Humana Medical Plan, Inc. v. Reale - FL Fed Dist Court Limits Medicare Advantage Plan's Recovery Rights
Posted date in MedicareHumana Medical Plan, Inc. v. Reale raises some important issues and questions regarding reimbursement rights of Medicare Part C (Medicare Advantage plans). Medicare Advantage plans are health plan options that are part of the Medicare program even though they are provided by private health insurance organizations. If you join a Medicare Advantage Plan, the plan will provide all of your Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D). Medicare Advantage plans include HMOs, PPOs, private fee for service plans and Medicare special needs plans. To join a Medicare Advantage plan, you must already have Medicare Part A and Part B.
Medicare Advantage plans are governed by the very same statutes as well as regulations as Medicare including the Medicare Secondary Payer Provisions. Advantage plans are given the same rights as Medicare in terms of reimbursement of conditional payments when a third party is liable. Medicare Advantage plans are granted rights to recover payments from Advantage plan participants under 42 USC 1395w-22(a)(4)[i] and 42 CFR 422.108[ii]. 42 USC 1395w-22(a)(4) specifically references the MSP recovery statute (42 USC 1395y (b)(2)) in granting the Advantage plan a right of recovery on par with Medicare’s conditional payment recovery rights. 42 CFR 422.108 provides that an advantage plan “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.”
In Reale, the Federal District court had to decide just how far an Advantage plan’s rights extend under the MSP provisions in bringing a recovery cause of Action. Humana paid the defendant Mary Reale, a Medicare Advantage program participate, Medicare benefits cover her medical expenses relating to a slip and fall. The total benefits amounted to over nineteen thousand dollars. Reale brought suit to recover damages for her slip and fall accident which eventually resulted in a settlement. Humana filed a cause of action in Federal District court against Reale alleging the Medicare Secondary Payer Act entitled it to receive reimbursement of the monies paid to Reale. In response to the suit by Humana, Reale filed a motion to dismiss claiming 42 USC 1395y(b)(2) didn’t give Humana a private cause of action resulting in the court lacking subject matter jurisdiction. Judge Marcia Cooke agreed with Reale.
The court’s analysis centered on whether Humana’s claim arose under federal law to give the court subject matter jurisdiction since the court didn’t have diversity of citizenship jurisdiction given the amount in controversy was less than the required $75,000. Humana argued the court had subject matter jurisdiction because “Humana’s alleged right to reimbursement under 42 U.S.C. § 1395y(b)(2) ‘present[s] an important and ‘substantial’ issue of federal law’.” The court scrutinized the rights an Advantage plan has in terms of recovery under 42 USC 1395y(b)(2) and 42 CFR 422.108(f) and disagreed with Humana’s argument that they were entitled to reimbursement. She stated that a “close reading of the federal regulation suggests otherwise.”
In arriving at this conclusion, she stated:
“A Medicare Advantage organization, such as Humana, “will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations …” However, under 42 U.S.C. 1395y(b)(2)(B)(i), the Secretary’s authority is limited to making payments “conditioned on reimbursement to the appropriate Trust Fund.” Id. The United States is vested with full authority to bring an action for reimbursement, not the Secretary. 42 U.S.C. § 1395y(b)(2)(B)(iii)1. Therefore, because the Secretary does not have the authority to bring an action for reimbursement, Humana cannot claim such a right under 42 C.F.R. §422.108(f). Accordingly, Humana has failed to bring a claim arising under federal law.”
Accordingly, Judge Cooke held that subject matter jurisdiction didn’t exist and the Defendant’s motion to dismiss should be granted. This decision strips Advantage plans of the right to bring a cause of action in federal court under the MSP provisions. It seems to take the Advantage plans down a notch in terms of having recovery rights on par with the United States. In reviewing Judge Cooke’s conclusion immediately above, she distinguishes the rights of the “Secretary” and the United States. An advantage plan has the same rights as the Secretary but not the US government. This is an important distinction and caused Humana’s cause of action to fail in this particular case. Based upon the holding of this case, only the Department of Justice can bring suit to recover reimbursements under the MSP in federal court. One would assume the issues will have to be litigated in state court instead and there may be defenses available under state law.
That being said, the case did recognize that Medicare Advantage plans have the same recovery rights as the Secretary under the MSP provisions. The ability to file suit under the MSP is just not one of those recovery rights. In general, an Advantage plan will have to reduce for procurement costs just like Medicare does under its recovery formula (42 CFR 411.37).
This is a good decision to utilize in negotiating with an Advantage plan.
[i] 42 U.S.C. §1395w-22 (a)(4) provides: “(4)Organization as secondary payer Notwithstanding any other provision of law, a Medicare+Choice organization may (in the case of the provision of items and services to an individual under a Medicare+Choice plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section— (A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or (B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.)”.
[ii] 422.108 - Medicare secondary payer (MSP) procedures. (a) Basic rule. CMS does not pay for services to the extent that Medicare is not the primary payer under section 1862(b) of the Act and part 411 of this chapter. (b) Responsibilities of the MA organization. The MA organization must, for each MA plan (1) Identify payers that are primary to Medicare under section 1862(b) of the Act and part 411 of this chapter; (2) Identify the amounts payable by those payers; and (3) Coordinate its benefits to Medicare enrollees with the benefits of the primary payers. (c) Collecting from other entities. The MA organization may bill, or authorize a provider to bill, other individuals or entities for covered Medicare services for which Medicare is not the primary payer, as specified in paragraphs (d) and (e) of this section. (d) Collecting from other insurers or the enrollee. If a Medicare enrollee receives from an MA organization covered services that are also covered under State or Federal workers' compensation, any no-fault insurance, or any liability insurance policy or plan, including a self-insured plan, the MA organization may bill, or authorize a provider to bill any of the following (1) The insurance carrier, the employer, or any other entity that is liable for payment for the services under section 1862(b) of the Act and part 411 of this chapter. (2) The Medicare enrollee, to the extent that he or she has been paid by the carrier, employer, or entity for covered medical expenses. (e) Collecting from group health plans (GHPs) and large group health plans (LGHPs). An MA organization may bill a GHP or LGHP for services it furnishes to a Medicare enrollee who is also covered under the GHP or LGHP and may bill the Medicare enrollee to the extent that he or she has been paid by the GHP or LGHP. (f) MSP rules and State laws. Consistent with 422.402 concerning the Federal preemption of State law, the rules established under this section supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to MA plans. A State cannot take away an MA organization's right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer. The MA organization 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.