Identifying and Satisfying Conditional Payments by Medicare Advantage Plans
When settling a claim involving a Medicare beneficiary, parties to the settlement are well aware of their obligation to contact the Center for Medicare and Medicaid Services (CMS) and determine whether Medicare has made any conditional payments for medical expense related to the workers’ compensation claim. Once inquiry is made, the Center for Medicare and Medicaid Services provides the parties with a conditional payments demand. Unfortunately, CMS does not coordinate with Medicare Advantage plans and as such, the conditional payments demand from CMS does not include any medical bills that may have been paid under a Medicare Advantage plan.
Part C of the Medicare statute allows for the creation of the Medicare Advantage program. Medicare Advantage (MA) organizations are private insurers who contract with Medicare to provide coverage to Medicare beneficiaries. Beneficiaries who choose coverage under Part C are covered by the private insurer as opposed to the Federal Center for Medicare and Medicaid Services. The MAs are paid a fixed amount from Medicare for each enrollee and directly administer benefits to the insureds.
Do Medicare Advantage organizations have the same rights of recovery as CMS under the Medicare Secondary Payer Act 42 U.S.C. § 1395y(b)(2)?
Federal regulations indicate that Medicare Advantage organizations have the same rights of recovery under the Medicare Secondary Payer Act as does Medicare (the Center for Medicare and Medicaid Services) 42 C.F.R. 422.108(f). Section 108 provides:
(b) Responsibilities of the MA organization. The MA organization must, for each MA plan –
(1) Identify payers that are primary to Medicare under Section 1862(b) of the Act and part 411 of this chapter;
(2) Identify the amounts payable by those payers; and
(3) Coordinate its benefits to Medicare enrollees with the benefits of the primary payers, including reporting, on an ongoing basis, information obtained related to requirements in paragraphs (b)(1) and (b)(2) of this section in accordance with CMS instructions. 42 C.F.R. 422.108.
In addition, subsection (f) provides in part:
The MA organization will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter. 42 C.F.R. 422.108(f).
Subpart B provides in §411.24(b) the following:
(b) Right to initiate recovery. CMS may initiate recovery as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no fault insurance, or an employer group health plan. 42 C.F.R. 411.24(b).
It follows that since Medicare (and Medicare Advantage plans) can recover even after payment has been made by a primary plan (such as a settlement) that the right of recovery exists regardless of notice. It is well settled that Medicare has a "super lien" vesting them with rights to recovery without pre-settlement notice to parties. The foregoing provision suggests that Medicare Advantage plans have the same rights.
It therefore follows that steps must be undertaken in settlement of workers’ compensation claims involving Medicare beneficiaries to identify any such claimants who are covered under a Medicare Advantage plan as opposed to traditional Medicare.
The primary pitfall arises from the fact that the Medicare conditional payments demand does not include payments from Medicare Advantage insurers. Therefore, it is incumbent upon employers and their insurers to identify cases involving Medicare Advantage beneficiaries and identify the Medicare Advantage insurer. This insurer should then be contacted with respect to any conditional payments that it may have made for injury related medical expenses.
The standing of Medicare Advantage plans to pursue recovery under the Medicare Secondary Payer Act has been litigated in several cases. Early cases suggested that Medicare Advantage plans did not have the same rights of recovery as CMS. More recent cases, however, illustrate a trend toward finding that Medicare Advantage plans have the same rights under the Medicare Secondary Payer Act as CMS. In In re Avandia Marketing, 685 F.3d 353 (3d Cir. 2012), the Court of Appeals for the Third Circuit held that a Medicare Advantage plan, Humana, had a private cause of action under the Medicare Secondary Payer Act to recover payments from primary payers. In re Avandia Marketing, 685 F.3d at 356-357, 367.
The Court of Appeals for the Seventh Circuit, which has jurisdiction over federal appeals arising in Illinois, has yet to address the issue. If and when a federal appeals court issues a contrary decision to the decision inAvandia, then the question may ultimately be accepted for resolution by the U.S. Supreme Court.
The Illinois Workers’ Compensation Act does contain a provision prohibiting liens, which provides that no payment, claim, award or decision under the Act "shall be assignable or subject to any lien." 820 ILCS 305/21. Principals of federal preemption, however, would not bar Medicare Advantage plans from asserting a conditional payments lien. The Code of Federal Regulations specifically provides:
[c]oncerning the Federal preemption of State law, the rules established under this section supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to MA plans. A State cannot take away an MA organization’s right under Federal law and the MSP regulations to bill, or to authorize providers and suppliers to bill, for services for which Medicare is not the primary payer. 42 C.F.R. 422.108(f).
The issue of Medicare Advantage plan’s rights under the Medicare Secondary Payer Act will undoubtedly continue to be litigated throughout the country. Medicare Advantage plans such as Humana have become aggressive in their attempts to establish their rights under the Medicare Secondary Payer Act.
Until this issue is either resolved by the U.S. Supreme Court or is addressed by the Seventh Circuit, employers and their insurers must identify claimants/petitioners who are Medicare Advantage beneficiaries and take steps to identify any conditional payments liens that the MA may possess. Thus, any conditional payments lien presented by a Medicare Advantage plan should be addressed and fully resolved in order to protect the parties involved.
Additional issues will arise where conditional payment liens are identified by Medicare Advantage plans. For example, what are the petitioners’ and respondents’ rights if an Medicare Advantage plan improperly asserts a conditional payments lien containing medical expenses that were not related to the workers’ compensation claim? If Medicare Advantage plans have the same standing as Medicare to enforce the Medicare Secondary Payer Act, it would appear to logically follow that the Medicare Advantage plan’s interests must also be protected as to future medical expense. Until these issues are fully resolved in the courts, arguably Medicare Set-Asides would need to be used to protect Medicare Advantage plans. Moreover, care should be undertaken to address these issues through the course of settlement negotiations.
The risk associated with not protecting Medicare Advantage plans is illustrated by the case of Humana Medical Plan, Inc. v. Western Heritage Ins. Co., 94 F. Supp. 3d 1285 (S.D. Fla. 2015). There, in the underlying personal injury action, the plaintiff asserted that she had no outstanding Medicare liens. In addition, a conditional payments demand letter from CMS confirmed that CMS had made no Medicare payments on behalf of the plaintiff. The plaintiff, however, was insured by Humana under a Medicare Advantage plan. The insurer for the defendant, Western Heritage, attempted to place Humana’s name on the settlement draft. A state court judge ordered the draft to issue without Humana named. Ultimately, Humana sued Western Heritage seeking recovery under the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b)(2). Western Heritage argued that Humana did not have a private cause of action under the Medicare Secondary Payer Act. The U.S. District Court for the Southern District of Florida disagreed and not only found that Humana had a private cause of action under the Medicare Secondary Payer Act, but entered summary judgment against Western Heritage. The court then proceeded to award double damages.
The downside in not protecting Medicare Advantage plans is apparent from the Western Heritage ruling. Accordingly, Medicare Advantage policies involving workers’ compensation claimants and petitioners must be identified, conditional payments confirmed, and resolved prior to settlement.