Humana Stretches Boundaries of MSP Private Cause of Action Again

CMS, Commentary, Medicare Set-Aside Blog, MSP Litigation on May 11, 2016 | Posted by Jennifer Jordan, JD, MSCC

In the Fourth Circuit, Humana is currently pursuing reimbursement from the attorneys representing a passenger in a motor vehicle action under the persons in receipt of settlement funds provision of the MSP in yet another attempt to get the courts to grant Medicare Advantage Organizations (MAOs) the same rights as the federal government with regard to recoveries under the Medicare Act. The failure to reimburse results from a not uncommon misunderstanding by much of the legal profession regarding the differences between traditional Medicare Parts A & B administered by the federal government verses Medicare Part C contracted out to private insurance companies. Although MAOs are granted all the same rights as the Secretary of Health and Human Services with regard to powers under the Medicare Act, well developed case law beginning in 2009 determined that the Medicare Secondary Payer Act (MSP) provided very different and distinct recovery rights to the United States compared to the those of the Secretary. Accordingly in the infamous In re Advandia case that Humana relies upon so desperately, the Third Circuit Court of Appeals granted MAOs a private cause of action under 42 U.S.C. 1395y(b)(3)(A) because it could not permit it to utilize 42 U.S.C. 1395y(b)(2)(B)(iii) reserved only for use by the United States which MAOs do not share the powers of. And herein lies the problem with this opinion by the Fourth Circuit.

Facts of the case are such that Defendants settled this case with several insurance companies for $475,600. Humana made $191,612.09 worth of conditional payments for which none was repaid from the settlement proceeds. Defendants erroneously sought conditional payment information from CMS, not understanding that there is a difference in how and by whom Medicare benefits may be delivered and how little oversight CMS maintains over Medicare Advantage benefits. This however is a common misunderstanding among attorneys throughout the nation. What is perplexing that that CMS does not even tell the requesting party that the reason there are no conditional payments on record is because the Medicare beneficiary in question is enrolled in a Part C plan, a fact that the agency and all of its various contractors are well aware.  Instead CMS simply allows these attorneys to believe that they satisfied their obligations under the MSP by determining that Medicare did not have an interest to protect which in fact they asked the wrong party who still has statutory recovery rights even though the funds have been disbursed. Given that this occurs regularly all over the country, it would be difficult to even call this malpractice on the attorneys part, but I digress.

The fact of the matter is that someone among the parties knew of Humana’s existence and issued a check including its name, therefore the attorneys were technically on notice. But that is irrelevant as known or should have known is not the legal issue here. It is whether Humana has the right to extend the private cause of action to suits against persons in receipt of settlement funds.  This is an argument of strict statutory construction that this court failed to address in its opinion. As with other circuits, this court relied upon In re Advandia and Chevron deference and failed to really look at the issue at hand. It is undisputed that Humana is entitled to reimbursement but the MSP does not support Humana’s choice of party to pursue.

Ironically it was in In re Advandia that the Third Circuit provided the loophole for Humana to continue its recovery pursuits in federal court rather than through express provisions provided in the MSP and its regulations by making the distinction between 42 U.S.C. 1395y(b)(3)(A) and 42 U.S.C. 1395y(b)(2)(B)(iii). Because the latter is reserved for use only by the United States and MAOs are only empowered with the rights of the Secretary, the Third Circuit determined that MAOs were entitled to bring a private cause of action under only 42 U.S.C. 1395y(b)(3)(A). But if Humana is not able to utilize 42 U.S.C. 1395y(b)(2)(B)(iii), then how is it able to pursue “any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity” when that sentence begins “In addition, the United States may recover under this clause from….” In its entirety, the statutory provision that creates a legal liability for persons who received payment from a primary plan reads as follows:

(iii)  Action by United States

In order to recover payment made under this subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity. The United States may not recover from a third-party administrator under this clause in cases where the third-party administrator would not be able to recover the amount at issue from the employer or group health plan and is not employed by or under contract with the employer or group health plan at the time the action for recovery is initiated by the United States or for whom it provides administrative services due to the insolvency or bankruptcy of the employer or plan. An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.

If Avandia is the precedent upon which all of Humana’s cases rely, and it is the case in which the distinction between rights of the United States and the Secretary was addressed by directing MAOs to bring suits under a different section of the statute, then how is it that this court can continue to find Avandia persuasive yet allow Humana to exercise rights of the United States in this particular case???

 

HUMANA INSURANCE CO., Plaintiff, v. PARIS BLANK LLP, et al., Defendants.
Civil Action No. 3:16CV79-HEH
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA, RICHMOND DIVISION
2016 U.S. Dist. LEXIS 61814
May 10, 2016, Decided
May 10, 2016, Filed