For several years we have been advising our clients, all of whom are in the Ninth Circuit (California, Arizona, Nevada, Washington, Montana, Oregon, Hawaii, Idaho and Alaska), that Federal Circuit Court cases throughout the country have shown a continuing increase in jurisdictions adopting the reasoning of the In Re Avandia case, which holds that Medicare Advantage Plans (MAPs – also referred to as Part C (Medicare Advantage Plans) and Part D (Medicare Prescription Drug) plans) have the same right to reimbursement as Medicare A and B, and the same right to sue for double damages if reimbursement is not made by RREs (responsible reporting entities). It has been our opinion that the Ninth Circuit and the rest of the country are likely to eventually all adopt the Avandia reasoning and accordingly we recommend our clients identify and protect all Part C/D interests when settling cases, preferably by ensuring those plans are reimbursed directly from settlement proceeds before disbursement of the balance is made to the beneficiary/plaintiff and counsel.
The Ninth Circuit, the largest in the country, has been somewhat in limbo since our Court has never directly decided the issue. The closest we have come to any indication how our Court might decide this issue is found in Parra v. PacifiCare of Arizona. In that case the issue was whether a private Medicare Advantage Organization (“MAO”) plan could sue a plan participant’s survivors, as opposed to the plan participant himself, for conditional payments made by the MAO on behalf of the deceased beneficiary. The Parra court decided that issue against the insurer, holding the insurer had no right to seek reimbursement from an award for general damages in a wrongful death case brought only by the survivors and not by the deceased’s Estate (in other words, they couldn’t take the survivors’ money to pay a debt owed by the decedent, when the decedent’s Estate was not a party and had not been awarded any money). The Parra court specifically noted it did not have to reach the issue of whether an MAO has a right to sue for reimbursement, as Medicare Parts A/B do under the MSP, because that issue was not directly presented. There is some dicta in Parra indicating the Arizona Circuit Court might not be inclined to decide in favor of the MAP if this issue was ever presented directly, but until now there has been no case pending or decided in our Circuit which directly addressed the issue.
That case is now here. On September 18, 2017, Humana Health Plan filed its action against Hartford Casualty Insurance Company in the Western District Court in Washington, seeking declaratory relief as to Hartford’s obligation to reimburse Humana for conditional payments Humana made as a Medicare Advantage Plan, and to establish that Humana had a right to sue (a “private cause of action”) pursuant to Section 42 USC 1395y(b)(3)(A) of the MSP.
The case arises out of Hartford’s failure to reimburse Humana for conditional payments it made on behalf of the Hartford insured. Hartford had instead paid the full settlement proceeds to the settling plaintiff, leaving it to the plaintiff to pay Humana from the settlement proceeds. When plaintiff did not make that payment, Humana sued Hartford claiming Hartford had failed to meet its obligation to protect Humana’s interest in reimbursement under the MSP. Hartford’s position is that the MSP does not give Humana the same rights as Medicare A and B plans to statutory lien protection, or to sue to enforce its rights under the MSP (see Humana Health Plan v. Hartford Casualty Insurance Company, Case No. 2:2017cv01407, Western District of Washington).
This is precisely the scenario we have worked to protect our clients from facing by ensuring they do make these payments, even though there has not been a clear case decided on the issue in our Circuit – although now presumably we will get such a decision. Our reasoning has been that the Avandia case is one of the most reviewed and tested cases we have seen, and has survived repeated judicial scrutiny at several levels. Its reasoning has been adopted by an ever-increasing number of states, now including New Jersey, Florida, Pennsylvania, Delaware, Alabama and Georgia, and we expect other states to follow.
As lawyers, we are charged with reasonably anticipating in what direction the law is heading, and providing advice to clients accordingly. Years of experience have shown us it imposes little burden on settling plaintiffs to allow the RREs who are paying the settlement proceeds to satisfy all statutory liens, including those by MAPS, directly from the settlement proceeds, or at the very least cut separate checks to the statutory lienholders and provide them to plaintiff’s counsel along with the balance of the settlement proceeds, so our clients have proof in their files that they did protect the lienholder’s asserted right to reimbursement. We believe it is better to err on the side of caution, and we will continue to do so.
It will be interesting to see what the Washington Court decides now that the issue is squarely presented. We will be watching the case closely, and will provide updates as developments occur.
Should you have questions about this issue or any other matter involved Medicare, Medicaid and other statutory reimbursement matters, please do not hesitate to contact us. We have nine years of experience addressing compliance issues regarding the MSP, which has been called one of “the most completely impenetrable texts within human experience.” (Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3d Cir. 2010)), and we are here to assist you.
Seana B. Thomas, Esq.