Court Allows Medicare Advantage Plan’s Suit for Double Damages to Proceed

By Kate Riordan  |  October 14, 2014

In an important development on the Medicare Advantage (MA) front, the court in Humana v. Farmers Texas County Mutual Insurance Company, et. al, No. 13-CV-611-LY (W.D. Texas, September 24, 2014) issued a ruling allowing a Medicare Advantage plan’s lawsuit for “double damages” to proceed.

A copy of this decision can be obtained here.

Last February a magistrate recommended that the District Court dismiss Humana’s lawsuit against Farmers, wherein Humana – a Medicare Advantage organization – sought double damages for alleged violations of the Medicare Secondary Payer Act via the act's private cause of action framework.  Federal Judge Lee Yeakel, in a brief four page decision, rejected the magistrate’s recommendation.

Without providing any additional analysis, the court aligned itself behind In re Avandia Mktg, a Third Circuit ruling that Medicare Advantage Plans have private cause of action rights under the MSP.  For a detailed analysis of the 2012 Avandia case, see ISO CP’s article here.

The MSP’s private cause of action provision allows entities to bring suit in Federal Court to pursue alleged MSP reimbursement claims, including double damages in some circumstances. The nature and scope of the MSP’s private cause of action provision is the most critical question for courts to decide at this juncture.

In Avandia, the Third Circuit held that “the plain text” of the MSP’s private cause of action provision affords MAOs private cause of action rights. Prior to Avandia, courts had been reluctant to expand these rights beyond traditional Medicare or the injured party. Following Avandia, companies such as Humana have sought to expand the list of states where a Medicare Advantage Plan would hold such powerful recovery rights.

The ability of Medicare Advantage Plans to use the MSP’s private cause of action provision to recover payments made prior to a personal injury settlement has a direct impact on the nature of MSP obligations for insurers. Simply put, insurers need to know if they can face double damages lawsuits from Medicare only, or also from a whole class of healthcare insurers who offer Medicare Advantage Plans. The Humana v. Farmers decision moves us closer to a resolution of this issue in Texas, and possibly the entire Fifth Circuit.

We will continue to watch this case and others closely and will provide updates as required.

Kate Riordan

Kate Riordan is the director of Medicare Secondary Payer (MSP) initiatives at ISO Claims Partners. She has well over five years of experience in completing Medicare Set-Asides and obtaining CMS approvals, with a concentration in California claims. Kate graduated Bowdoin College and Suffolk University Law School and is a Medicare Set-Aside Certified Consultant.