First Circuit, Massachusetts Court: Assignee of Medicare Advantage Plan May Bring Private Cause of Action for Double Damages

Conditional Payments, Medicare Advantage, MSP Litigation on July 31, 2019
Posted by Jean S. Goldstein, JD

Earlier this month, the United States District Court for the District of Massachusetts issued a ruling on a Motion to Dismiss and Motion to Strike Class Allegations involving an insurance carrier and a Medicare Advantage Organization (MAO).  The United States District Court for the District of Massachusetts sits in the First Circuit, which includes the Districts of Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island.  Until this decision, the First Circuit has not addressed whether a MAO (or its assignees) may bring a private cause of action suit under the Medicare Secondary Payer (MSP) Act, pursuant to 42 U.S.C. 1395y(b)(3)(A).  As we often discuss here on our blog, MAOs and/or the assignees of MAOs have been championing claims across the nation against primary payers, which includes workers’ compensation, liability, and no-fault insurers, carriers, and plans. The Plaintiffs’ goals in these cases is to obtain double damages, under the MSP’s private cause of action provision on allegations that a primary payer has failed to provide for primary payment or appropriate reimbursement. This most recent case is MSP Recovery Claims, Series LLC v. Plymouth Rock Assurance Corp., Civil Action No. 18-cv-11702-ADB, 2019 U.S. Dist. LEXIS 119499 (D. Mass. July 18, 2019)and is yet another example of a MAO action filed by an assignee of a MAO, against a primary payer for failure to provide appropriate reimbursement.    

The Substantive Facts of the Case are as Follows:

  • An individual identified as “A.C.” in both the Complaint and by the Court was injured in an automobile accident on April 12, 2012;
  • A.C. received medical services for accident related injuries;
  • A.C. subsequently enrolled in a Medicare Advantage Plan, known as the Fallon Community Health Plan (“Fallon”), which paid $1,782.02 in accident-related medical services;
  • A.C. asserted a claim against the driver, who was insured by Plymouth Rock Assurance Corporation, which resulted in a settlement;
  • The settlement was subsequently reported to the Centers for Medicare and Medicaid Services (CMS);
  • On June 19, 2017, Fallon assigned all rights to recover conditional payments to MSP Recovery, LLC;
  • In August 2018, MSP Recovery brought suit against Plymouth alleging that Plymouth knew it was obligated to reimburse Fallon for the $1,782.02 payment, but nonetheless failed to do so;
  • MSP Recovery also filed a class action alleging that Plymouth was the primary payer for numerous other medical expenses incurred by other MAOs who Plymouth had not reimbursed[1]
  • Plymouth filed a Motion to Dismiss MSP Recovery’s claim as related to A.C. and a Motion to Strike the Class Allegations.

The Court Denied the Primary Payer’s Motion to Dismiss Finding That the Assignee of an MAO Can Bring a Double Damages Action Under the MSP. 

Plymouth, as a primary payer, asserted various arguments to persuade the Court to dismiss the matter.  However, the Court denied Plymouth’s Motion to Dismiss involving A.C., opining that:

  • CMS regulations provide that a MAO may exercise the same rights as the United States government to recover against a primary plan, entity, or individual
    • Here, the court determined that MSP Recovery, as an assignee of a MAO, is situated in a position similar to a MAO and could exercise the same rights as the US government to bring such an action.
  • The assignment to the MAO assignee was valid.
    • The Court found that unlike in other MAO cases we have seen, MSP Recovery demonstrated a complete chain of assignment for its claim to recover medical expenses related to A.C. injuries. 
    • The Court disagreed with an additional argument asserted by Plymouth indicating that the assignment was invalid on grounds that the MSP provision is penal because it allows for double recovery. The Court held that where a statute creates a remedial cause of action, the assignment of those claims is permissible even where the statute provides double or treble damages.  The Court specifically went on to state that the very purpose of the private cause of action provision of the MSP was to “reduce the cost of the Medicare program and that it plays a remedial role by allowing private parties to recover from primary payers who fail to pay medical costs.” Id. at 18.
  • The primary payer was aware of its obligation to reimburse the MAO for accident related medical services but failed to do so.
    • The Court noted that Plymouth settled A.C.’s claim and was aware of its obligation to reimburse Fallon, as alleged in the complaint, noting those allegations were well-pled.
    • The Court did not address whether Plymouth had adequate and sufficient notice to reimburse Fallon, particularly because there was not mention of whether a recovery demand letter was sent to Plymouth.  This issue is yet to be addressed by the Court.
    • In addition, the parties also disagreed as to when the statute of limitations for claims stemming from A.C.’s accident related medical services began to run.  This question is also one which is to be resolved as the litigation progresses.

Based upon the foregoing reasoning, the Court found that MSP Recovery demonstrated that it held a facially valid assignment of a claim for which there was a valid cause of action, and that MSP Recovery pled a proper assignment of the claim for medical expenses stemming from A.C.’s accident.  Therefore, the Motion to Dismiss was denied. 

With respect to the Motion to Strike the Class Claim, the Court found that this case presents a “rare instance in which striking the class allegations is appropriate for three reasons.” Id. at 25.  The first being that the class was deemed to be overbroad, as there were no limits in the class definition.  The second reason cited by the Court is that the class cannot be defined until the case is resolved on its merits.  The last and most compelling reason is that none of the issues/questions of law or fact presented were common across all class members. Each alleged unreimbursed claim would be individually specific; and therefore, class members would not be similarly situated. For these reasons, the class allegations were struck from the Complaint.

Key Takeaways and Commentary:

We continue to bear witness to the Courts treating Medicare Advantage Organizations (MAOs) as though they are on equal footing with the federal government. This case is yet another example of a Court extending and expressly enabling recovery as if MAOs are the government, to move forward with private causes of action.  Primary payers, providers, and any entity/individual with some sort of a nexus to a claim should not assume that they are insulated from the private cause of action provision under the MSP.  It remains to be seen whether Plymouth will ultimately be liable for double damages, but we suspect this litigation will be followed closely, especially by those with claims in the First Circuit (Districts of Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island).

In addition, the Court made a very interesting point, specifically stating that “Congress’ goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system.”  Id.at 7.  While we are certainly seeing increased competition in the Medicare Advantage Plan marketplace, we are not finding that the Medicare Advantage Plan system has created a more efficient and less expensive Medicare system, particularly between primary payers and MAPs.  Rather we are finding just the opposite, as primary payers are still faced with the immense challenge of identifying Medicare Part C and Part D enrollment.  At the very root of this challenge is the fact that CMS provides information regarding Medicare Part A and Part B, which assists with discovering conditional payments Medicare has made; but CMS does not provide information about the supplemental plans for which a Medicare beneficiary is enrolled.  There currently is no clear method for primary plans to identify MAP enrollment.  However, in an effort to address this problem, earlier this year both the House and Senate introduced the Provide Accurate Information Directly Act (the “PAID Act.”).  The proposed legislation would expand the Section 111 Query process to identify whether a beneficiary is, or during the preceding 3-year period, has been, entitled to benefits, or was enrolled in any Medicare Part C (Medicare Advantage) plan and/or Medicare Part D (prescription drug) plan, as well as identify the plan name and address.  The bills have not gained much additional traction; however, we will monitor the legislation and provide any significant updates.

Given that this most recent case is falling in line with other jurisdictions allowing MAOs (or MAO assignees) to bring an action for double damages under the MSP, from a Medicare compliance standpoint, we continue to offer the following best proactive practices related to conditional payments/liens and primary payers’ MSP obligations:

  • Do not wait until settlement of a claim to identify all possible conditional payments.  Medicare conditional payment/lien investigation, and resolution should be done well in advance of settlement discussions;
  • Review all medical bills and understand all injury related treatment;
  • Create an open dialogue with the injured individual or their counsel, if represented, inquiring about all plans a Medicare beneficiary is enrolled in.  The timely discovery of MAP, Part D, and/or Medicaid enrollment can benefit all settling parties;
  • Understand the current MSP landscape, particularly within your jurisdiction and the challenges primary payers have been facing; and
  • Create internal processes on how to timely handle conditional payments, MAP recoveries, and other liens.

Overall, establishing and implementing best proactive practices has never been more important.  We will continue to follow this case, as well as other MSP litigation, and keep our readers updated.


[1] Although, these expenses were not identified as MSP Recovery indicated it would identify these expenses once it obtains and organizes data from Plymouth after the discovery phase.