Resolution of Medicare Conditional Payments remains a concern for all involved. Whether plaintiff or plaintiff’s counsel, defendant, insurer, or defendant/insurer’s counsel, resolution of Medicare Conditional Payments continues to slow the settlement process, and sometimes spoils potential settlement. In addition to governmental entities such as the United States (US), the Department of Health and Human Services (HHS), and the Centers for Medicare and Medicaid Services (CMS), we can now add Medicare Advantage Organizations (MAOs) and Prescription Drug Plans (PDPs), Medicare Part C and Part D private carriers, as entities that parties will have to deal with regarding Medicare secondary payment subrogation rights as these private carriers begin seeking reimbursement for payments made for services in which Medicare is a secondary payer.
On December 5, 2011, Danielle R. Moon, J.D., M.P.A., Director, Medicare Drug & Health Plan Contract Administration Group, and Cynthia Tudor, Ph.D., Director, Medicare Drug Benefit and C&D Data Group, of the Centers for Medicare and Medicaid Services published a memorandum to all of the Medicare Advantage Organizations and Prescription Drug Plan Sponsors regarding Medicare Secondary Payment Subrogation Rights for Part C and Part D private carriers seeking reimbursement for payments made for services in which Medicare is a secondary payer.
The memorandum summarizes CMS’ regulations giving MAOs and PDPs the right, under existing Federal law, to collect for services for which Medicare is not the primary payer. The memorandum mentions recent decisions where several courts have challenged Federal regulations governing these collections. Specifically, the memo mentions that several MAOs have not been able to take private action to collect for Medicare Secondary Payer (MSP) services under Federal law because they have been limited to seeking remedy in State court.
Although not specifically mentioned, the memo may have been speaking about cases such as Humana Medical Plan v. Reale, decided on January 31, 2011, by the Federal Southern District Court in Florida, in which the Court concluded it lacked subject matter jurisdiction over Humana’s complaint requesting reimbursement of conditional payments it made. The Court concluded that under 42 U.S.C. 1395y(b)(2)(B)(i), the United States is the only entity vested with full authority to bring an action for reimbursement, not the Secretary. Therefore, the court concluded that because the Secretary does not have the authority to bring such action, Humana did not have the authority either.
In the case, Plaintiffs Humana Medical Plan, Inc. (Humana), was the Medicare Advantage organization that administered Medicare benefits to Medicare beneficiaries who are enrolled in the Medicare Advantage program. In April 2009, Humana paid Defendant Mary Reale (Reale), a Medicare Advantage program participant, certain Medicare benefits in the amount of $19,155.41 to cover Reale’s medical expenses incurred as a result of a slip and fall. Shortly after her fall, Reale filed suit against the Hamptons West Condominium Association and/or its insurer (the “Association”) to recover for her injuries. The action between Reale and the Association eventually settled for an amount greater than $19,155.41. On May 17, 2010, Humana filed an Amended Complaint against Reale and her attorney, Donna B. Michelson, P.A., alleging that the Medicare Secondary Payer Act, 42 U.S.C. §1395y(b)(2), (MSP), entitled it to receive reimbursement of the $19,155.41 paid to Reale. Defendants argued that the case should be dismissed because 42 U.S.C. §1395y(b)(2) does not grant Humana a private cause of action and, as a result, the Court lacked subject matter jurisdiction.
Humana contended that 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.” Section 1395y(b)(2) requires reimbursement to the “appropriate Trust Fund for any payment made by the Secretary . . . with respect to an item or service if it is demonstrated that such primary plan . . . had a responsibility to make payment with respect to such item or service.” 42 U.S.C. § 1395y(b)(2). Humana argued that 42 U.S.C. § 1395y(b)(2), coupled with 42 C.F.R. § 422.108(f), entitled it to reimbursement.
The court disagreed, indicating that a close reading of the federal regulation suggests otherwise. 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). Therefore, the Secretary does not have the authority to bring such action.
In order to recover payment made under the subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has authority to bring an action for reimbursement. Humana cannot claim such a right under 42 C.F.R. §422.108(f). Accordingly, the Court concluded Humana failed to bring a claim arising under federal law.
The memorandum however makes it clear that CMS’ regulations at 42 CFR § 422.108 describe MSP procedures for MAOs to follow when billing for covered Medicare services for which Medicare is not the primary payer. According to the memo, these regulations also assign the right (and responsibility) to collect for these services to MAOs. Specifically, §422.108(f) indicates that MAOs will exercise the same rights of recovery that the Secretary of Health and Human Services (HHS) exercises under the original Medicare MSP regulations in subparts B through D of part 411 of 42 CFR.
The memorandum also indicates that these same regulations established in 42 CFR Section 411 supersede any State laws. Additionally, the MSP regulations at 42 CFR §422.108 are extended to Prescription Drug Plan (PDP) sponsors at 42 CFR §423.462. Accordingly, PDP sponsors have the same MSP rights and responsibilities as MAOs.
Notwithstanding recent court decisions like Humana Medical Plan v. Reale, in which the Court concluded it lacked subject matter jurisdiction over Humana’s complaint requesting reimbursement of conditional payments it made, and therefore finding the United States is the only entity vested with full authority to bring an action for reimbursement, CMS maintains that the existing MSP regulations are legally valid and an integral part of the Medicare Part C and D programs’ ability to recoup payments made for covered Medicare services for which Medicare is not the primary payer. As a result, plaintiff, plaintiff’s counsel, defendant, insurer, and defendant/insurer’s counsel will have to be prepared to deal with Medicare Advantage Organizations and Prescription Drug Plans, Medicare Part C and Part D private carriers, regarding Medicare secondary payment subrogation rights as these private carriers begin seeking reimbursement for payments made for services in which Medicare is a secondary payer.
About the Author: Rafael Gonzalez is Director of Medicare Compliance & Post-Settlement Administration. He brings over 20 years of experience in the Workers’ Compensation and Liability insurance industries with a specific focus on Medicare Compliance. Rafael has been responsible for all areas of Medicare Set Aside Allocations (MSAs) including the preparation of MSAs and their approval by the Center for Medicare & Medicaid Services. At Gould & Lamb, Rafael’s duties include assisting clients with Medicare Compliance issues, specifically on Post-Settlement Administration and client education.