Medicare Advantage Plans Without Recovery Rights in NY?

Medicare Set-Aside Blog on August 31, 2011
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As the Medicare Part C saga continues to get more interesting, it appears that NY law precludes Medicare Advantage Plans from collecting reimbursement from personal injury proceeds at all. Law (GOL) § 5-335(a) provides:

(a) When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff’s entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.

You will note that I added emphasis to the interesting part – basically a healthcare plan cannot subrogate against an insurance settlement or judgement unless a statutory recovery right of reimbursement exists, and following Humana, Parra and Kaiser, it has become pretty well settled law that a Medicare Advantage Plan is not granted a private cause of action under the MSP and only has a right of subrogation. So basically defendant Oxford was unable to reclaim its $40K in treatment under the MSP, nor under the subrogation rights that the MSP expressly granted the plans because they were precluded by state law. The court granted the plaintiff’s motion to extinguish the liens and/or subrogation rights asserted by Oxford and the plaintiff was free to keep the medical damages recovered in the settlement.

Once again we are faced with an interesting conflict of law. Federal law specifically granted MAOs a right to seek reimbursement through subrogation and all case law during the last year indicates that not only is subrogation what Congress intended, but is the appropriate and only manner in which the MAO may seek redress. Then here we have the State of New York passing legislation that, likely unintentionally, supersedes federal law. It will be interesting to see if a constitutional challenge ensues on appeal.

P1 Marie Ferlazzo, Plaintiff, against 18th Avenue Hardware, Inc., et ano.,
2011 N.Y. Misc. LEXIS 4175
August 22, 2011, Decided