Medicare Advantage Plans do have a Private Cause of Action After All

Medicare Set-Aside Blog on June 29, 2012
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In a surprising ruling by the US Court of Appeals for the Third Circuit yesterday, the District Court ruling in In re: Avandia Marketing, et al., decided in June 2011, was reversed, finding that the Medicare Advantage plan administered by Humana does have standing to bring a private cause of action to recover as a secondary payer under the MSP. In 2011, several district courts arrived at the same conclusion that the statutory language of the MSP and its supporting regs did not support such a cause of action. However, all of those decisions focused on the private cause of action afforded the United States under 42 U.S.C. 1395y(b)(2)(B)(iii) and did not consider an action under §1395y(b)(3)(A) which does not contain such limiting language.

The MSP is still not a qui tam statute. Humana clearly has a personal legal interest sufficient to confer standing. It is undisputed that its MAO is entitled secondary payer status and should have the same rights as the federal government to recover payments made on behalf of the Medicare program even though Congress failed to make that clear, if that was even its intent. There are Medicare dollars in play, although not as closely tied dollar for dollar as benefits paid through Parts A and B, and the intent of the statute is to prevent them from being spent unnecessarily. So it appears that the intent of the MSP was salvaged for MAOs through strict statutory interpretation. The court is absolutely right that there is nothing in §1395y(b)(3)(A) that would prevent Humana from bringing its claim for reimbursement.

Although the statute clearly provides sufficient authority for the ruling, the opinion deviates quite a bit unnecessarily into Congressional intent and Chevron deference for CMS interpretation, truly showing the bias of the court. With regard to Congressional intent, the court relies upon the fact that private health plans delivering Medicare services existed prior to the passing of the MSP in 1980; therefore, they had to be within the scope of Congressional intent in the original MSP provisions. Then why is it that secondary payer status was given to MAOs through the CFR whereas Congress wrote it in legislatively through the Medicare Modernization Act in 2003 when it granted Part D plans secondary payer status? MSP provisions have been treated as a legislative and regulatory afterthought for over 30 years and speculating otherwise at this point is comical. We know what the purpose of the MSP is, but Congress and CMS have done a lousy job implementing it.

The second area where the court deviated too far was in the discussion of the capitation rate. There was a lot of discussion about how bonuses and capitation rates are based upon program savings and if the MAO could not recover in secondary payer situations, how it would be at a great disadvantage and that just couldn’t have been Congress’ intent. Well what the court apparently doesn’t know and cannot glean from the regs or CMS policy is just how little support Part C programs get from CMS. There is actually an adjustment to the capitation rate of 0.173 for secondary payer situations, known as the “MSP factor.” It is a flat rate and is triggered simply by an MSP situation existing, not by the nature or extent of the injury leading to the exclusion. A paper cut work comp claim and a double amputation MVA will both reduce the MAO capitation by the same amount. The MAO receives a list of HICNs and perceived associated primary payers with notice of the reduced capitation rate. They are not even afforded the nature of the injury excluded by Medicare. It appears that CMS is only concerned with its payment to the MAO, not the MAO’s ability to recover from a primary payer. Therefore, it is hard to believe that Chevron deference is due to CMS policy supporting MAO recoveries when CMS does not even support the MAO MSP recovery efforts other than to encourage them to pursue recovery despite all of the district court opinions to the contrary.

Regardless of how it got there, it does appear that the court has a valid point that an MAO can bring a private cause of action under §1395y(b)(3)(A) instead of §1395y(b)(2)(B)(iii). Which brings me to my favorite quote from the opinion: “Although we hold the text of § 1395y(b)(3)(A) to unambiguously provide Humana with a private cause of action, we recognize that a declaration that the language of the Medicare Act is clear may be counterintuitive. After all, the Medicare Act has been described as among ‘the most completely impenetrable texts within human experience.'”

INSURANCE COMPANY, individually and on behalf of all others similarly
situated, Appellants
No. 11-2664
2012 U.S. App. LEXIS 13230
June 28, 2012, Filed