Medicare Advantage Appeals Alert

In recent years a growing number of courts have addressed the recovery rights of Medicare Advantage plans. Medicare Advantage plans, otherwise known as Part C plans, are offered by private health insurers as a replacement for Medicare hospital insurance (Part A) and medical insurance (Part B). In exchange for Advantage plans providing health coverage to Medicare beneficiaries, Medicare pays Advantage plans a fixed monthly amount for each beneficiary enrolled. Although most Advantage plans only provide benefits that are otherwise payable under Parts A and B, some Advantage plans also provide prescription coverage. Medicare beneficiaries also have the option of enrolling in separate Medicare prescription drug (Part D) plans, which like Advantage plans are offered by private health insurers that receive a subsidy from Medicare. It is important to keep in mind in resolving conditional payment claims that Medicare only asserts conditional payment claims for payments made under Parts A and B. If a Medicare beneficiary is enrolled in a Medicare Advantage or prescription plan, each plan may have a separate lien that should be addressed in settling a case.

Humana, one of the nation's largest Medicare Advantage and prescription drug plan providers, filed four lawsuits over the last two weeks against Farmers Insurance in an attempt to establish new case law supporting the recovery rights of Medicare Advantage plans. The U.S. District Courts in which the cases were filed include the Eastern District of Tennessee, the Western District of Missouri, the District of Kansas, and the Western District of Texas. In each case Humana is asserting claims for double damages for medical expenses that Humana argues should have been paid under no-fault or med pay coverage. As an alternative to double damages, which is based on the amount of Humana’s discounted payments, Humana is seeking payment for the full amount that would have been paid by Farmers if Farmers had issued payment directly to the providers for the charges asserted. Humana has also asked each court to issue a declaratory judgment finding that Medicare Advantage plans are secondary to no-fault and med pay insurance and that Farmers must reimburse a Medicare Advantage plan in situations when Farmers is the primary payer. Finally, Humana has requested that each court order Farmers to provide broad restitution to Humana for medical expenses paid for any Humana plan enrollee when Farmers was the primary payer and had no-fault or med pay coverage.

As noted above, Humana's complaints are focused on no-fault and med pay policies. Farmers allegedly denied payment for Humana's claims on the basis that Farmers had a first party contract with the insured and Humana therefore did not have a valid subrogation lien. As discussed below, Farmers' position is consistent with prior case law holding that Medicare Advantage plans do not have the same direct recovery rights as Medicare and may only assert subrogation claims based on their contract with the insured. According to Humana, however, Farmers should nevertheless have issued payment, as Humana claimed in reimbursement letters that they have the same direct recovery rights as Medicare despite the prior case law supporting Farmers' position.

Prior to the Third Circuit’s decision in In re: Avandia Marketing, Sales Practices, and Products Liability Litigation, 685 F.3d 353 (3rd Cir. 2012), every court that had addressed the issue held that Medicare Advantage plans do not have a cause of action under federal law to recover from primary plans. Instead, courts held that Medicare Advantage plans could only pursue a subrogation claim based on a contract with each insured, which is consistent with Farmers’ description of Humana’s claims as subrogation liens. In the Avandia case, however, the Third Circuit held that a Medicare Advantage plan may assert a private cause of action against an insurer under the Medicare Secondary Payer Act. Earlier this year, the U.S. Supreme Court denied certiorari in the Avandia case. Thereafter, the Ninth Circuit held in Parra v. PacifiCare, 715 F.3d 1146 (9th Cir. 2013) that a Medicare Advantage plan could not assert a private cause of action against claimants under the Medicare Secondary Payer Act, although the Ninth Circuit did not address the rights of Medicare Advantage plans to recover from insurers.

The lawsuits filed by Humana are a clear attempt to extend the Third Circuit’s ruling to other Circuits. Texas is in the Fifth Circuit, Tennessee is in the Sixth Circuit, Missouri is in the Eighth Circuit, and Kansas is in the Tenth Circuit. Given the holdings of U.S. District Courts outside the Third Circuit, these cases should set important precedent concerning the recovery rights of Medicare Advantage plans. We will continue to follow these cases closely and we will provide you with any updated information.

If you have any questions on Medicare Advantage or prescription drug plan liens, please do not hesitate to contact us. If you are uncertain whether a claimant is enrolled in a Medicare Advantage or prescription drug plan, we can help verify that information. We are currently assisting clients in a number of cases with the lien research and negotiation process and we can handle the process in any case in which a Medicare Advantage or prescription drug plan is involved.