• Another Roadblock for Medicare Advantage Plan Recovery of Medicare Secondary Payer Conditional Payments
  • June 22, 2011 | Authors: Ramy Fayed; Janice H. Ziegler
  • Law Firms: SNR Denton - Washington Office ; SNR Denton - Chicago Office
  • Last week, a federal district court ruled in Humana v. GlaxoSmithKline that a Medicare Advantage (MA) plan does not have the right to sue in federal court to recover payments from a primary plan under the Medicare Secondary Payer (MSP) laws. In the process, the court effectively invalidated the provisions of a Centers for Medicare & Medicaid Services (CMS) regulation that grants MA organizations such recovery rights.

    Under the MSP laws, the United States has a direct right of action to recover conditional Medicare payments from a group health plan or from a workers’ compensation, liability insurance (including self-insurance) or no-fault insurance plan (each a non-group health plan or NGHP) once it is demonstrated that the group health plan or NGHP has or had primary responsibility to make such payments. The MSP laws also contain a separate "private cause of action" in the case of "a primary plan which fails to provide for primary payment" under the MSP laws. Both the United States and the private litigants are authorized to seek double damages under the statute.

    Medicare benefits are, in some instances, provided through MA and Medicare Part D prescription drug plan sponsors that contract with CMS. These entities have certain specified rights and duties under the Medicare laws, regulations, and other CMS guidance regarding recovery of conditional payments under the MSP laws. The courts have, however, dismissed several recent federal court cases brought by MA plans seeking to recover conditional payments under the MSP laws.

    In both Humana v. Mary Reale (S.D. Fla., January 31, 2011) and Parra v. PacifiCare (D. Ariz., April 7, 2011), the courts dismissed the conditional payment recovery actions filed against Medicare beneficiaries, largely on the basis that the MA plans had no right of action to pursue their claims. These decisions were consistent with an earlier decision by the Sixth Circuit in Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003), under which a managed care plan similar to an MA plan brought suit against a Medicare beneficiary seeking recovery of conditional payments. All three cases focused primarily on whether the MA plans could pursue recovery under the United States’ direct right of action provision in the MSP laws, but did not specifically address whether MA plans could pursue recovery under the separate private cause of action provision. (This was not surprising as the private cause of action provision applies on its face to actions against primary plans.)

    In Humana v. GlaxoSmithKline, the United States District Court for the Eastern District of Pennsylvania addressed the issue of whether Humana (an MA plan) could pursue recovery in federal district court against GlaxoSmithKline (GSK) (a liability self-insurance plan) to recover conditional payments under the private cause of action provision in the MSP laws. In its Memorandum Opinion and Order, the court granted GSK's motion to dismiss Humana's claims for failure to state a claim on which relief may be granted.

    While the court recognized Humana’s rights under the Medicare laws and implementing regulations to assume secondary payer status and to "bill for reimbursement of conditional payments" it previously made, it held that Humana did not have a right of action to enforce its rights as a secondary payer, at least under the federal MSP laws. The court found that while the MA statute "does reference the MSP" laws, the MA provision does not reference or expressly incorporate the remedy the MSP laws provide to the United States in 42 U.S.C. § 1395y(b)(2)(B)(iii), nor does it reference or incorporate § 1395y(b)(3), which creates the private right of action. Id. at 9-10. The court reasoned that where there is no explicit grant of a private right of action in a statute, the four-part Cort v. Ash test must be applied to determine if a right of action exists. The court concluded that the test was not met.

    The court made two important additional points:

    1. It noted that Humana was not left without a remedy since "[r]ather than seeking payment directly from GSK under the Medicare Act, it can bring its claims in the state courts against its enrollees to enforce its secondary payer status under the terms of their insurance contracts." Id. at 11. The court asserted that state courts are well suited to interpret insurance contracts and determine whether the enrollees recovered medical damages against which Humana can seek reimbursement or assert subrogation rights under the terms of its enrollees’ contracts.

    2. It found that the CMS regulation stating that the MA organization will exercise the same rights to recover from a primary plan as the Secretary of the U.S. Department of Health and Human Services was not a permissible construction of the statute as CMS cannot create a private right of action where Congress declined to do so. Id. at 13.

    While this district court decision is certainly not the end of the story, the Humana v. GlaxoSmithKline case casts doubt on an MA plan’s ability to sue a primary plan in federal court under the MSP laws to enforce its recovery rights. There are, however, significant potential counter-arguments in support of application of a private right of action in this context that Humana and other MA organizations have and will no doubt continue to assert. It will be interesting to see whether CMS chooses to weigh in as these cases proceed, particularly in the Part D context where CMS has the potential for sharing in recoveries.