Texas court: Medicare Advantage Plans can sue for private cause of action under the Medicare Secondary Payer statute

March 21, 2018 / 5 min read

In Humana v. Shrader, 2018 WL 1384529 (S.D. Tex. March 16, 2018), the federal district court ruled, in part, that the private cause of action (PCA) provision under the Medicare Secondary Payer (MSP) statute (which allows for “double damages”)[1] applies to Medicare Advantage Plans (MAPs), thereby allowing the PCA claims asserted by three MAP providers against a plaintiff law firm to proceed in this case.

This ruling by the federal district court for the Southern District of Texas places it in line with a growing number of decisions from other jurisdictions finding that MAPs enjoy PCA rights under the MSP, including a 2014 ruling by the federal district court for the Western District of Texas in Humana v. Farmers, 95 F.Supp. 983 (W.D. Tex. 2014).

stethoscope

Facts

As part of this large asbestos tort action, three MAP providers, Humana, United Healthcare, and Aetna (hereinafter plaintiffs) sued Shrader & Associates, LLP (Shrader) who represented certain injured claimants. The plaintiffs identified at least 15 injured parties represented by Shrader who they alleged received medical care for their asbestos related conditions from either private healthcare providers or through one of the plaintiffs’ MAP programs.

The plaintiffs filed multiple claims against Shrader aimed at seeking recovery of their alleged payments from the asbestos settlement trusts. One of these claims (which is the sole focus of this article) was a private cause of action under the MSP for Shrader’s alleged failure to properly reimburse their alleged liens from the asbestos trusts.[2]

Shrader moved to dismiss on several grounds, including lack of subject matter jurisdiction and failure to state a claim for which relief may be granted. In moving to dismiss, Shrader argued that the MSP did not provide MAPs with PCA rights because (1) the asbestos trusts are not “primary plans” under the MSP; (2) plaintiffs failed to allege facts showing that a “primary plan” failed to make payment; and (3) interpreting the MSP to provide MAPs with PCA rights would “render Medicare Part C’s secondary provision superfluous.”

Court’s Ruling

The court rejected these arguments and denied the motion to dismiss, finding that the plaintiffs alleged a sufficient PCA claim, thereby allowing it to go forward.

In reaching its decision, the court first ruled that the asbestos trusts are “primary plans” under the MSP based on the 2003 Congressional amendments to the definition of primary plans. The court noted these amendments added self-insured entities as primary plans, demonstrating Congress’ “clear intention” to make tortfeasors liable under the MSP. Accordingly, the court ruled that the asbestos trusts “can constitute primary plans under the MSP, and the settlements paid by asbestos trusts to Shrader [on behalf of its clients] can be a source of reimbursement under the MSP.”

The court next ruled that the plaintiffs had sufficiently alleged facts that a “primary plan” failed to make payment in the context of the PCA. The court rejected Shrader’s argument that application of the PCA was limited technically to claims involving group health plans and payments made by the “Secretary” in relation to governmental traditional conditional payment claims based on prior rulings on these points. Accordingly, the court found plaintiff’s allegations that Shrader failed and/or refused to provide reimbursement sufficiently alleged that it failed to “make a required payment” in the context of the MSP’s PCA statute.

Finally, the court rejected Shrader’s argument that extending the MSP’s PCA statute to MAPs was improper given the separate and specific recovery provisions under the MAP statutes. On this point, the court rejected the idea that the recovery provisions in the MAP statutes somehow foreclosed availability of MSP’s PCA statute for MAPs. Further, the court agreed with the recent interpretations and rulings from other courts finding that the MSP’s PCA provision applies to MAPs and their recovery claims.

Bigger Picture

As noted, the court’s ruling Shrader places it in line with a growing number of recent decisions finding that MAPs have double damages rights under the MSP’s PCA statute. With this decision, there are now two decisions out of Texas, from two different Texas federal district courts, holding that MAPs enjoy these rights. We will now wait to see where this case heads next on the MAPs underlying allegations, and whether double damages liability will ultimately apply.

It is noted that this decision comes on the heels of the recent federal district court ruling out of Connecticut in Aetna v. Guerrera, 2018 WL 132066 (D. Conn. March 13, 2018) which also found that the MSP’s PCA action applies to MAPs. Click here to review the author’s summary on this case.

Based on the court’s ruling in Shrader (and the prior 2014 Humana v. Farmers ruling), Texas claims payers should be on heightened alert to ensure that MAP lien claims are being properly addressed to avoid potential PCA double damages actions. From a wider view, as suggested by the author in his Guerrera summary, MAP recovery claims should be of concern and considered by claims payers and other parties regardless of jurisdiction as MAPs continue their quest to establish PCA double damages rights. A key consideration here involves developing protocols regarding how MAP lien issues will be identified and addressed as part of claims and settlement practices.

ISO Claims Partners has been an industry leader in protocol development in all areas of MSP compliance, and we look forward to helping you build MAP best practices. Please contact the author if you are interested in learning more. Click here for information on our MAP services and to view our State-by-State Guide to Medicare Advantage in the courts.

[1] The MSP’s private cause of action section, codified at 42 U.S.C. 1395y(b)(3)(A), states as follows: There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A). Reference to the PCA in this article is to this statutory provision.

[2] As noted, the plaintiff’s asserted other causes of action, including ERISA and unjust enrichment claims. This article only addresses the MSP PCA claims. The reader should review the entire decision for the court’s ruling on all other claims and issues.