As MAPs Continue Recovery Efforts, Florida Court Says the MSP Does Not Preempt State Law

Medicare Advantage, MSP Litigation, MSP News on October 16, 2018
Posted by Jean S. Goldstein, JD

You may recall that we recently blogged about whether the Medicare Secondary Payer (MSP) Act, a Federal law, preempts State law.  A Maryland case quite succinctly addressed this question several months ago finding that State law is not preempted by the MSP if certain conditions are met.  This question was also addressed recently in a Florida Court, in Ocean Harbor Cas. Ins. v. MSPA Claims, 1, 43 Fla. L. Weekly 2219 (Dist. Ct. App. 2018).

Ocean Harbor, like many other cases before it, was initiated by Plaintiffs, MSPA Claims 1, LLC (MSPA), as an assignee of a Medicare Advantage Organization (MAO) seeking to represent thirty-seven other MAOs in Florida.  MSPA contended that a class action was appropriate and its right to payment from Ocean Harbor was “automatic” under the MSP.  The trial court found that the thirty-seven MAOs were potential class members and certified the class.

Ocean Harbor appealed the class certification.  In addressing whether the class certification was appropriate, the Court aptly noted that the case hinged on an intersection of State law and Federal Medicare law.  In its analysis, the Court opined that the MSP was never intended to broadly preempt State insurance law, noting that reimbursement rights under the MSP are not automatic, and that reimbursement obligations must first be demonstrated under State law.  Therefore, MSPA would be required to demonstrate that the MAO failed to honor the underlying statutory or contractual obligations as required by state law, by failing to make payment in the first instance.

The Court in its analysis, cited to case law which supports the harmonious relationship between the MSP and State law, with the foremost goal being that Medicare be the payer of last resort, once the underlying reimbursement obligation has been demonstrated.  Ultimately, the Court reversed the lower Court’s decision to certify the class action.  While, MSPA may be running to various Courts with claims against primary payers, it must first demonstrate that a primary payer was required to make the payment in the first place, pursuant to an underlying obligation.

Also, of interest in this most recent case, is the Court’s rejection of MSPA’s argument that Ocean Harbor failed to exhaust administrative remedies regarding Florida law.  MSPA argued that it made an “organization determination” that Ocean Harbor had the responsibility to make payments and that Ocean Harbor could have challenged these determinations pursuant to 42 C.F.R. § 422.566.  The Court, in response, noted that the regulations do not create federal administrative remedies for a primary plan like Ocean Harbor to challenge such an “organization determination.”  The regulations only address claims by a Medicare beneficiary against an MAO.   As such, this case further highlights the challenges associated with Medicare Advantage Plans, as a primary plan does not have the right to seek administrative review of an MAO’s determination or demand for repayment.  While the Strengthening Medicare And Repaying Taxpayers Act of 2012 (the SMART Act), promulgated administrative remedies, those remedies apply only to determinations by the Secretary under Medicare Parts A and B and not to determinations by MAOs.

Takeaways and Commentary:

There are two important takeaways from this most recent case, based upon the application of State law with respect to the MSP and the current challenges associated with recoveries by MAOs.  We have seen two recent cases that demonstrate that State law is not preempted by the MSP.   Essentially, the MSP does not dictate the standards of compensability, but simply the order of payment when a Medicare beneficiary has an alternate and primary source of payment for medical treatment.  Furthermore, as we continue to see more recovery actions by MAPs, it is important for primary payers to be on the defensive.  Primary payers must timely and properly identify MAP enrollment and possible demands for repayment (to the best of their abilities) to effectively mitigate future exposure.