Medicare Advantage Plans (MAPs), also known as Medicare “Part C,” are private insurance plans that provide a Medicare beneficiary’s “Part A” and “Part B” benefits. A Medicare beneficiary can choose to enroll in a MAP rather than traditional Medicare. Part D plans provide benefits for a Medicare beneficiary’s prescription drugs. It is important to note that traditional Medicare generally does not provide prescription coverage directly; a beneficiary must enroll in a Part D plan to receive Part D benefits.
MAPs and Part D plans have undefined recovery rights for conditional payments under the Medicare Secondary Payer Act (MSP). When Congress created the Part D program in 2003, it failed to address secondary payer issues beyond simply stating that Part D plans’ secondary payer rights operated “in the same manner” as the MAPs’ secondary payer rights. 42 U.S.C. §1860D-2(a)(4). The Centers for Medicare and Medicaid Services (CMS) Prescription Drug Benefit Manual adds little more direction or guidance to Part D plans’ obligations under the MSP. In fact, it only goes as far as stating: “The MMA extended MSP laws applicable to MA organizations to Part D sponsors. Accordingly, Part D sponsors will have the same responsibilities under MSP laws as do MA plans….” See CMS Medicare Prescription Drug Benefit Manual, Chapter 14, Coordination of Benefits, Section 50.13. The case law across the country is scattered on the degree of recovery rights that MAPs and thereby Part D plans have for payments covered by other insurance or a settlement, a judgment, or an award. It is clear, however, that at the very least they have rights to recover the payments that they have made just as they would for any other medical lien, and in some jurisdictions, they have the right to recover double damages for payments that are not reimbursed. This article will explore the current state of confusion and ambiguity pertaining to the recovery rights for conditional payments that MAPs and Part D plans have.
MAP and Part D Recovery Rights Case Law History
Exploring the history of MAP and Part D recovery rights case law is fundamental to understanding what brought us to this confusion today. On February 4, 2011, a wrongful death action involving a MAP enrollee in the U.S. District Court for the District of Arizona titled Parra v. Pacificare of Arizona, 715 F.3d 1146 (9th Cir. Ariz. 2013), found that the MSP did not provide a private cause of action for MAPs and Part D plans similar to that provided for Part A and B plans under 42 U.S.C. §1395y(b)(3) (A). Additionally, the Parra decision found no congressional intent to infer such a right. Due to express statutory and regulatory provisions regarding billing rights, the court found that the proper place for a MAP reimbursement claim lies in the state courts under traditional contract theories.
Subsequently, the U.S. District Court for the Eastern District of Pennsylvania ruled against Humana in its efforts to recover from GlaxoSmithKline in a case titled In Re Avandia v. GSK. In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353(3d Cir. Pa. 2012), cert. denied, 133 S. Ct. 1800 (2013). While Humana argued that the MSP, 42 U.S.C. §1395y(b)(3)(A), unambiguously granted a private cause of action to MAPs, the court found that it did not. Rather, the court held that Humana only had a lien right under state law to recover such payments.
On December 5, 2011, in response to the Parra and In Re Avandia decisions, the CMS issued a memorandum in support of MAPs and Part D plans having the right to collect for payment of services when Medicare is not the primary payer. In the memorandum, CMS went so far as to state that MAPs and Part D plans can exercise the same rights of recovery that the Secretary of Health and Human Services exercises under the existing MSP regulations. While the CMS memo was very clear on CMS’ position on MAP and Part D recovery rights, a memorandum issued by an administrative agency is not binding, and therefore litigation continued. Even so, the CMS memo arguably could carry some weight through Chevron deference. Chevron deference is a well-known, two-part test established by the U.S. Supreme Court for determining when a federal court ought to defer to the interpretation of a statute by the federal agency charged with implementing that statute. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
On July 12, 2012, the Third Circuit Court of Appeals reversed the U.S. district court decision in In Re Avandia. The Third Circuit found that MAPs have the same rights to recovery as Medicare and additionally that MAPs have a right to pursue a private cause of action for double damages under the MSP for conditional payments that are not reimbursed. Presumably the court would have found the same for Part D plans, although no such claims were present in the case.
On April 15, 2013, the U.S. Supreme Court denied certiorari to review the In Re Avandia case; therefore, the decision of the Third Circuit remained in place. Just four days later, on April 19, 2013, the Ninth Circuit affirmed the initial decision in the Parra case, which found that MAPs do not have the same rights to recovery as Medicare does and can recover conditional payments by way of their contract with the beneficiary.
Then on September 24, 2014, the U.S. District Court for the Western District of Texas (Austin Division) overturned an earlier U.S. magistrate judge’s recommendation in Humana v. Farmers Texas County Mutual Insurance Company, 95 F. Supp. 3d 983 (D. Tex. 2014), which rejected a private cause of action for MAPs. The decision is the first in the Fifth Circuit to follow the line of reasoning from the Third Circuit’s In Re Avandia decision.
The most recent major decision on this issue is Collins v. Wellcare Health Plans, 73 F. Supp. 3d 653 (D. La. 2014), on December 16, 2014. There, the U.S. District Court for the Eastern District of Louisiana decided that the MAP had a private cause of action under the MSP to secure reimbursement from its insured to recover conditional payments that it had made related to an automobile accident. This is the second decision from the Fifth Circuit to follow In Re Avandia.
The resulting question is, where do we stand today? Currently, we have two circuits, the Ninth and Third Circuit, which have differing views on MAP recovery rights. Both circuits agree that MAPs and Part D plans have the right to recover conditional payments; however, they disagree as to the extent to which MAPs and Part D plans can use that right. We cannot read anything from the U.S. Supreme Court’s denial of review in the In Re Avandia case.
That denial first was too close in time to the decision in the Ninth Circuit (Parra); but more importantly, legally, the U.S. Supreme Court had the right to deny certiorari, and not hearing the case has no precedential value.
Each circuit court can still interpret the law based on legal authority that exists across the country. With two conflicting circuit opinions, the law should be viewed as unsettled and unclear.
Best Practices for Payers Regarding Medicare Advantage and Part D Payments
Until Congress clarifies the MSP law, or the U.S. Supreme Court rules on this issue, more litigation is expected. Insurance carriers should therefore consider MAPs and Part D plans as generating potential claims for recovery when resolving a workers’ compensation or liability claim with a Medicare beneficiary claimant.
The best way to reduce risk by MAPs and Part D plans is to adopt good practices consistent with the law in the applicable jurisdiction today. Defense lawyers should become familiar with these practices and consider them when approaching a settlement involving a Medicare beneficiary. As always, the threshold question that must be asked is whether or not the case involves a Medicare beneficiary. Timing is crucial to this analysis because it is the claimant’s status on the date of settlement or judgment and not the date of the injury or the accident that is relevant.
Medicare beneficiary status can be based on a number of factors, principally age, illness, or disability. Recall that a claimant’s right to Medicare is not based on need, as with state Medicaid programs, but on eligibility. Once eligibility tests are met, then Medicare status is established. Thus, if your claimant is 65 years or older, has contracted Lou Gehrig’s, suffers from kidney disease, or is entitled to Social Security disability income, he or she is more likely than not a Medicare beneficiary. If the claimant does not meet any of these entitlement requirements, then there is no MAP or Part D plan claim, and the case can proceed to settlement or judgment without regard to these plans’ interests. However, if any of these factors exists, then these plans could have paid for care related to the claim that could subject your client to exposure. Therefore, you must address it.
Although you have a potential for Medicare status, there is no need to protect a MAP or a Part D plan if the claimant is not a Medicare beneficiary. Thus always corroborate claimant’s Medicare status, before taking any other steps.
Assuming that Medicare status has been determined, defense attorneys should take every step to identify all healthcare plans that a claimant may have through discovery. This information is critical in those jurisdictions that currently recognize a MSP private cause of action claim against your client. In those jurisdictions that do not, you should include the information in the settlement documentation because it is relevant, at a minimum, to how these liens should be addressed. In those jurisdictions that have not yet addressed the question, it is best to err on the side of caution.
The Third Circuit case of In Re Avandia is the only U.S. circuit court of appeals decision to date that has established the private cause of action against primary plans (insurance carriers and self-insurers) that handle workers’ compensation and liability cases. The Third Circuit includes the states of Pennsylvania, New Jersey, and Delaware. In these jurisdictions, the best practice for a defense lawyer is to identify immediately the MAP and prescription drug plans for a claimant and have a strategy in place to address these liens and reimbursement obligations at the time of settlement. Since workers’ compensation insurers and self-insurers and the payers in these jurisdictions can presently be subject to double damages, it may make sense to notify your court immediately of this concern and how it should be addressed. Additional care must be taken in these jurisdictions because the liability is strict. It is easy for the unknowing defense practitioner to become entangled in this trap because a claimant could also individually bring the private cause of action on behalf of the MAP and Part D plans. Hence, it may make sense for the insurance carrier or the self-insured, or both, to pay directly. If that is not feasible, involving your court should be considered. Should court involvement not be an option, then carefully draft the release with the proper indemnity provisions for the MSP private cause of action, including a waiver from the claimant to prevent the claimant from presenting a cause of action him- or herself. If the plan is for the claimant to pay, always ask for confirmation of payment.
Always check to see if the venue of your case has a U.S. district court opinion that has addressed the MSP question discussed in this article. If it has, and it follows In Re Avandia, you should consider paying the reimbursement directly as you would in Pennsylvania, New Jersey, or Delaware. If it has not, then you should still consider using discovery to identify whether MAP or Part D plans are involved. If a claimant is a Medicare beneficiary, then the release should specify how those liens or reimbursement obligations will be addressed. At a minimum, having proof that the liens or the reimbursement obligations were satisfied would be helpful.
While In Re Avandia is the only current circuit court of appeal decision, it certainly won’t be the last. One case to watch is Humana v. Western Heritage Insurance Co. This case involves an insurance carrier that settled a liability matter and learned after the settlement that the claimant was a Medicare beneficiary. In an attempt to mitigate its risk, the carrier attempted to add conditions to the release. The plaintiff’s attorney resisted, and the state court required Western Heritage to pay the funds, allowing the claimant and his attorney to deal with the Medicare issues. Regrettably, the claim involved a MAP, and as the matter progressed with regard to the lien, Humana did not receive a favorable ruling on its lien and filed an appeal. It also filed a lawsuit against Western Heritage in the U.S. district court requesting the full value.
Despite the pending state court appeal, the U.S. district court in the action brought by Humana awarded Humana double damages because Western Heritage was required (in the court’s interpretation of the MSP law) to pay Humana when the case settled. Western Heritage appealed, and the case is presently pending in the Eleventh Circuit. Oral argument was held in midApril of this year with a decision expected sometime late summer or early fall. A ruling for Humana would more than likely result in widespread application across the country. If that should occur, counsel will need to be prepared to address reimbursement obligations under MAPs and Part D plans as well as Part A and Part B plans or risk exposure to double damages. However, a ruling for Western Heritage would lead to the opposite conclusion.