Rafael Gonzalez, Esq. President, Flagship Services Group
On March 13, 2018, the United States District Court for the District of Connecticut published its decision on Aetna Life Insurance Company v. Nellina Guerrera, Carter Mario Injury Lawyers, attorney Sean Hammil, attorney Danielle Wisniowski, and Big Y Foods, Inc. concluding that the MSP Private Cause of Action provision unambiguously permits suit by MAOs and, further, that even if it was ambiguous, 42 CFR section 422.108(f) grants MAOs the right to sue under the Private Cause of Action provision. The court also finds that suit may be brought against a primary plan, but not against beneficiaries or their attorneys. The court also concludes that suit may be brought against Big Y, as its settlement payment to Guerrera and/or her attorneys was not appropriate reimbursement under the MSP.
Facts of the Case
On or about February 20, 2015, Guerrera sustained personal injuries at the Big Y location in Monroe, for which she subsequently sought and received medical care. Aetna is a Medicare Advantage Organization (MAO) and operates a Medicare Advantage health insurance plan (MAP). At all relevant times, Guerrera was a Medicare beneficiary and was enrolled in and maintained health insurance coverage through Aetna’s MAO Plan.
Following the February 20, 2015 accident, Aetna paid approximately $9,854.16 in medical expenses on behalf of Guerrera. Guerrera retained the services of the law firm Carter Mario and attorneys Hammil and/or Wisniowski to represent her in a claim against Big Y for the injuries she sustained on February 20, 2015. Ultimately, Guerrera settled her claim against Big Y for $30,000.
Aetna made multiple attempts to place the defendants on notice that it had a lien on the medical expenses resulting from Guerrera’s injuries at Big Y. Aetna tried to recover those expenses from one or more of the defendants, beginning on September 22, 2015, a year before settlement between Guerrera and Big Y was reached.
On March 10, 2016, Big Y agreed that it would not send the full amount of any settlement to Guerrera, Carter Mario, Hammil, and/or Wisniowski without first dealing with Aetna’s lien. Nevertheless, Big Y subsequently sent the full $30,000 settlement payment to Guerrera, Carter Mario, Hammil, and/or Wisniowski on or about September 15, 2016.
The Medicare Secondary Payer Act
The MSP provides that Medicare cannot pay medical expenses when “payment has been made or can reasonably be expected to be made under a workman’s compensation law or plan of the United States or State or under an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A)(ii).
In subsection 1395y(b)(2)(B) of the MSP, Congress gave the Secretary of HHS authority to make conditional payments “if a primary plan has not made or cannot reasonably be expected to make payment with respect to such item or service promptly,” but such payment “shall be conditioned on reimbursement.” Congress further provided an enforcement mechanism for the United States in cases where conditional payment has been made.
Subsection 1395y(b)(2)(B)(ii) provides that “a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” 42 U.S.C. § 1395y(b)(2)(B)(ii).
Subsection (2)(B)(ii) also contains a responsibility-triggering provision, which explains that responsibility for repayment “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.” Finally, subsection (2)(B)(iii) creates a cause of action for the United States, which provides that “in order to recover payment made under this subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self- insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.”
Congress also created a private right of action, codified at section 1395y(b)(3)(A) of title 42 of the United States Code, and described herein as the “Private Cause of Action” provision. In comparison to the cause of action created for the United States, the Private Cause of Action provision is relatively sparse. It provides that “there is established 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 (b)(1) and (b)(2)(A).” 42 U.S.C. § 1395y(b)(3)(A).
That is the entirety of the Private Cause of Action provision; it does not make explicit who may bring suit or against whom, or even under what conditions precisely suit may be brought. Paragraph (b)(1) governs situations in which group health plans must provide payment, while paragraph (b)(2)(A) governs situations including liability insurance settlements. 42 U.S.C. §§ 1395y(b)(1), (b)(2)(A).
Subject Matter Jurisdiction
In its complaint, Aetna alleges claims pursuant to the Medicare Secondary Payer Act, title 42, section 1395y of the United States Code, as well as common law claims arising out of Aetna’s insurance contract with Guerrera. The defendants move to dismiss the Medicare Act claims for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), or, in the alternative, for failure to state a claim pursuant to Rule 12(b)(6). The defendants also urge the court to decline to exercise supplemental jurisdiction over Aetna’s state law claims.
The defendants vigorously assert that this court lacks subject matter jurisdiction over Aetna’s claims because Aetna’s Medicare Act claims are improper for a variety of reasons, and because this case arises, “if at all, under state contract law.” Aetna asserts that its Medicare Act claims raise federal questions, which are properly decided by this court.
The court agrees with Aetna that it has adequately alleged federal claims to give this court federal question jurisdiction pursuant to section 1331 of title 28 of the United States Code. The questions before the court, therefore, revolve around the Medicare Act, specifically the Private Cause of Action provision.
Who May Sue Under the MSP Private Cause of Action Provision
The first question the court must answer is whether Aetna, an MAO, may bring suit pursuant to the Private Cause of Action provision. Aetna asserts that the Private Cause of Action provision “provides a private cause of action to private entities, specifically MAOs.”
The defendants have not meaningfully challenged Aetna’s right to bring suit as a MAO. In their Memorandum, defendants merely observe that “the MSP Act does not specify whom or what is granted this private right of action against primary plans” and then “assumes, for the sake of argument, that the MSP Act permits an MAO to bring a private right of action.” In their Reply to the plaintiff’s Response, the defendants assert that, as an MAO, Aetna “has no authority to bring the claims,” but the substance of their argument appears without weight.
The Second Circuit has never directly addressed whether MAOs may bring suit pursuant to the Private Cause of Action provision. The only two circuits who have addressed this question, the Third and Eleventh Circuits, have both reached the conclusion that MAOs may sue under the Private Cause of Action provision. This court, too, finds the reasoning of the Third and Eleventh Circuits persuasive, and concludes that Aetna, as a MAO, may sue under the Private Cause of Action provision.
In sum, although the defendants have repeatedly expressed doubt that an MAO may bring suit pursuant to the Private Cause of Action, they have cited no authority on this question aside from pointing out that the Private Cause of Action provision does not mention MAOs. However, the Private Cause of Action provision does not list any entity who may sue. See 42 U.S.C. § 1395y(b)(3)(A). Clearly, Congress did not create a cause of action for no one. The court concludes that the absence of a specific reference to MAOs is not probative of Congress’s intent. See 42 U.S.C. § 1395y(b)(3)(A).
Aetna specifically cites the court to section 422.108(f) of title 42 of the Code of Federal Regulations, which provides that a “MAO will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” 42 C.F.R. § 422.108(f). Aetna urges the court to accord the regulation deference in keeping with the Chevron doctrine, first articulated in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The Chevron doctrine instructs that, “when Congress has ‘explicitly left a gap for an agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation,’ and any ensuing regulation is binding in the courts unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to the statute.”
In addition, Aetna notes that, in a 2011 memorandum, “CMS clarified that it understood MAOs, like Aetna, to have the same rights and responsibilities to collect from primary payers as traditional Medicare.” However, memoranda are “not subject to sufficiently formal procedures to merit Chevron created, but it may not create a right that Congress has not.” However, in this case, the CMS regulation does not create a new cause of action, but rather clarifies ambiguity in the Private Cause of Action provision.
For the reasons articulated above, the court concludes that the Private Cause of Action provision unambiguously permits suit by MAOs and, further, that even if it was ambiguous the CMS regulation that addresses MAO enforcement mechanisms, section 422.108(f), grants MAOs the right to sue under the Private Cause of Action provision.
Who May Be Sued Under the MSP Private Cause of Action Provision
In its complaint, Aetna brings claims pursuant to the MSP Private Cause of Action provision against three categories of defendant: (1) a Medicare beneficiary, Guerrera; (2) the law firm, Carter Mario, and the lawyers, Hammil and Wisniowski, who represented Guerrera in her personal injury settlement with Big Y; and (3) a tortfeasor, Big Y. In their Motion to Dismiss, the defendants argue that the Private Cause of Action provision permits suits only against a “primary plan,” and that Aetna has failed to allege that any of the defendants–Guerrera, or her attorneys, or Big Y– constitute a “primary plan.”
In response, Aetna argues that other federal courts have upheld the right of MAOs to sue all three types of defendants at issue here pursuant to the Private Cause of Action provision, and urges this court to follow suit.
Suit May be Brought Against Primary Plan, But Not Against Beneficiaries or Their Attorneys
The Private Cause of Action provision does not specify who may be sued. Instead, the Private Cause of Action provision states that suit may be brought “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).” 42 U.S.C. § 1395y(b)(3)(A). Thus, the language of the provision itself does not clarify against whom suit is proper.
When interpreting the MSP Private Cause of Action, the Second Circuit has previously concluded that suit may be brought against the primary plan itself. Aetna urges the court to find that beneficiaries and their attorneys may also be sued pursuant to the Private Cause of Action. The court concludes, however, that the MSP and interpreting regulations do not give MAOs the right to sue beneficiaries or their attorneys.
The plain language of the Private Cause of Action provision, while admittedly vague, suggests that Congress intended suit against only primary plans. The provision is triggered when “a primary plan fails to provide for primary payment (or appropriate reimbursement).” 42 U.S.C. § 1395y(b)(3)(A). Had 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.
In support of its interpretation, Aetna cites the court to a CMS regulation section 411.24(g) of title 42 of the Code of Federal Regulations, which states that “CMS has a right of action to recover its payments from any entity, including a beneficiary, that has received a primary payment.” 42 C.F.R. § 411.24(g). Aetna further cites the court to the government’s cause of action in the MSP, subsection (2)(B)(iii), which states that “the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.” 42 U.S.C. § 1395y(b)(2)(B)(iii).
Aetna also directs the court to a ruling by a court in the Eastern District of Louisiana, which held that beneficiaries who had received a settlement from a tortfeasor were, in effect, converted into primary plans. Collins v. Wellcare Health Plans, 73 F. Supp. 3d at 667-68. The Collins court concluded that the settlement itself–as opposed to the entity that funded the settlement–was the “primary plan” because “there is no real distinction between a claim against a tortfeasor or his insurer to obtain reimbursement and a claim against a beneficiary to obtain reimbursement from a settlement funded by a tortfeasor or his insurer.”
The court declines to follow the lead of the Collins court, as primary plan has a clear definition that does not include beneficiaries who have received benefits or settlement funds. The MSP defines primary plan 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).
Aetna also directs the court to a decision from the Eastern District of Virginia, Humana Insurance Company v. Paris Blank LLP, in which the court held that the plaintiff, a MAO, could pursue a claim under the Private Cause of Action provision against a beneficiary and her attorneys. 187 F. Supp. 3d 676, 681. As in Collins, the Paris Blank holding relied on section 422.108(f), which equates the rights of recovery for MAOs to the rights of recovery for the government, in combination with section 411.24, which permits recovery against beneficiaries and their attorneys, as the court has just described. However, the court does not agree with Paris Blank.
Admittedly, this interpretation of the Private Cause of Action provision–that it allows for double damages against primary plans, but does not allow for recovery of payment from beneficiaries or their attorneys–conflicts with the intention of CMS that MAOs be accorded the same rights to recover as the government because the government’s cause of action grants the United States the authority to sue beneficiaries and their attorneys for recovery of payment. 42 U.S.C. § 1395y(b)(2)(B)(iii). CMS regulations, however, are only entitled to deference where they interpret ambiguous statutory language. With respect to the damages available, the language of the Private Cause of Action provision is unambiguous.
For the foregoing reasons, the court concludes that the Private Cause of Action provision permits suits for double damages against primary plans, as defined in the MSP, see title 42, section 1395y(b)(1)(2)(A)(ii), but excludes beneficiaries and their attorneys. The court therefore grants the defendants’ Motion to Dismiss the Medicare Act claims with respect to Guerrera, Carter Mario, Himmel, and Wisniowski.
Suit May be Brought Against Big Y as Aetna Has Adequately Alleged Big Y is a Primary Plan
Having concluded that Aetna, an MAO, may sue under the Private Cause of Action provision, and further having concluded that Aetna may sue a primary plan, the question remains whether Aetna has adequately pled that Big Y is a primary plan. As stated above, the MSP defines primary plan, in pertinent part, as “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)(2)(A)(ii). The MSP further provides that “an entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.”
The defendants assert that Big Y, a tortfeasor, is not a “primary plan” within the meaning of the MSP. In support of this argument, the defendants cite the court to three cases: Parra, 715 F.3d 1146, Mason, 446 F.3d 36, and Woods, 574 F.3d 92. In sum, Parra, Mason, and Woods are either readily distinguishable from this case or, in the case of Mason, reliant on a materially different version of the MSP.
Despite Payment in Settlement, Suit for Reimbursement Is Proper
The final issue for the court with respect to interpretation of the Private Cause of Action provision is to determine whether Big Y, as a primary plan, has “failed to provide for primary payment (or appropriate reimbursement)” within the meaning of the MSP. 42 U.S.C. § 1395y(b)(3)(A).
In its Complaint, Aetna alleges that Big Y was notified of Aetna’s lien on Guerrera’s medical expenses, but nevertheless paid Guerrera and/or her attorneys “the full amount of the Settlement Proceeds.” Arguably, the fact that Big Y paid a settlement means that it did not “fail to provide for primary payment.” 42 U.S.C. § 1395y(b)(3)(A). However, the court concludes that 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.
If a beneficiary or other party fails to reimburse Medicare within 60 days of receiving a primary payment, the primary plan “must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). This regulation applies equally to an MAO. § 422.108(f).
The court finds the reasoning of the Eleventh Circuit in Humana v, Western Heritage Insurance Company, 832 F.3d at 1239-40, to be relevant and persuasive, and similarly concludes that the facts alleged here, if true, constitute a failure to appropriately reimburse Aetna in violation of the MSP.
The Eleventh Circuit found that Western’s payment to Ms. Reale or any other party is insufficient to extinguish its prospective reimbursement obligation to Humana. Sixty days after Western tendered the settlement to the Reales and their attorney, because no party reimbursed Humana, Western became obligated to directly reimburse Humana. § 411.24(i)(1). Therefore, Western failed to provide for “appropriate reimbursement” as defined by the CMS regulations.
In sum, the court concludes that, pursuant to both the text of the Private Cause of Action provision and the CMS regulations interpreting the MSP more broadly, Aetna has adequately alleged that Big Y’s settlement payment to Guerrera and/or her attorneys was not “appropriate reimbursement.” Therefore, the defendant’s Motion to Dismiss Aetna’s Medicare Act claims against Big Y is denied.
For the foregoing reasons, the defendants’ Motion to Dismiss is granted in part and denied in part. Aetna’s claims pursuant to the Medicare Act are dismissed with respect to Guerrera, Carter Mario, Hammil, and Wisniowski, but allowed against Big Y.
This is yet another federal district court allowing MAPs an MSP private cause of action. However, unlike other federal courts, which have allowed suits against the beneficiary and the beneficiary’s attorneys, this court denies Aetna its pursuit of double damages against the Medicare beneficiary, the attorneys that represented her, and the law firm which employed them.
The court only allows an MSP private cause of action to be brought against Big Y, the corporate defendant, as the sole primary plan responsible for reimbursement of the $9,854.16 Aetna made in medical expenses related to the February 15, 2015 accident and resulting injuries.
About Rafael Gonzalez
Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedIn, Twitter, Instagram, and Facebook. He can be reached at email@example.com or 813.967.7598.
About Medicare Conditional Payments
42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensation, liability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.
42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.
About Medicare Advantage and Prescription Drug Plans Reimbursement
42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.
About Medicaid Third Party Liability Liens
42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).
About Flagship Services Group
Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or firstname.lastname@example.org.