In the first opinion of its kind, a federal district judge in Virginia recently held that a Medicare Advantage Organization (“MAO”) may utilize the Medicare Secondary Payer Act’s (“MSP”) private right of action to pursue a claim for reimbursement of covered medical expenses against the plan beneficiary’s personal injury attorney.
In Humana Ins. Co. v. Paris Blank LLP, defendant Paris Blank moved to dismiss Humana’s complaint, which sought reimbursement of conditional medical payments. Humana contracts with the Centers for Medicare and Medicaid Services (“CMS”) to administer Medicare benefits for those electing to receive their benefits through the Medicare Advantage program. Paris Blank’s client, a Medicare Advantage enrollee, elected to obtain benefits through Humana.
Paris Blank’s Client Receives $475,600 From Insurance Companies, but Humana Never Reimbursed
In October 2013, Paris Blank’s client suffered injuries as a passenger in a motor vehicle accident. As a result, Humana made $191,612.09 in conditional payments on Paris Blank’s client’s behalf to cover her outstanding medical expenses. Paris Blank was retained to represent the injured passenger. As a result of a lawsuit filed by Paris Blank, Paris Blank’s client received payments from several insurance companies totaling approximately $475,600.
Humana Denies Request for a Waiver
The insurance companies issued the settlement checks to Paris Blank, as well as to Paris Blank and Humana jointly. However, for varying reasons, none of the money was ever reimbursed to Humana. As a result, in January 2015, Humana contacted Paris Blank’s client to inform her that she owed Humana $191,612.09 for reimbursement as it related to conditional payments Humana made for medical expenses. Humana’s communications stated that it sought reimbursement within 60 days and included information regarding the request of a waiver or the filing of an appeal. A Paris Blank attorney sent a request for waiver to Humana on behalf of their client. The waiver request contained correspondence between the Paris Blank attorney and CMS, which purported to show that Paris Blank’s client did not obligations under Medicare Part A and Part B; however, the correspondence did not address any obligations to any MAO under Part C.
In April 2015, Humana denied the request for waiver, and thereafter filed a lawsuit against Paris Blank and one of its attorneys. As of the time the complaint was filed, Humana had received no reimbursement for the conditional payments it made.
Paris Blank Wrong About Private Right of Action to Seek Reimbursement of Conditional Payments
The court began its analysis of Paris blank’s motion to dismiss by noting that the several contentions for dismissing Humana’s complaint were premised upon the theory that “no private right of action exists permitting [Humana] to pursue recovery for any conditional payments. Humana responded that the court should rely on the Third Circuit’s holding in In re Avandia, which “found that MAOs indeed could maintain a private right of action to recover conditional payments made on behalf of a beneficiary.”
The court noted that “eligible individuals may elect to receive their Medicare benefits either from the Government under Parts A and B or from a MAO under Part C.” According to the court, if an individual elects to participate in Medicare Advantage, then the CMS pays to the MAO a fixed amount for each enrollee. The MAO then administers benefits and assumes the risk associated with insuring that individual. A MAO exercises discretion as to the design of the plans; however, a MAO must provide benefits covered under Parts A and B of Medicare. A MAO may provide additional benefits as well.
MSP Makes Medicare Secondary Payer
The court goes on to explain that the MSP passed in 1980:
[C]reates a federal coordination of benefits regime between primary and secondary payers. The MSP statute generally prohibits Medicare from making payment for items or services to the extent ″payment has been made or can reasonably be expected to be made under″ workmen’s compensation plans, liability plans, or no fault insurance plans. In this manner, the MSP statute positions those plans as the primary payer and Medicare as the secondary payer.
Even though the MSP makes Medicare a secondary payer, the court noted that the MSP authorizes the Secretary “to make conditional payments-premised upon reimbursement-if the workmen’s compensation plan, liability plan, or no fault insurance plan has not made or cannot be reasonably expected to make payment for those items or services.” If those conditional payments are made, then the government may bring an action for reimbursement of any conditional payments “in the amount of double damages.” The MSP, the court further explained, generally establishes a “private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”
Court Relies on Third Circuit’s Holding in In re Avandia
After explaining how the secondary payer system works and the corresponding private right of action for double damages, the court set forth the Third Circuit’s holding in In re Avandia. The court set forth:
Although not binding precedent, this Court finds persuasive the Third Circuit’s determination that a MAO may pursue recovery pursuant to the private right of action in § 1395y(b)(3)(A). Section 1395y(b)(2)(A)’s plain language establishes a private right of action to recover double damages where a primary plan fails to pay. Absent from the plain language of the statute is any restriction upon who may utilize that private right of action.
Continuing on, the court said that “[e]ven if the Court were to find the language ambiguous, CMS regulations afford MAOs ‘the same rights to recover from a primary plan, entity or individual that the Secretary exercises under the MSP regulations.″ The court said:
This regulatory promulgation is a permissible interpretation of the MSP statute. This interpretation allows the MAO-an entity providing Medicare benefits under Part C-to exercise the same right to recovery as the government-an entity providing Medicare benefits under Parts A and B-for any conditional payment made for which the MAO ultimately should not have been responsible. Under Chevron deference principles, the Court would still find that Plaintiff could pursue recovery in this suit.
The court rejected Paris Blank and its attorney’s contention that the holding in In re Avandia was “aberrational” or that because the Third Circuit was the only court to make such a finding it was somehow unpersuasive. The court responded to those arguments by noting that the cases cited by Paris Blank predated In re Avandia, and that just because the Third Circuit was the only court to find that a MAO may seek reimbursement under the MSP “does not diminish the persuasiveness of the Third Circuit’s thorough and well-reasoned opinion. Moreover, other district courts outside of the Third Circuit have found In re Avandia’s reasoning persuasive and allowed MAOs to pursue a private right of action under the statute.”
Court Finds That Paris Blank Can Be Sued, Even Though They are a Law Firm
The court turned to Paris Blank’s next contention, which contended that Humana could not maintain a lawsuit against a law firm and an attorney representing an enrollee. Specifically, Paris Blank said it was not a primary payer and, therefore, they fell outside the scope of recovery provided by any private right of action. Conversely, Humana alleged that the MSP’s language “reaches broadly enough to allow recovery from any entity-including law firms and attorneys-receiving payment from a primary plan.”
The court concluded that “[c]ontrary y to Defendants’ position, the law does not carve out exceptions for attorneys and law firms. The statute generally establishes a private cause of action ″in the case of a primary plan which fails to provide for primary payment.″ The court said that to the extent the MSP’s language was ambiguous, “regulation dictates that MAOs ‘exercise the same rights to recovery from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.’″
Finally, the court shut down Paris Blank’s contention that the court should dismiss Humana’s request for a declaratory judgment and state law claims. There, the court found, “Because, however, the Court finds that Plaintiff can maintain this private right of action and Defendants pursue no alternative avenues in attacking declaratory judgment or jurisdiction over the related state law claims, this Court will deny Defendants’ Motion on those grounds.”
Law firms and Attorneys Representing Clients with Medicare Beware
The court’s holding in Paris Blank provides caution for attorneys that represent clients who have Medicare. If a firm or solo attorney’s client has medical expenses conditionally paid on their behalf, then the payor is entitled to reimbursement, which may be obtained from the enrollee him or herself, or as was the case in Paris Blank, from the law firm or attorney. Accordingly, attorneys need to make sure to investigate and determine what medical payments have been made on their client’s behalf, and even more importantly, who made those payments. The facts in Paris Blank reveal that Paris Blank’s client was paid more than $475,000, which was several times more than enough to reimburse Humana. Furthermore, Paris Blank appears to have been aware that the insurance companies making payments intended at least some of the money to be reimbursed to Humana. However, for whatever reason, Paris Blank did not reimburse Humana a dime, and, as a result, faced a costly lawsuit.
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