MSP Act clearly indicates that MAOs are included within the purview of parties who may bring a private cause of action.’ We agree.”
Reading the MSP “in the context of the broader Medicare Act,” the court turned to the reference in Part (3) of the MSP—creating the cause of action—to MSP Parts 1 and 2(A). Part (1) regulates group plans and had no bearing on the court’s analysis. Part (2)(A) defines “primary plan” and makes Medicare payments secondary, and Part (2)(B) applies to “conditional payments” made by the government. Parts (2)(A), (2)(B), and (3) “work together to establish a comprehensive MSP scheme”: (2)(A) establishes priority; (2)(B) addresses the government’s enforcement options; and “Paragraph (3)(A), the MSP private cause of action, grants private actors a federal remedy when a primary plan fails to fulfill its payment obligation, thereby undermining the secondary-payer scheme created by paragraph (2)(A).”
The court rejected Western’s argument that the MSP does not govern MAOs at all, and that only the “right-to-charge” provision applies to MAOs—MSP “Part (2)(A) unambiguously refers to all Medicare payments, which include both traditional Medicare and Medicare Advantage plans.” And the right-to-charge provision expressly refers to Part (2)(A) of the MSP, “reveal[ing] that MAO payments are made secondary to primary payments pursuant to the MSP, not the MAO right-to-charge provision.”
The majority also noted that whether or not MSP Part (2)(B) applies to MAOs as well as to the government—a question left open—neither Part (2)(A) nor (3) includes the limiting language found in (2)(B). “Thus, a primary plan that fails to make primary payment has failed to do so ‘in accordance with paragraphs (1) and (2)(A),’ regardless of whether the secondary payer is the Secretary or an MAO.” And the court rejected Humana’s argument that it did not “fail to provide for payment or appropriate reimbursement” in the Reales’ case, as required for an award of double damages, because it did not know that Humana was an MAO: “Western had the ability to discern the precise nature of Ms. Reale’s health insurance coverage. . . . Western therefore had constructive knowledge of Humana’s Medicare payment.”
Judge William Pryor, Jr. dissented, asserting that “the majority and the Third Circuit fail to take into account the phrase ‘in accordance with paragraphs (1) and (2)(A)’” in MSP Part (3). Paragraph (2)(A), Judge Pryor noted, “repeatedly and exclusively refers to the Secretary and the Trust Funds. . . . A Medicare Advantage Organization is not the Secretary, and it does not make payments out of the Trust Funds. As a result, it cannot seek payment or reimbursement in accordance with paragraph (2)(A).” Judge Pryor also disagreed with the majority’s observation that affording a right of action to MAOs comported with CMS regulations under which MAOs have the “same rights” as the Secretary. The Secretary, Judge Pryor noted, must sue under Part (2)(B), which establishes that “the United States may bring an action” against a primary payer. That provision, he noted, cannot apply to an MAO. “The regulation cited by the majority does not interpret [MSP Part (3)], and it certainly cannot rewrite the clear text of that section. . . . I would conclude that the text of the statute is clear and that Humana failed to state a claim.”
On January 25, 2018, following a poll requested by a member of the court and over Judge Tjoflat’s dissent, the court ordered that the case would not be reheard en banc.
Posted by Valerie Sanders.