US District Court for Connecticut dismisses a Medicare Advantage claim

August 7, 2023 / 12 min read

In an interesting new Medicare Advantage recovery case, the United States District Court for Connecticut in MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753 (D. Connecticut, July 6, 2023) ruled, in main part, that the insurer’s Section 111 reporting did not provide standing for MSP Recovery, as an assignee of a Medicare Advantage Plan, to sue the insurer for “double damages” under the Medicare Secondary Payer statute’s private cause of action (PCA) provision.^[1]

In reaching this decision, the United States District Court for Connecticut (hereinafter “court”) followed the United States Court of Appeals for the Second Circuit’s recent decision in MSP Recovery Claims, Series LLC v. Hereford Ins., 66 F.4^th 77 (2d Cir. 2023). In Hereford, the Second Circuit affirmed a judgment of dismissal in that case finding that the plaintiff, also an assignee of a Medicare Advantage Plan, lacked standing to bring its suit against a no-fault carrier for “double damages” under the MSP’s private cause of action statute based on the insurer’s Section 111 reporting.

Accordingly, finding Hereford controlling, the court ruled that MSP Recovery lacked proper standing to assert its claim, granted the insurer’s motion to dismiss for lack of subject matter jurisdiction, and denied MSP Recovery additional leave to amend its Complaint.

For those interested in a more detailed overview of this case, the author outlines the following:

MSP Recovery alleges insurer’s Section 111 reporting establishes standing to sue

In this action, MSP Recovery, as the assignee of a Medicare Advantage plan, sued the defendant insurer under the MSP’s private cause of action (PCA) statute^[2] alleging, in main part, that the defendant insurer “’fail[ed] to make appropriate and timely reimbursement of conditional payments for [Medicare Advantage] beneficiaries’ accident-related medical expenses’”^[3] in relation to certain no-fault claims and third-party liability settlements.

Regarding this claim, the court noted that “[i]n its seven Amended Complaints, [MSP Recovery] uses ‘exemplar’ claims to allege that [the defendant insurer] fails to uphold its obligations as a primary payer under the MSP Act to reimburse [Medicare Advantage Plans] for conditional payments.”^[4]MSP Recovery alleged, in main part, that “[b]y submitting Section 111 reports, MSP claims Travelers admitted that ‘“it made a ‘payment’ to a Medicare eligible beneficiary, and that the purpose of Travelers’ payment was to ‘resolve’ the beneficiary’s accident-related claim for medical benefits.”’^[5] In addition, MSP Recovery alleged that “’submission of Section 111 reports operates as an admission by Travelers that it is the ‘primary plan’ responsible for reimbursing any conditional payments made by an MAO.”’^[6]

In addition, the court noted that MSP Recovery also sought a declaratory judgment establishing “(1) that Travelers has a past, present, and future duty to reimburse the relevant MAOs for conditional payments made, and (2) the amount of money Travelers owes each MAO.”^[7] In this regard, the District Court for Connecticut noted that “ [b]eyond merely the exemplars, the Complaint seeks reimbursement for all instances where Travelers failed to uphold its statutory obligations while (1) acting as a no-fault insurer and (2) entering’into settlements on behalf of tortfeasors who are sued by Medicare beneficiaries’ … To ascertain the scope of this harm and the attendant damages to MAOs, MSP seeks declaratory relief.”^[8]

Defendant insurer moves to dismiss

In response to the above claims, the defendant insurer moved to dismiss MSP Recovery’s claims for lack of subject matter jurisdiction and failure to state a proper claim under Federal Rule of Civil Procedure 12(b)(6).^[9]

District Court for Connecticut dismisses MSP’s Recovery’s claims for lack of standing

The court ruled that MSP Recovery lacked proper standing to assert its claim and granted the insurer’s motion to dismiss for lack of subject matter jurisdiction.^[10]

In reaching this decision, the court based its ruling, in main part, on the United States Court of Appeals for the Second Circuit’s recent decision in MSP Recovery Claims, Series LLC v. Hereford Ins., 66 F.4^th 77 (2d Cir. 2023). Of note, the Second Circuit has jurisdiction over the U.S. District Courts for Connecticut, New York, and Vermont.^[11]In Hereford, the Second Circuit affirmed a district ruling that based on the facts in that case the insurer’s Section 111 reporting did not establish standing for the plaintiff to sue the insurer under the MSP’s private cause of action statute.

In finding Hereford controlling, the court cited the following passage from Second Circuit’s decision in the Hereford case:

“’[T]he plain language of Section 111 tells us that when a no-fault insurance provider such as Hereford reports a claim pursuant to Section 111, it does not thereby admit that it is liable for the claim. The statutory context of the section’s reporting obligation and the purpose of the reporting obligation confirm the correctness of this interpretation. Because MSP’s argument that the payments made by [the MAO] are reimbursable by Hereford rests entirely on its proposed interpretation of Section 111, MSP has not adequately alleged a ‘concrete’ or ‘actual’ injury or that the injury it alleges is fairly traceable to Hereford. It therefore lacks standing to bring the ... exemplar claim.’”^[12]

As part of its ruling, the court rejected MSP Recovery’s attempt to distinguish the Hereford ruling based on certain alleged factual differences between its action against the defendant insurer in this case with the facts contained in Hereford. In this regard, the court found, in general, that, despite MSP Recovery’s argument, many of the alleged factual differences were essentially present in both cases as more fully outlined in the endnote to this sentence.^[13]

Thus, based on Hereford, the District Court for Connecticut concluded “that the plaintiffs have failed to adequately allege injury-in-fact and causation for Counts One and Two … Accordingly, the Motion to Dismiss both counts of the Amended Complaints is granted.”^[14]

Finally, the court noted that since its dismissal was based on Article III standing, it had to dismiss MSP Recovery’s claim without prejudice, citing, Carter v. HealthPort Techs., LLC, 822 F.3d 47, 57 (2^nd Cir. 2016). However, the court denied MSP Recovery leave to amend its complaint stating, in part, “MSP should have been ‘on notice from the outset that the issue of standing would be front and center’ in this case^[15] … especially because the District Court’s Ruling in Hereford—which dismissed the operative Complaint for lack of standing—was issued more than seven months before the filing of the first Complaint in this case.”^[16]

Questions?

Please do not hesitate to contact the author if you have any questions or would like to learn how Verisk can help you address CMS conditional payment, Treasury, or Medicare Advantage/Part D claims.

[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).”

[2] See n1.

[3] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *1 (D. Connecticut, July 6, 2023).

[4] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *3 (D. Connecticut, July 6, 2023).

[5] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *4 (D. Connecticut, July 6, 2023), citing the following sections from MSP Recovery’s complaint: 938 Am. Compl. ¶ 19; 947 Am. Compl. ¶ 17; 948 Am. Compl. ¶ 17; 963 Am. Compl. ¶ 17; 964 Am. Compl. ¶ 17; 1012 Am. Compl. ¶ 17; 1290 Am. Compl. ¶ 17.

[6] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *4 (D. Connecticut, July 6, 2023), citing the following sections from MSP Recovery’s filed complaints: 938 Am. Compl. ¶¶ 20–21; 947 Am. Compl. ¶¶ 18–19; 948 Am. Compl. ¶¶ 18–19; 963 Am. Compl. ¶¶ 18–19; 964 Am. Compl. ¶¶ 18–19; 1012 Am. Compl. ¶¶ 18–19; 1290 Am. Compl. ¶¶ 18–19.

[7] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *1 (D. Connecticut, July 6, 2023).

[8] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *4 (D. Connecticut, July 6, 2023), citing the following sections from MSP Recovery’s filed complaints: 938 Am. Compl. ¶43 and ¶95.

[9] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *2 (D. Connecticut, July 6, 2023).

[10] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *7 (D. Connecticut, July 6, 2023).

[11] See, United States Court of Appeals for the Second Circuit

[12] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *6 (D. Connecticut, July 6, 2023), citing Hereford, 66 F.4^th at 89.

[13] On this point, the District Court for Connecticut stated:

In arguing that the Hereford decision does not compel dismissal of the Amended Complaints in this case, MSP urges a reading of the Second Circuit precedent that ignores its clear holding. In doing so, MSP attempts to distinguish Hereford in several ways. Pls.’ Resp. to Second Notice ¶¶ 1–17. First, MSP maintains that the underlying Amended Complaints here differ in that the plaintiffs not only allege the existence of Section 111 reports, but also set forth the relevant policy numbers for each Travelers insurance policy. Id. ¶ 2; 938 Am. Compl. ¶¶ 48, 65; 947 Am. Compl. ¶ 44; 948 Am. Compl. ¶ 44; 963 Am. Compl. ¶¶ 46, 60; 964 Am. Compl. ¶ 44; 1012 Am. Compl. ¶¶ 43, 57, 74, 88; 1290 Am. Compl. ¶ 50. A review of the Amended Complaint at issue in Hereford demonstrates that it too included a policy number for the exemplar claim, see Exhibit A to Reply in Support of Defendants’ Second Notice of Supplemental Authority, Hereford First Amended Complaint (“Hereford Compl.”) ¶ 49 (Doc. No. 67–1). Still, the Second Circuit concluded that the allegations in the Hereford Complaint did not adequately allege injury-in-fact or causation. See Hereford, 66 F.4th at 89. Additionally, MSP claims that the Hereford Court did not address “whether allegations of an actual contractual obligation ... could establish responsibility for pleading purposes.” Pls.’ Resp. to Second Notice ¶ 2. This argument overlooks that such an allegation was made in Hereford, see Hereford Compl. ¶ 49, and that this same argument was advanced by MSP on appeal, see Exhibit B to Reply in Support of Defendants’ Second Notice of Supplemental Authority, MSP’s Final Reply Brief at 6 (Doc. No. 67–2). Thus, the Second Circuit implicitly denied this theory by dismissing MSP’s claims for lack of standing. Hereford, 66 F.4th at 89.

Second, MSP asserts that the allegations at issue here are “materially different” from those in Hereford. Pls.’ Resp. to Second Notice ¶ 7. Specifically, plaintiffs contend that Hereford did not discuss whether a claim is plausibly alleged when the existence of a Section 111 report is considered in combination with:

a specific allegation that the primary plan has resolved the reported claim arising under the identified insurance policy;
detailed allegations that a [MAO] also made payments for medical expenses arising out of the automobile accident covered by the identified insurance policy; and
detailed descriptions of each coded procedure for which the MAO made payment showing that the medical expenses paid by the MAO related to the automobile accident. ¶ 5

However, the Hereford Complaint made these same allegations, see Hereford Compl. ¶¶ 47–55, and the Second Circuit still concluded that MSP failed to plausibly allege standing. In fact, the baselessness of this argument is aptly captured by the chart in Travelers’ Reply in Support of Defendants’ Second Notice of Supplemental Authority, which situates the “materially different” allegations in the case at bar beside nearly identical allegations in Hereford. See Defs.’ Reply in Supp. of Second Notice at 3–4. After conducting its own side-by-side review of the Hereford Complaint and the relevant Amended Complaints in this case, the court has little difficulty rejecting MSP’s assertion of a material difference in the underlying allegations.

Third, MSP posits that the Second Circuit in Hereford conflated the terms “liability” and “responsibility” under the MSP Act, see, e.g., Pls.’ Resp. to Second Notice ¶ 10, and that the existence of Section 111 reports is enough to plausibly allege that Travelers was the primary plan and thus responsible for reimbursing the MAOs, see id. ¶¶ 10–14. This conflicts directly with the Hereford decision, see Hereford, 66 F.4th at 87–89, which this court is bound by and not in a position to ignore, Jones v. Coughlin, 45 F.3d 677, 679 (2d Cir. 1995) (“A decision of a panel of this Court is binding unless and until it is overruled by the Court en banc or by the Supreme Court.”). While this court could have considered a different conclusion regarding standing if it approached the issue tabula rasa, that is of no consequence. The Second Circuit’s decision in Hereford controls. MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *6-*7.

[14] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *7 (D. Connecticut, July 6, 2023).

[15] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *7 (D. Connecticut, July 6, 2023), citing, MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 2019 WL 6311987, at *9 (C.D. Ill. Nov. 25, 2019), aff’d, 994 F.3d 869 (7th Cir. 2021).

[16] MSP Recovery Claims, Series LLC v. Travelers Indemnity Company, 2023 WL 4744753, at *7 (D. Connecticut, July 6, 2023), citing Hereford, 2022 WL 118387, at *1; 938 Compl.

The United States District Court for Connecticut dismisses a Medicare Advantage claim for “double damages” – rules that insurer’s Section 111 reporting not sufficient to establish standing

Defendant insurer moves to dismiss

District Court for Connecticut dismisses MSP’s Recovery’s claims for lack of standing

Questions?