In a 2-1 final decision out of the Eleventh Circuit Court of Appeals, Humana Medical Plan, Inc. v. Western Heritage Insurance Company, Humana prevailed in recovering double damages under the Medicare Secondary Payer (MSP) private cause of action due to Western Heritage’s failure to reimburse Medicare conditional payments. Recall that last year the District Court of Appeals had also found in favor of Humana, to which Western Heritage appealed that decision to the Eleventh Circuit. Oral arguments were heard in the Eleventh Circuit earlier this year, and the industry has been eagerly waiting the Eleventh Circuit’s decision.
Background/Recap of the Facts: In January 2009, Mary Reale, a Humana Medicare Advantage Plan beneficiary, was injured at Hamptons West Condominiums. Ms. Reale treated for her injuries and Humana paid for the treatment, totaling $19, 155.41. In June 2009, Ms. Reale and her husband sued the condominium in Florida state court for her injury. In March 2010, while her litigation was pending, Humana issued to Ms. Reale an Organization Determination in the amount of $19, 155.41. Although an administrative appeal process was available, no party appealed Humana’s Organization Determination. On April 20, 2010, in return for $115,000 from the condominium and its liability insurer, Western Heritage, the Reales released the condominium and Western Heritage. The Reales represented in the settlement agreement that there was no Medicare or other lien or right to subrogation. The Reales also agreed to indemnify the condominium and Western Heritage against any Medicare lien or right to subrogation.
On May 7, 2010, Humana sued the Reales and their attorney in the Southern District of Florida seeking reimbursement. The Reales sought dismissal, to which the court agreed, holding that a Medicare Advantage Plan (MAP) does not have a private cause of action to recover reimbursement from a beneficiary under the MSP. Likely in response to Humana’s suit, the condominium and Western Heritage attempted to make Humana a payee on the settlement draft to the Reales. The Reales then sought sanctions against Western Heritage for failure to comply with the settlement agreement. At that point, the parties agreed instead that the Reales’ attorney would hold $19, 155.41 in trust out of the $115,000 settlement amount pending resolution of the Reales’ litigation, and Western Heritage then tendered the $115,000 settlement to the Reales.
At this point the Reales sued Humana seeking a declaration as to what they owed Humana, however the court ultimately ruled that it lacked jurisdiction to adjudicate the dispute between Humana and Ms. Reale as to her MAP benefits. Subsequently, on January 11, 2011, Humana sued Western Heritage in the action upon which this appeal proceeded. Humana’s initial counts in its complaint were: 1) Double damages under the MSP private cause of action, 42 U.S.C. § 1395y(b)(3)(A); 2) Declaratory relief under the Medicare statutory and regulatory scheme; 3) Damages under several state law theories including unjust enrichment and a contract implied by law.
Eleventh Circuit Decision: Through analysis of the MSP and CMS regulations, the Eleventh Circuit found that MAPs have a right to a private cause of action for double damages against a primary plan where reimbursement has not occurred. Specifically, the Eleventh Circuit found the following persuasive: 1) CMS Regulations- A MAP “will exercise the same rights to recover 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.” 42 C.F.R. § 422.108(f); 2) Statutory Basis- The MSP private cause of action, located at 42 U.S.C. § 1395y(b)(3)(A) is unambiguous and broadly permits any party with standing (including a MAP) to sue a primary plan. The Third Circuit in the In Re Avandia case also held that MAPs are included within the purview of parties who may bring a private cause of action.
Western Heritage countered that the MSP does not govern MAPs at all and that the MAP right-to-charge provision instead governs when and whether a MAP is a secondary payer. However, the court rejected this argument finding that the right to charge provision reveals that MAP payments are made secondary to primary payments under the MSP.
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