New Major Medicare Advantage Decision

On August 8, 2016, the 11th Circuit issued its opinion in Humana v. Western Heritage, 15-11436 (11th Cir., August 8, 2016). It is a major victory for Medicare Advantage Organizations (MOAs) and a major blow to liability insurers. Matthiesen, Wickert & Lehrer (MWL) attorney, Ryan Woody, filed an amicus brief for America’s Health Insurance Plans arguing in support of Humana and in favor of an MAO’s right to bring a private cause of action.

The court affirmed the judgment in favor of Humana on all counts. However, there was a dissenting judge. Joining Judge Black’s majority opinion was Judge Barrington Parker, Jr., sitting by designation from the 2nd Circuit. The majority took great care in reviewing the entire structure of the Medicare Act and explaining how MAOs fit within Part C and the Medicare Secondary Payer (MSP) Act fit within Part E. (Op. 7-11). As to the private cause of action within Part E, the court noted that its prior decision in Glover v. Liggett Group, Inc., 459 F.3d 1304, 1310 (11th Cir. 2006) implicitly supported Humana’s reading of the provision. (Op. 9). In analyzing the private cause of action provision, the court concluded that it along with its references to 42 U.S.C. § 1395y(b)(1) and § 1395y(b)(2)(A) “work together to establish a comprehensive MSP scheme.” (Op. 14). It concluded that MAOs can avail themselves of the private cause of action because (1) the reference to paragraph 2(A) refers to all Medicare payments, including Part C (Op. 15); and (2) that 42 U.S.C. § 1395w-22’s reference to 42 U.S.C. § 1395(b)(2) reveals that MAO payments are made secondary to primary payments pursuant to the MSP not the MAO’s right-to-charge provision (Op. 16). The court rejected Western Heritage’s argument that because Humana is not the “Secretary” as referenced in § 2(B), Humana’s payments are not “conditional”. Instead, the court concluded that the Secretary and an MAO’s payment obligations are “coextensive” and that a “primary plan that fails to make primary payments has failed to do so in accordance with paragraphs (1) and (2)(A), regardless of whether the secondary payer is the Secretary or an MAO.” Id.; 42 U.S.C. § 1395y(b)(3)(A). (Op. 16-17). Thus, it concluded that an MAO has both secondary payer status and can make reimbursable secondary payments. (Op. 18). Finally, the court rejected Western Heritage’s arguments that double damages were not appropriate. It held that Western Heritage had knowledge of Humana’s payments, evidenced by the fact that it placed Humana as a co-payee on the check. (Op. 20). It went on to conclude that Western Heritage failed to make payment notwithstanding its placement of the funds in trust pending resolution of the litigation and that the private cause of action mandates double-damages by use of the word “shall”. (Op. 22).

Judge Pryor dissented. He bought into the argument that Humana is not the Secretary and does not make conditional payments under the MSP Act but only has a right to charge plans under 42 U.S.C. § 1395w-22(a)(4). (Dissent at 24). He wrote, “Because Humana is not the Secretary and its coffers are not the Trust Funds, it cannot seek payment or reimbursement in accordance with paragraphs (1) and (2)(A).” He concluded that the private cause of action was unavailable to MAOs because its reference to §§ (1) and 2(A) are limited to situations where the Secretary has made conditional payments. (Dissent 26).

Overall the decision is a major victory and further cements the 3rd Circuit’s decision In re Avandia Mktg., Sales Practices & Products Liab. Litigation, 685 F.3d 353 (3rd Cir. 2012), as the correct reading of an MAO’s rights under the Medicare Act. This decision now marks three Circuits that have found the private cause of action applicable to payments made by MAOs when you include the 6th Circuit’s decision in Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787,790 (6th Cir. 2014).

To read the full opinion, click HERE. If you should have any questions regarding this article or subrogation in general, please contact Ryan Woody at rwoody@mwl-law.com.

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Ryan L. Woody
Partner

Ryan L. Woody is a litigation attorney and partner with Matthiesen, Wickert & Lehrer, S.C. Ryan’s practice focuses on large loss subrogation and defense, Medicare Advantage, ERISA reimbursement, lien resolution, healthcare litigation, and appeals. Ryan is a frequent national speaker on insurance coverage, ERISA and health insurance, and workers’ compensation subrogation.