Second Circuit Court Addresses Whether An MAO May Bring Suit: Primary Payer Takes the Hit

Medicare Advantage, Medicare Set-Aside Blog, MSP Litigation, MSP News on March 15, 2018
Posted by Jean S. Goldstein, JD, CMSP

Nearly every week those of us in the Medicare Secondary Payer (MSP) industry receive alerts about a new Medicare Advantage Organization (MAO) bringing suit for failure to provide reimbursement for conditional payments made by an MAO on behalf of a Medicare beneficiary.  Many of these suits come out of the Third and Eleventh Circuits, and at the onset are first challenged based on whether in fact the Plaintiff(s) has standing to bring an action.  Yesterday, a decision was issued from the Second Circuit on a Motion to Dismiss that addressed two questions and set precedent in this Circuit as to:

  • Whether an MAO may bring suit pursuant to the private cause of action provision found within the Medicare Secondary Payer act (MSPA); and
  • Who in fact may be sued by the MAO pursuant to the MSPA.

(Aetna Life Ins. Co. v. Guerrera, No. 3:17-cv-621 (JCH), 2018 U.S. Dist. LEXIS 41450)

The facts of this most recent case are quite simple:

  • Defendants in the matter are Guerrera (the individual who sustained an injury), Big Y (a supermarket chain, with a location in Connecticut where Guerrera’s injury occurred), and the attorneys who represented Guerrera;
  • Defendant, Guerrera, sustained personal injuries at the Big Y for which Guerrera received medical care;
  • Guerrera was Medicare eligible and was enrolled in and maintained health insurance coverage through Aetna;
  • Aetna is a Medicare Advantage Organization;
  • Aetna paid medical expenses on behalf of Guerrera;
  • Guerrera settled the claim against Big Y;
  • Aetna provided notice that conditional payments for medical expenses resulting from Guerrera’s injury were made;
  • An agreement was made that full settlement would not be sent directly to Guerera or the attorneys involved in the matter;
  • Despite the agreement, Big Y sent the full settlement payment to Defendants, and the conditional payments made by Aetna remained unpaid.

As you may have read here consistently on our blog, the Third and Eleventh Circuits have concluded that MAOs may sue under the Private Cause of Action provisions found in the Medicare Secondary Payer Act (MSPA).  To date, we have not seen this consensus consistently in other Circuits, as many cases settle out of court.  For this reason, the decision out of the Second Circuit is groundbreaking. The Second Circuit court held that Aetna, an MAO, is entitled to sue under the Private Cause of Action provision found within the MSPA.

 The Court also addressed the issue of whom Aetna had the right to sue. This case was brought against three categories of defendants:

  • A Medicare beneficiary (Guerrera);
  • The law firm who represented the Medicare beneficiary; and
  • The tortfeasor (Big Y).

In addressing this subject, Aetna argued that Federal Courts have upheld the right of MAOs to sue all three types of defendants as involved in this matter.

The Court took a different view, however, and found that there is no cause of action against the beneficiary or the law firm. The Court looked to the MSPA and asserted that “the express language of the Private Cause of Action provision [found within the MSPA] does not specify who may be sued.”  Id. at 23.  The Court noted that there exists a “clear definition of a “primary plan” such that it is defined as “a group health plan or large group health plan . . . and a workmen’s compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance…” 42 U.S.C. § 1395y(b)(1)(A)(ii).  In addition, the private cause of action provision is triggered when a “primary plan . . . fails to provide for primary payment (or appropriate reimbursement).” 42 U.S.C. § 1395y(b)(3)(A).  The Court went on to say that “…[h]ad Congress intended to create a cause of action for double damages against beneficiaries who received payment from a primary plan, Congress could simply have created a cause of action when “any entity or person” failed to reimburse an MAO.”  Id at 25-26. Because the MSPA specifically addresses primary plans, and not beneficiaries who have received payment, the Court asserted that neither the beneficiary nor their attorneys in this matter be sued.  This means that even though the beneficiary and the beneficiary’s law firm received settlement proceeds, it is solely Big Y who is on the hook for not reimbursing Aetna for the conditional payments made.  The reason is simply stated by the Court: primary plans cannot evade their obligations to Medicare by settling with beneficiaries. [1]  See Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006).

After establishing that Aetna could sue Big Y, as a primary plan, the last issue the court addressed was whether Big Y as a “primary plan fail[ed] to provide for primary payment (or appropriate reimbursement) within the meaning of the MSP[A].” Id at 43.  The Court opined that,

“the fact that Big Y paid a settlement means that it did not “fail to provide for primary payment.”…However…Big Y did not satisfy the obligation outlined by the Private Cause of Action provision, because the Private Cause of Action provision also includes the clause “or appropriate reimbursement.” The word “appropriate” signals that primary plans may not satisfy their obligations under the MSP simply by paying a settlement to a beneficiary, where they are on notice that a secondary payer has already paid the beneficiary’s medical expenses.” Id. 43-44.

More simply put: Big Y knew Aetna made conditional payments and failed to appropriately reimburse Aetna, despite being on notice of the payments made.   
Aetna was provided leave to Amend its Complaint to clarify which claims are federal law claims and against whom each state claim was alleged; so stay tuned for the final outcome on this matter.  However, now that the Second Circuit is on board with allowing an MAO to bring a private cause of action, which Circuit is next?  This is yet another example of a Court interpreting the MSPA as they see fit, and determining MAOs are in fact vested with full authority to bring actions for reimbursement in Federal Court.  These Courts are siding with MAOs, and ultimately primary payers are and will be taking the hit.  Without a doubt, we can expect to see more MAO actions and that other Circuits will soon follow the direction of the Third, Eleventh, and now Second Circuit.

In anticipation of more MAO claims, we offer some simple best practice tips:

  • Ask questions of beneficiaries, to determine if in fact they have supplemental plans;
  • Ask to see Medicare cards;
  • Understand the difference between CMS and MAOs and that these entities do not operate in the same fashion;
  • Do not assume medical treatment has terminated because you have not received bills.  Ask whether beneficiaries are still treating; and
  • Respond to all correspondence from MAOs, timely and promptly.

For assistance with conditional payments or lien resolutions, please contact our team at  Our lien resolution team is comprised of an experienced group of clinical, legal, and claims professionals.  We advocate on your behalf to make sure you can settle your claim.

[1] Obligations are triggered by payment.  The MSPA specifically notes that “[a] primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.” 42 U.S.C. § 1395y(2)(B)(ii).