Humana authorized to sue insurer as Medicare secondary payer

A private insurer offering a Medicare Advantage (MA) plan does have a cause of action against primary insurers to seek reimbursement as a secondary payer under the Medicare Secondary Payer (MSP) Act. The Eleventh Circuit affirmed a district court order granting summary judgment in favor of Humana Medical Plan, Inc., an MA plan provider, that brought suit against Western Heritage Insurance Company, a liability insurer that settled personal injury claims that arose from a slip-and-fall accident involving one of Humana’s MA plan enrollees.

Secondary payer. The MSP Act is designed to allocate liability when more than one insurer is liable for an individual’s medical costs—particularly between an individual’s health insurer and a tortfeasor’s liability insurer. Under the MSP Act, Medicare serves as a secondary payer to all other sources of coverage. Under the statute, a private entity can bring a lawsuit for double damages “in the case of a primary plan which fails to provide for primary payment.”

Accident. One of Humana’s enrollees was injured in a slip-and-fall accident. The enrollee received treatment and her medical providers charged her $74,636.17. Humana paid $19,155.41 of the enrollee’s medical expenses. The enrollee then filed a personal injury action against Hamptons West Condominiums—the owner of the property where she was injured. Hamptons West’s liability insurer, Western Heritage, entered into a settlement agreement to resolve the liability issues for a sum of $115,000. As part of that settlement, the enrollee attested that she had no outstanding Medicare liens. Although Western Heritage attempted to include Humana as a payee in the settlement, the enrollee was directly paid the full amount.

Lawsuits. When the enrollee and Humana failed to come to an agreement as to Humana’s reimbursement amount, Humana brought suit against the enrollee. After Humana voluntarily dismissed the action, the enrollee filed a suit in state court seeking a declaration of the amount she owed Humana. The court determined that Humana’s share of the settlement amounted to $3,685.03. Humana appealed that decision. Humana then filed suit against Western Heritage seeking to recover from Western Heritage on the grounds that Western Heritage was the primary payer. Humana brought a motion for summary judgment seeking a declaration that Western Heritage was liable to Humana under the MSP Act, seeking double damages under the MSP Act’s private cause of action provision. The district court granted Humana’s motion, concluding that the MSP Act did give MA plans a private cause of action against primary payers.

MSP Act claim. The Eleventh Circuit held that an MA organization has the rights of a secondary payer under the MSP Act’s private cause of action provision. The court pointed to the regulations at 42 C.F.R. Sec. 422.108(f), which establish that an MA organization “will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” Additionally, the court reasoned that the statutory text of the MSP Act established that MA organizations are included within the class of entities permitted to bring a private cause of action against a primary plan. The court expressly held that the MSP Act did not limit its cause of action to cases in which traditional Medicare is the secondary payer.

Double reimbursement. In addition to determining that Humana was permitted as an MA organization to bring its cause of action under the MSP Act, the Eleventh Circuit held that the insurer was also properly awarded summary judgment on its claim by the district court. The court concluded that because Western Heritage attempted to include Humana as a payee in the settlement, the liability insurer demonstrated that it had constructive knowledge of Humana’s Medicare payment and right to reimbursement. The court reasoned that Western Heritage’s reimbursement of the enrollee was insufficient to release Western from its reimbursement obligation to the MA plan. The court concluded, therefore, that Humana’s request for double reimbursement was appropriate because, under a private cause of action, the MSP Act entitled the secondary payer to double the amount that the secondary payer was otherwise entitled.

Dissent. Circuit Judge Pryor dissented, asserting that because Humana is not HHS or the HHS Secretary, the MA organization was not entitled to recover reimbursement as though it was the HHS Secretary. Through an analysis of the statutory text, the dissent argued that an MA organization received no authority from the MSP Act authorizing it to seek reimbursement as a secondary payer. Therefore, the dissent reasoned, Humana failed to state a claim.

SOURCE: Humana Medical Plan Inc. v. Western Heritage Insurance Company, (CA-11), No. 15-11436, August 4, 2016.

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