Medicare Advantage Plan Can Recover From Settlement Proceeds Despite State's Anti-Subrogation Doctrine

In the recently decided case of Estate of Deborah A. Ethridge v. Recovery Mgmt. Sys., 2014 Ariz. App. LEXIS 23 (February 13, 2014), the Court of Appeals of Arizona decided that a Medicare Advantage plan's recovery rights under the Medicare Act preempt Arizona's common law anti-subrogation doctrine. When Ms. Ethridge died in 2007 due to alleged nursing home negligence, her estate and her beneficiaries pursued recovery and sought (among other damages) compensation for medical expenses. Ethridge's Medicare Advantage plan had paid for care stemming from her alleged injury. Her estate and beneficiaries ultimately settled for $1.2 million and, thereafter, the Medicare Advantage plan sought reimbursement for its claims. In response, her estate sought a declaration from the court that the Medicare Advantage plan could not obtain any recovery under Arizona's anti-subrogation doctrine. 

 

Under the court's close reading of the controlling statutes, it was clear to the court that "Medicare Advantage plans [do not enjoy] the same right to reimbursement enjoyed under traditional Medicare." Id. at *11-*12. Because the statute provides Medicare Advantage plans with the right to obtain reimbursement from the settlement proceeds of personal injury claims, however, and because there is an express preemption provision that (through amendment) broadly preempts 'any' state law, Arizona's anti-subrogation doctrine was preempted. Therefore, the Advantage plan could seek reimbursement from the estate's recovery.

 

This decision was silent as to a Medicare Advantage plan's reimbursement rights against a settling defendant, such as an insurance company or self-insured. The court only specifically addressed the rights of a Medicare Advantage plan in respect to the estate's recovery proceeds. However, this decision is yet another example (in a growing line of cases) in which a Medicare Advantage plan is more actively engaging in collection efforts. Given this trend, we continue to caution parties to investigate whether claims of a Medicare Advantage plan exist when settling any case with a Medicare beneficiary.