On September 20, 2017, the United States District Court for the Southern District of Florida published its opinion on MSPA Claim I, LLC., v. National Fire Insurance Company of Hartford, finding that since it is undisputed that on June 4, 2014, at the time of the settlement in this case, the threshold amount referenced in paragraph (9) of the Medicare Secondary Payer Act (MSP) was set at $2,000, and that National Fire’s settlement was for $1,500, the threshold to bring an MSP private cause of action is not met. The Court therefore concludes that Plaintiff does not state a cognizable claim under the MSP. Having found the threshold amount is not met, the Court did not reach the standing issue as to whether the Plaintiff had a valid assignment at the time it filed suit.
Facts of the Case
Plaintiff MSPA Claims I, LLC invokes the private cause of action provision of the MSP Act to recover reimbursement of Medicare benefits in this case. Plaintiff is a twice-removed assignee of a Medicare Advantage Organization (MAO), called Florida Healthcare Plus, Inc., which paid medical bills incurred by its enrollee named L.H., who suffered burns at a Sonic location. Plaintiff alleges Defendant National Fire Insurance Company provided liability insurance for Sonic and should reimburse the costs incurred by Florida Healthcare Plus, Inc. Plaintiff also alleges that National Fire settled L.H.’s claim against Sonic for $1,500 on June 4, 2014, but National Fire failed to reimburse Florida Healthcare Plus, Inc. for that amount.
Florida Healthcare Plus, Inc. originally assigned its claim against National Fire to La Ley Recovery Systems, Inc., which, in turn, assigned its claim to Plaintiff MSPA Claims I, LLC.
The Second Amended Complaint
The Second Amended Complaint asserts two counts against National Fire. The first is a private right of action under the MSP Act at 42 U.S.C. § 1395y(b)(3)(A), seeking double damages for National Fire’s alleged failure to reimburse Florida Healthcare Plus for Medicare benefits it advanced to cover L.H.’s medical costs. The second count is for a declaratory judgment as to National Fire’s obligation to reimburse the payment of conditional Medicare benefits.
Defendant National Fire is moving to dismiss arguing the settlement amount of $1,500 is less than the $2,000 threshold amount necessary to trigger National Fire’s reimbursement obligation under the MSP Act. Second, Defendant National Fire argues the assignment to Plaintiff is invalid because the MAO, Florida Healthcare Plus, Inc. did not approve it prior to the filing of the complaint.
Law Requires Primary Payer to Reimburse Medicare
The Medicare Act Part C, allows a private insurance company operating as a Medicare Advantage Organization to administer Medicare benefits pursuant to a contract with the federal government, Centers for Medicare & Medicaid Services (CMS). The law requires a primary plan to reimburse Medicare “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). “In other words, Medicare may obtain reimbursement from a primary plan if it demonstrates that the primary plan ‘has or had a responsibility’ to pay for the item or service.” MSP Recovery, LLC. v. Allstate Ins. Co., 835 F.3d 1351, 1355 (11th Cir. 2016).
In addition to allowing the federal government to file suit seeking reimbursement, Congress also created a private right of action against a primary plan that fails to provide for primary payment. At issue in this motion to dismiss is whether the threshold amount applies to private rights of action by a MAO, or only to claims brought by the federal government.
Demonstrated Responsibility is Part of Private Cause of Action
In Allstate, the Eleventh Circuit examined the structure of the Medicare Secondary Payer Act’s private cause of action. The text of the private right of action indicates “there is established a private cause of action for damages …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).
Recognizing the lack of clarity in the statute, the Eleventh Circuit held that the demonstrated responsibility requirement is incorporated as a prerequisite to pursuing the private cause of action. Allstate, 835 F.3d at 1359. The Eleventh Circuit held that even though “demonstrated responsibility” was not explicitly included as a prerequisite in the text of the private right of action at § 1395y(b)(3)(A). Rather, the demonstrated responsibility provision is written in a separate section § 1395y(b)(2)(B). In Allstate, the private right of action established in § 1395y(b)(3)(A) references paragraph 2(A), which, in turn, references paragraph (2)(B). Therefore, the Eleventh Circuit reasoned the demonstrated responsibility requirement should be read into the private right of action. Here, the question goes one step further and the Court must decide whether the threshold amount found in § 1395y(b)(9) should likewise be read into the private right of action as a prerequisite.
The Medicare Secondary Payer Threshold Amount
The threshold amount provision in the MSP Act indicates that “clause (ii) of paragraph (2)(B) and any reporting required by paragraph (8) shall not apply with respect to any settlement, judgment, award, or other payment by an applicable plan arising from liability insurance … and from alleged physical trauma- based incidents … constituting total payment obligation to a claimant of not more than the single threshold amount calculated by the Secretary under subparagraph (B) for the year involved.” 42 U.S.C. § 1395y(b)(9)(A). The threshold amount section references clause (ii) of paragraph (2)(B), which, in turn, cross-references paragraph (9), and clarifies that any reimbursement obligation imposed upon a primary plan for payments is subject to paragraph (9). 42 U.S.C. § 1395y(b)(2)(B)(ii). Unequivocally, statutory section (2)(B) references the threshold amount of paragraph (9) and vice-versa. Following Allstate’s rationale, this Court likewise reads the threshold amount requirement into the private right of action.
Threshold Amount Applies to Government & Private Causes of Action
Plaintiff requests the Court limit the threshold amount requirement to cases brought by the federal government for reimbursement under 42 U.S.C. § 1395y(2)(B)(3). In support of its position, MSPA cites W. Heritage Ins. Co., 832 F.3d at 1237, to argue that paragraph (2)(B) does not apply to Medicare Advantage Organizations. The Eleventh Circuit, in Humana, did not, however, decide whether the Government’s right of action in paragraph (2)(B) was available to MAOs. 832 F.3d at 1237, n. 4 (“The parties do not argue and we do not consider whether the Government’s cause of action described in paragraph (2)(B) was intended to be available to Medicare Advantage Organizations.”). The Court, therefore, does not find Plaintiff’s argument persuasive that the threshold amount only applies to the government’s actions, and not private ones.
The parties have not cited any case that limits the threshold requirement of paragraph (9) to the Government’s right of action and does not apply it to the private right of action. Indeed, courts have recognized the general principle that “Congress clearly intended there to be parity between MAOs and traditional Medicare.” In re: Avandia Mktg. Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 364 n. 18 (3d Cir. 2012). This principle is also reflected in the regulations promulgated under Medicare, which state “the MAO will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP Act regulations.” 42 C.F.R. § 422.108(f).
Cost Savings Rational Applies to Both Medicare and Advantage Plans
Even if the Court were to agree with Plaintiff that the statute is ambiguous as to whether the threshold requirement is embedded in the private right of action, an examination of the legislative history does not show that Congress intended to draw distinction between Medicare and MAOs. Plaintiff argues Congress included the threshold amount only to assure the Government does not recover less than the cost to pursue a claim. The problem with the Plaintiff’s argument is that the cost-savings rationale applies equally to MAOs, which are funded out of the same trust funds that support traditional Medicare. See 42 U.S.C. § 1395w-23(f). Moreover, if Plaintiff were correct, a Medicare beneficiary receiving benefits from an MAO would be required to reimburse the organization regardless of the settlement amount, whereas a Medicare beneficiary receiving benefits from traditional Medicare would not if the amount was below the threshold. See 42 C.F.R. § 411.24(g) (stating the government has a right of action against any entity, including a beneficiary, that has received a primary payment). Surely, Congress did not intend disparate treatment between beneficiaries of Medicare and those of MAOs.
It is undisputed that at the time of the settlement in this case, the threshold amount referenced in paragraph (9) of the MSP Act was set at $2,000. It is undisputed that National Fire’s settlement was for $1,500, less than $2,000. It is undisputable that the threshold to bring a cause of action is not met. The Plaintiff, therefore, does not state a cognizable claim under the MSP Act. Having found the threshold amount is not met, the Court need not reach the standing issue as to whether the Plaintiff had a valid assignment at the time it filed suit. Defendant’s motion to dismiss is granted.
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About Rafael Gonzalez
Rafael Gonzalez, Esq. is President of Flagship Services Group. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, 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 firstname.lastname@example.org or 813.967.7598