Private Cause of Action 2018

1.15.2019 Blog

The Private Cause of Action provision of the Medicare Secondary Payer Act (MSP) (42 U.S.C. Section 1395 y(b)(3)A) remained  the focus of much of the MSP litigation in  2018. Although one form or another of the MSP Recovery LLC entity continued to file complaints on behalf of Medicare Advantage Organizations (MAOs) to recover payments made on behalf of their enrollees, the majority of the reported opinions focused on procedural issues as opposed to substantive ones.  The procedural issues generally involved challenges to Plaintiff’s standing to bring suit based on defects in the underlying assignments from the Medicare Advantage Plans.

The MAO-MSO Recovery II, LLC. v. State Farm Mut. Auto. Ins. Co., 2018 U.S. Dist. LEXIS 117356, case however is noteworthy.  In this case, the U.S. District Court in Illinois held that assignee-organizations may pursue a private cause of action claim pursuant to the MSP Act on behalf of an assignor-MAO.

Plaintiffs in this case were not MAOs, rather, they were assigned rights of recovery under the MSP Act by several MAOs.  Several beneficiaries who were also insured under Defendants’ automobile insurance plans were involved in accidents requiring medical services.  The assignor-MAOs were alleged to have issued conditional payments, giving rise to liability under the MSP Act.

Defendants challenged Plaintiff’s second amended complaint, arguing a lack of standing to pursue the recovery rights.  First, Defendants argued Plaintiff did not hold a valid assignment from the assignor-MAOs.  In this case, the assignor-MAO first assigned their rights to recovery to an intermediary organization, which subsequently assigned the rights to Plaintiff.  The Court rejected that argument and held the Recovery Agreement sufficiently demonstrated intent to transfer an identifiable recovery interest to an assignee.  The Agreement included language stating the assignor-MAO assigned all rights it pertained to the rights pursuant to any State or Federal statute for any of its plan participants or members.  The Court further pointed to a provision in the first assignment stating any subsequent assignment must be acknowledged and accepted by the assignor-MAO, as was the case here.

Defendants further argued that even if there was a valid assignment of recovery rights, Plaintiff did not suffer an injury required for jurisdictional standing requirements.  Plaintiff used an exemplary beneficiary who was insured under Defendant’s insurance plan and injured in an accident.  Defendant alleged in the case of the exemplary beneficiary that they notified CMS there had been an accident in which the beneficiary had sustained an injury, and that Defendant paid a series of medical bills relating to that injury which exhausted the policy limits.  Defendant argued since the MSP Act only allows recovery up to the statutory policy limits, the exhaustion of the policy here called into question the subject matter jurisdiction of the Court to hear this case.  The Court noted that the ultimate question here was whether Defendant as a primary payer failed to reimburse the assignor-MAO for conditional payments made, regardless if it already made payments under the policy to the beneficiary.  Since the assignor-MAO made payments for the beneficiary’s medical bills, it was obligated to reimbursement by Defendant.  The Court viewed it immaterial that Defendant had already made payments up to the policy limit for the beneficiary’s medical bills.

The MSP Act states that “the primary plan must reimburse Medicare even though it has already reimbursed the beneficiary or other party”. See Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006).  This case demonstrates another generously-construed judicial interpretation of the rights Medicare and MAOs have in recovery conditional payments, and the notion that reimbursement for conditional payments should remain a priority.


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