The Subrogation Rights of Medicare Advantage Organizations Should be Considered When Settling a Personal Injury Action
A recent case decided by a U.S. District Court in Florida provides an important reminder that Medicare Advantage Organizations may employ Medicare Secondary Payment reimbursement remedies and that the settlement of a personal injury action without considering such an organization’s lien is done at one’s peril. See Humana Medical Plan, Inc. v. Western Heritage Insurance Company, 2015 U.S. Dist. 31875 (S.D. FLA 2015).
“Medicare Advantage Organizations” are private insurance companies that contract with the Center for Medicare and Medicaid Services to provide Medicare benefits and may also provide additional benefits to its enrollees.
The Medicare Secondary Payer Act (“MSP Act”) provides that Medicare is to serve as the “secondary payer” to other sources of insurance coverage including group health plans, workers compensation plans, automobile or liability insurance plans. 42 U.S.C.§1395 y(b)(2)(A). The MSP Act authorizes Medicare to make conditional payments for a patient’s medical treatment and requires a primary plan to reimburse Medicare for all conditional payments (42 U.S.C. §1395 y(b)(2)(B)).
The MSP Act further provides that, in the event the primary plan fails to reimburse such conditional Medicare payments, the United States is authorized to bring an action against the primary plan for double the amount due.
In Humana, a plaintiff in a personal injury action had enrolled in a Humana Medicare Advantage Plan and settled her claim against the condominium complex where she had slipped and fallen, for $115,000. While Medicare had not made any “conditional payments” on plaintiff’s behalf, the Humana Medicare Advantage Plan had paid approximately $19,000 for the plaintiff’s medical treatment. When the insurance carrier for the defendant condominium learned of Humana’s lien rights it attempted to include Humana on the settlement check but the state court directed that the full $115,000 settlement should be paid to the plaintiff.
Thereafter, Humana pursued the defendant’s insurance carrier, Western Heritage Insurance Company in the U.S. District Court to recover the funds that it paid on the injured party’s behalf.
Humana alleged that it had the same rights as Medicare and that its payments were conditioned upon reimbursement and, thereafter, subject to MSP Act’s statutory private cause of action and entitled to recover double damages.
Relying on the Third Circuit Court of Appeals decision In Re Avandia, 685 F.3d 353 (3rd Cir. 2012), the District Court determined that a Medicare Advantage Organization such as Humana is entitled to assert MSP Act’s private cause of action to pursue recovery of payments made for medical expenses and it was statutorily entitled to recover double the amount it had paid on behalf of the injured party.
New York practitioners should note that the Appellate Division, Second Department, in Trezza v. Trezza, 104 A.D.3d 37, 957 N.Y.S.2d 380 (2d Dept. 2012), has held that New York’s General Obligation Law §5-335, (which protects a plaintiff who settles an action for personal injuries from being subject to a reimbursement claim) as applied to Medicare Advantage Organizations, is preempted by federal law. The Trezza holding thus exposes insurance carriers for settling defendants in New York personal injury actions to the same risk as the defendant’s insurance carrier in Humana.
For more information about this Client Advisory, please contact: Vincent W. Crowe, a member of the Insurance and Litigation Practice Groups.