Executive Summary: The court accepted the Avandia analysis and allowed a claim for reimbursement as against a primary payer, in this case a liability carrier after settlement, without requiring or even inquiring whether its plan documents provide for such reimbursement. The court went further and approved a double recovery on behalf of Humana.
The case arose out of a lawsuit brought by Mary Reale against Hamptons West, a condominium association, for unspecified injuries. Humana had paid $19,155.41 in medical expenses, and later Reale and her husband settled with Hampton West for $115,000. The parties took steps to account for the Humana claim, agreeing to a holdback by plaintiff's counsel pending resolution of the reimbursement claim.
Humana first sued in Federal court. Reale sought dismissal based on lack of Federal jurisdiction, and the court granted that relief. Humana then sought reconsideration but then elected to dismiss the lawsuit voluntarily before the court could rule, apparently because another lawsuit had been filed in the interim.
The Reales sued Humana in state court, seeking a declaratory judgment on the amount owed. The court applied state subrogation law and found that the reimbursement claim was limited to $3,685.03. This decision was appealed and was reversed by the Third District Court of Appeal for lack of jurisdiction, the court ruling that Reale should have pursued an administrative appeal under the Medicare Act. 180 So.3d 195 (2015)
Thus, at this point, the Federal courts and the state courts had both determined that the claim should be handled under the other system. The attorney for Reale had the reimbursement funds in his account, under the agreement. But what happened to those funds after that point is not clear.
One step was taken here which has not been taken in other cases: Humana sued the liability carrier, Western Heritage Insurance, for the reimbursement amount and for double damages under the Medicare statute in Federal court, well before the state court action was resolved. Summary judgment in favor of Humana's position was granted in March 2015.
The Circuit Court of Appeals, affirming, ruled and reasoned as follows.
Humana did not assert that it had an implied cause of action under the Medicare Advantage statute, 42 USC 1395ww-22(1)(4), and did not assert that it could pursue a reimbursement claim that is authorized in favor of CMS under the MSP statute. Rather, it asserted that it, like any other private party with standing, had the right to pursue its claim as a "private cause of action" under a different part of the MSP statute, b-3-A.
The court agreed further that Humana was entitled to a double recovery, even though Western Heritage had taken steps to protect Humana's interest by requiring an agreement from Reale that the funds needed to make reimbursement be held in trust by Reale's attorney. The court held that the demand letter plus 60 days time limit provided under the statute, and the provision under the CMS regulation that permits a reimbursement claim "event though [the primary payer] has already reimbursed the beneficiary," precluded that position.
Of interest is the dissent by Judge William Pryor. He noted that the majority opinion was inconsistent, approving the argument that Humana could pursue the same rights that CMS could under the MSP law while also upholding its right to pursue this claim as a private actor pursuing the "private cause of action." He observed,
Subparagraph (B) empowers the Secretary of Health and Human Services to make payments conditioned on reimbursement of the Medicare Trust Funds, but it says nothing about Medicare Advantage Organizations. Medicare Advantage Organizations instead charge primary plans in accordance with section 1395w-22(a)(4). 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)." For that reason, section 1395y(b)(3)(A) creates no private cause of action for a Medicare Advantage Organization. . .The fact of Judge Pryor's dissent, and the contrast of the emerging line of pro-Avandia cases with the opposing line of Parra-Care Choices decisions, may make it more likely that the U.S. Supreme Court will agree to accept this case for consideration and, perhaps, finally give us all a definitive ruling on these continuingly thorny issues.
Subparagraph (B) also gives the Secretary a cause of action to recover reimbursement against primary plans, and subrogates the United States to any right to payment under a primary plan. A Medicare Advantage Organization receives no authority from paragraphs (1) and (2)(A). . .
Section 1395w-22(a)(4) mentions section 1395y(b)(2), but the cross-reference "simply explains when MAO coverage is secondary to a primary plan—that is, under the same circumstances when insurance through traditional Medicare would be secondary." It does not subject Medicare Advantage Organizations to all of the parts of section 1395y(b)(2). Instead, it establishes a different regulatory regime—one that does not require Medicare Advantage Organizations to be secondary payers, impose time limits on reimbursement, require demonstrated responsibility, establish an extensive administrative process, give the Secretary a cause of action, or subrogate the United States to any right to payment by a primary plan. A Medicare Advantage Organization charges primary plans in accordance with section 1395w-22(a)(4), not section 1395y(b)(2)(A). [Citations omitted]