The 11th Circuit U.S. Court of Appeals, which includes Florida, Alabama and Georgia under its jurisdiction, has found that Medicare Advantage Plans (MAPs) may assign their rights of recovery under the MSP Act to another party. The consequence of the ruling is that MAPs or their assignees may assert a claim for reimbursement against no-fault and personal injury protection (PIP) plans for payments made by the MAPs deemed to be related to a claimed injury, including a claim for double damages.
Giving full effect to the Medicare Secondary Payer (MSP) Act, the 11th Circuit Court, in the case of MSP Recovery, LLC v. Allstate, et al., case number 1:15-cv-21532 (August 30, 2016), held a contractual obligation, such as one found between insurer and insured in a No-Fault or Personal Injury Protection (PIP) plan sufficiently demonstrates responsibility for payment to satisfy a condition precedent to a private cause of action under the Act.
What is uncertain, and the issue the 11th Circuit left on remand of the consolidated cases to the lower courts, is whether the insurers’ valid contracts actually render the insurers responsible for primary payments. For example, an insurer may have already exhausted policy limits before the MAP asserts a reimbursement claim. Does the insurer have additional liability to pay the MAP beyond the policy limits? This question will likely be addressed in the lower courts.
As a result of this decision no-fault/personal-injury-protection (PIP) plans must be cognizant of Medicare eligible claimants and their responsibility to pay primary for injury-related medical services received by these claimants. If the plan or insurer receives correspondence or claim for reimbursement from a MAP or an entity recovering on behalf of the MAP such correspondence should not be ignored. A proper response to the MAP would be payment of the reimbursement claim, dispute of the reimbursement claim based upon the charges being unrelated to the injury or asserting a defense to reimbursement such as the policy limits having been exhausted in payment of other injury related medical care.
This ruling followed consolidation of seven cases MSP Recovery and MSPA Claims 1 asserted against various insurance defendants (insurers) who provided no-fault/personal-injury-protection (PIP) coverage to policyholders (insureds).
The claims stem from situations where insureds were injured in motor vehicle accidents in Florida. The insureds were Medicare beneficiaries enrolled with Florida Healthcare Plus (FHCP), a Medicare Advantage Organization (MAO). FHCP provided payment of treatment expenses related to the MVAs and assigned its rights to recover conditional payments from the insurers to MSP Recovery, LLC (MSP Recovery).
In turn, MSP Recovery sued each of the seven insurers for failure to repay conditional payments and to recover double damages under the MSP Act’s private cause of action for this failure.
Initially, a lower court dismissed all seven cases citing to Glover v. Liggett 459 F.3d 1304, 1306 (11th Cir. 2006), which held that primary plans’ responsibility must be demonstrated before a plaintiff files a claim under the MSP Act. The lower court reasoned the plaintiff needed a judgment on the insurance contract prior to bringing an action, and refused to recognize the argument asserted by MSP Recovery that a contractual obligation could satisfy the “demonstrated responsibility” requirement under the Act.
MSP Recovery argued FHCP is a secondary payer and the insurers are primary payers. Therefore, the primary payers have obligations under the MSP Act to reimburse FHCP for medical costs related to the MVA injuries. MSP Recovery further asserted that the insurers’ responsibility to repay the conditional payments is demonstrated by the insurance contracts the insureds entered into with them.
The 11th Circuit focused its analysis on the plain language of the Act, and specifically the phrase “by other means,” located in 42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added):
“…responsibility for such payment 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.”
The Court found CMS provided some clarity as to what evidence may constitute “by other means.” Specifically, the Court cited 45 C.F.R. 411.22(b), which states that responsibility for payment may be demonstrated by settlement, award, or contractual obligation.
While the insurers argued their contracts with the insureds could only demonstrate responsibility when reduced to a judgment or settlement, the Court took time to underscore an “important difference” between tort liability and contract law.
The Court stated:
“A contract imposes obligations on the parties immediately, without any involvement of the courts. While a lawsuit may be necessary to enforce a contract in the event of a breach, the obligations created by the contract exist as soon as it is executed. By contrast, an alleged tortfeasor has no obligations until he is adjudged liable. In a similar vein, demonstrating responsibility by means of a ‘judgment’ necessarily presupposes a separate proceeding in which that judgment was obtained. On the other hand, the term ‘contractual obligation’ in the CMS regulations presupposes only the existence of a contract.”
The Court commented that if it were to adopt the position of the insurers, then the phrase “by other means” would be rendered meaningless. To render a section of law meaningless violates a basic interpretative canon which states that a statute should be construed to give effect to all its provisions. Therefore, giving full effect to all provisions of the statute, the Court held a contractual obligation may serve to sufficiently demonstrate responsibility for payment.
A copy of the decision may be found here.