The 3rd Circuit recently decided that private insurers offering Medicare Advantage coverage were permitted to utilize the federal statute [Medicare Secondary Payer Act, 42 U.S.C. 1395y (b) (2)] to pursue a federal cause of action for subrogation. This outrageous decision permits the subrogation recoveries to be channeled into the pockets of the private insurers without their prior knowledge of a lawsuit. The 3rd Circuit’s ruling is now being challenged in the Supreme Court. The Writ of Certiorari describes how this will affect your settlement:
The decision threatens to significantly hamper settlement efforts in mass tort cases. Like the Avandia settlement process from which this case arises, putative tortfeasors settling mass tort claims typically make arrangements to satisfy any government liens arising from Medicare’s status as a secondary payer. To facilitate that process, the Federal Government has established clear Medicare-reimbursement procedures with which settling defendants must comply. See, e.g., 42C.F.R. § 411.20 et seq. Those procedures enable identification, from data made available by CMS, of settling claimants to whom Medicare made conditional payments so appropriate reimbursement to the Government may be remitted. At least with respect to Medicare, therefore, defendants can safely enter into settlement agreements without fear that they will be subject to double-damages lawsuits. In contrast, putative tortfeasors willing to enter settlements do not have an independent and reliable source of information (such as CMS) available to identify which MAO covered which settling claimant at what point in time, which is needed to permit resolution of all MAO reimbursement claims.
Neither the Government nor MAOs publish lists of Medicare Advantage enrollees matched to their carriers. Without this information, a settling putative tortfeasor cannot identify with any assurance the MAOs with which to engage in discussions regarding reimbursement. The problems become particularly acute for those Medicare Advantage enrollees who switch carriers or move onto a spouse’s plan. Thus, under the 3rd circuit decision, a settling putative tortfeasor is placed in the untenable position of being exposed to double damages for having failed to resolve a lien claim about which it is not aware. At a minimum, this uncertainty would deter if not defeat some settlements that litigating parties wish to enter.
Congress has created an alternative subrogation regime for Medicare. Under the Medicare Secondary Payer Act (“MSP Act”), 42 U.S.C. § 1395y(b)(2), a tortfeasor that settles with, or is found liable for injuring, a Medicare beneficiary must reimburse the United States for the costs Medicare incurred in covering the beneficiary’s medical expenses. If the tortfeasor fails to do so—after its responsibility for payment has been demonstrated by a judgment or a settlement—the Act authorizes the United States to sue the tortfeasor for double damages. This federal subrogation regime differs from the typical state-law regime in two important ways: (1) the MSP Act imposes an affirmative obligation on tortfeasors to reimburse Medicare without requiring Medicare to bring a reimbursement action; and (2) the MSP Act authorizes Medicare to recover double damages from tortfeasors that fail to provide such reimbursement.
Most courts have interpreted the federal subrogation regime created by the MSP Act to be limited to recovering payments made by Medicare. The Third Circuit, however, held that private insurers operating Medicare Advantage plans can also pursue federal subrogation rights under the MSP Act, rather than under state law. The Medicare Advantage program, enacted 17 years after the MSP Act, authorizes private insurers to offer health insurance to Medicare-eligible individuals that replaces traditional Medicare benefits. As the Third Circuit conceded, the Medicare Advantage statute itself does not provide such insurers a federal cause of action against tortfeasors. Nonetheless, that court construed the MSP Act to provide private insurers operating Medicare Advantage plans with the same federal cause of action that it provides Medicare. The Courts of Appeals have disagreed over the extent to which the MSP Act authorizes double-damages suits against tortfeasors. Taking the narrowest view, the Sixth Circuit has construed the MSP Act to provide only the United States—and not private insurers or Medicare beneficiaries—with a cause of action against tortfeasors. The First and Eighth Circuits, in contrast, have construed the Act also to permit Medicare beneficiaries to sue tortfeasors, but only where Medicare—and not private insurers—covered the beneficiaries’ medical costs. The Third Circuit adopted the broadest construction of all by holding that the MSP Act creates a cause of action for private insurers to sue tortfeasors for double damages, even though Medicare did not pay the benefits and regardless of whether those insurers have adequate subrogation remedies under state law.
The extent, if any, to which the MSP Act permits private insurers to pursue federal double-damages actions against tortfeasors is a matter of significant importance.
This Court should grant certiorari to clarify the extent to which the MSP Act authorizes double damages suits against putative tortfeasors. The decision below—which extended the MSP Act’s remedies beyond government-provided Medicare to privately provided Medicare Advantage plans— conflicts with the decisions of other Court of Appeals concerning what private parties, if any, can sue tortfeasors under the Act. Without clarity from this Court, entities or individuals that settle tort actions (or that are found liable in court) will face inconsistent liabilities based on the regional Court of Appeals in which they find themselves litigating— and a double-damages penalty if they erroneously evaluate those liabilities. The Third Circuit’s decision to extend the remedies in the MSP Act to MAOs, moreover, will have significant consequences. By providing MAOs with a federal cause of action for double damages, the Third Circuit’s ruling overrides the well-developed state-law remedies that private insurers typically invoke in these circumstances. Without a clear statement of legislative intent, courts should not lightly presume that Congress intended to effect such a sweeping and significant change in the law. Nor can the Third Circuit’s decision be justified on the merits. The plain text of the MSP Act limits the private cause of action to instances in which the plaintiff is seeking to recover a conditional payment made by Medicare. That is simply impossible when an MAO brings suit under the MSP Act: because the MAO itself is responsible for paying its enrollees’ medical costs, the MAO by necessity seeks to recover the amounts that it paid out, not amounts that Medicare paid out. And were there any ambiguity on that score, Congress surely resolved any such ambiguity when it authorized MAOs to charge primary payers but did not include any express federal remedy for MAOs in enacting the Medicare Advantage statute.
What is Medicare Advantage or Medicare Part C (From the COB handbook)?
A Medicare Advantage Plan (like an HMO or PPO) is another Medicare health plan choice that is a part of Medicare. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare. The plan provides all of Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. In all types of Medicare Advantage Plans, there is always coverage for emergency and urgent care. Medicare Advantage Plans must cover all of the services that Original Medicare covers except hospice care. Original Medicare covers hospice care.
Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D). In addition to your Part B premium, there is usually pay one monthly premium for the services included.
Each Medicare Advantage Plan can charge different out-of-pocket costs and have different rules for how claimants get services (like whether you need a referral to see a specialist or if you have to go to only doctors, facilities, or suppliers that belong to the plan for non-emergency or non-urgent care). These rules can change each year.
There are different types of Medicare Advantage Plans:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Private Fee-for-Service (PFFS)
- Special Needs Plans (SNP)
There are other less common types of Medicare Advantage Plans that may be available:
- HMO Point-of-Service (HMOPOS) Plans
- An HMO plan that may allow some services out-of-network for a higher cost
- Medical Savings Account (MSA) Plans
A plan that combines a high deductible health plan with a bank account. Medicare deposits money into the account (usually less than the deductible)
More About Medicare Advantage Plans
- You can join a Medicare Advantage Plan even if you have a pre-existing condition, except for End-Stage Renal Disease
- You can only join or leave a plan at certain times during the year
- If you go to a doctor, facility, or supplier that doesn’t belong to the plan, your services may not be covered, or your costs could be higher, depending on the type of Medicare Advantage Plan. In most cases, this applies to Medicare Advantage HMOs and PPOs
- You usually get prescription drug coverage (Part D) through the plan
- Medicare Advantage Plans can’t charge you more than Original Medicare for certain services like chemotherapy, dialysis, and skilled nursing facility care
- Medicare Advantage Plans will have an annual cap on how much you pay for Part A and Part B services during the year.
You can generally join a Medicare Advantage Plan if you meet these conditions:
- You have Part A and Part B
- You live in the service area of the plan
- You don’t have End-Stage Renal Disease (ESRD) (permanent kidney failure requiring dialysis or a kidney transplant)
If you have Coverage
Talk to your employer, union, or other benefits administrator about their rules before you join a Medicare Advantage Plan. In some cases, joining a Medicare Advantage Plan might cause you to lose employer or union coverage. In other cases, if you join a Medicare Advantage Plan, you may still be able to use your employer or Union coverage along with the plan you join.