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California spotlight: Medicare Advantage recovery rights

By Mark Popolizio  |  February 12, 2020

The issue of Medicare Advantage Plans (MAPs) recovery rights has catapulted to the compliance forefront over the past few years following a series of court rulings finding that MAPs can sue claims payers for “double damages” under the Medicare Secondary Payer (MSP) private cause of action (PCA) provision.  

With a growing number of jurisdictions finding that MAPs have PCA rights, it is time to turn the spotlight on California to make sure California claims payers have a solid understanding of the current MAP recovery landscape—including two recent California decisions allowing MAP double damages suits to proceed. And as part of this review, it is a great opportunity to assess whether you have an adequate MAP game plan to meet this growing compliance menace.  

What are MAPs? 

To get the ball rolling, it is important first to understand what MAPs are and how they fit into the larger Medicare program. MAPs are Medicare insurance programs provided by private insurance companies under Part C of the Medicare program. They serve as an alternative to traditional Medicare (Parts A and B) provided by the federal government. Part C was introduced in 1997 to help contain costs, provide alternative coverage options to traditional Medicare, and spur private sector innovation.[1]  

Nationally, there are 3,148 different MAPs available for the 2020 plan year.[2] As of 2019, United Healthcare and Humana are the top MAP insurers, accounting for a combined 44% of the total MAP market, while  Blue Cross Blue Shield, CVS (Aetna), and Kaiser Permanente cover 15%, 10%, and 7% of MAP enrollees, respectively.[3]  

California has a high MAP enrollment rate

After a slow start, MAP enrollment has nearly doubled in the past decade. MAPs have become more popular for many reasons, including that MAPs often offer more benefits than traditional Medicare. Presently, 34% of all Medicare beneficiaries (or 22 million individuals) are covered under a MAP—and this number is projected to reach 47% by 2029.[4]  

MAP enrollment varies greatly by state. In California, 40% of all Medicare beneficiaries are currently enrolled in a MAP, which places California in a group of 21 other states with MAP enrollment rates between 31% and 40%.[5] Of note, six states, plus Puerto Rico, have MAP enrollment rates greater than 40%.[6]

MAPs are on the march for double damages

As MAP enrollment increases, questions are surfacing regarding the nature and extent of MAP recovery rights. Under specific MAP statutes and regulations, MAPs may “bill” or “charge” their enrollees or insurers for reimbursement of medical services they provide for claim-related treatment.[7] These provisions have been interpreted as permitting MAPs to establish contractual recovery rights as part of their underlying insurance agreements, but not creating an implied federal private cause of action right.[8] 

The bigger question, however, is whether the Medicare Secondary Payer statute’s private cause of action provision allows MAPs to sue insurers for double damages. If so, then MAPs can sue claims payers (and potentially other parties) for double damages if they fail to address MAP recovery claims properly—just like the federal government can for traditional Medicare conditional payment claims. 

The MSP’s PCA 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).

Whether this statute is available to MAPs was first addressed in 2012 by the United States Third Circuit Court of Appeals[9] in the case In re Avandia, 685 F.3d 353 (3rd Cir. 2012). In Avandia, the court ultimately held that the “plain text” of the MSP’s PCA statute applied to MAPs—meaning MAPs could sue claims payers for double damages in relation to their recovery actions. As part of this detailed ruling, the court rejected the argument that the MSP’s PCA provision applied only to the federal government, concluding instead that this section contemplated the Medicare Act as a whole, thereby placing no limits on a MAP’s ability to sue for double damages under this statute.[10] In addition, the court cited several other legal and policy bases in support of its findings.[11] The Avandia decision quickly opened the door for similar actions (and rulings) in other jurisdictions.

In 2016, the United States Eleventh Circuit Court of Appeals[12] took up the issue in Humana v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016). In Western Heritage, the Eleventh Circuit not only agreed with the Third Circuit’s holding but also levied double damages against the insurer based on the facts presented.[13]

Similar rulings have also been issued by several United States District Courts. Over the past few years, federal district courts for Connecticut, Illinois, Louisiana, Tennessee, Texas, and Virginia have found that MAPs can sue for double damages under the MSP.[14] And in 2019, federal district courts in Ohio, Massachusetts, and South Carolina joined this growing list.[15] 

As courts outside of California are increasingly finding that MAPs can bring PCA claims, the question becomes: Just where is California on this issue?

Ninth Circuit has not yet addressed Avandia

Turning to California, our starting point is the United States Ninth Circuit Court of Appeals (which has appellate jurisdiction over the district courts in the western states, including the Central District of California).[16] In 2013, the Ninth Circuit addressed the PCA statute in relation to MAPs from a different factual scenario in the case Parra v. PacifiCare of Arizona, Inc., 715 F.3d 1146 (9th Cir. 2013). In Parra, a decedent’s wife and children, in a survivorship action, filed a claim for injunctive and declaratory relief that the defendant MAP (PacifiCare) was not entitled to recover from a wrongful death settlement received from the tortfeasor insurer. PacifiCare argued that, per Avandia, it had the right to bring a PCA claim against the beneficiary’s survivors. 

However, the Ninth Circuit disagreed, finding that the MSP’s PCA statute did not authorize MAP claims against survivors. The court noted that the PCA provision, by its text, applied “in the case of a primary plan which fails to provide for payment” per 42 U.S.C. § 1395y(b)(3)(A) and that PacifiCare was not making a claim against the insurer, but rather, against the survivors of a wrongful death settlement.[17] As such, the court viewed Avandia as inapplicable to the issue presented and declined to weigh in on whether it believed Avandia was rightfully decided, stating: “We need not resolve whether Avandia was decided correctly because it does not aid PacifiCare.”[18]  

Thus, in Parra, the Ninth Circuit stopped short of addressing whether it believed the PCA statute allows MAPs to sue insurers since that issue was not technically before it in that case. Going forward, it will be interesting to monitor if the right case ultimately finds its way before the Ninth Circuit and, if so, whether this court will fall in line with the Third and Eleventh Circuits’ decisions in favor of MAPs on this issue.          

California district court has allowed MAPs to sue insurers for double damages

While the Ninth Circuit passed on the question in Parra, the United States District Court for the Central District of California has allowed MAP double damages suits to proceed in MAO-MSO Recovery II, LLC v. Mercury Insurance[19] and MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange.[20]

In both these cases, the plaintiff (MAO-MSO), as a purported assignee for several MAPs and other alleged MAP-related entities,[21] brought PCA claims against the insurers for their alleged failure to pay for the MAPs’ enrollees’ medical treatment or reimburse the MAPs for such treatment in relation to no-fault claims and liability settlements.  

In response, the insurer in Mercury moved to dismiss, arguing that the MSP’s PCA provision did not apply to MAPs based on the Ninth Circuit’s ruling in Parra. While in Farmers, the insurer argued that MAO-MSO’s complaint as pleaded was insufficient to bring a PCA claim.

However, the Central District of California rejected the insurer’s attempts to dismiss MAO-MSO’s action on these grounds in both cases.

In Mercury, the court first found Parra inapplicable since the court in Parra did not address whether the MSP’s PCA statute extended to MAP claims against insurers, which was the issue in MAO-MSO’s action against Mercury.

On this point, the court explained:

[T]he factual differences between the instant case and Parra make Parra’s holding inapplicable here. There, the Ninth Circuit found the MSPA private cause of action did not apply because the plaintiffs were not suing a primary payer who had failed to provide primary payment. Here, plaintiffs are attempting to sue a primary payer who allegedly failed to provide primary payment. Therefore, the Court is not persuaded that the holding in Parra applies.[22]

From there, the court concluded that 42 C.F.R. § 422.108(f) extended the MSP’s PCA statute to MAPs. This section, in part, states that “[t]he [MAP] 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.” Accordingly, the court determined that “[t]his language supports the conclusion that [MAPs], like the Secretary [Medicare], may assert a private cause of action.”[23] And finally, the court viewed Avandia and Western Heritage as persuasive, concluding that “[b]ased on the language of [42 C.F.R. § 422.108(f)] and the persuasive reasoning of the Third and Eleventh Circuits, the Court finds that [MAPs] may assert a private cause of action pursuant to §1395y(b)(3)(A).”[24] 

Turning to Farmers, while the court dismissed MAO-MSO’s amended complaint on other bases, the court felt it “prudent” to address the merits of the insurer’s argument that MAO-MSO’s action should be dismissed for failure to state a claim.[25] Very generally, the insurer argued that the complaint was deficient in that it failed to contain specific facts and details regarding the alleged treatment and bills at issue and any alleged reimbursement demands issued. But the court disagreed, finding that MAO-MSO was not required to “plead their claims with the level of factual granularity demanded by [the insurer].”[26] Further, the court stated that there was “no indication that CMS regulations requiring [MAPs] to identify primary payers and coordinate their benefits imposes a prerequisite to asserting a cause of action pursuant to §1395y(b)(3)(A).[27] Accordingly, the court in Farmers found that MAO-MSO had alleged facts sufficient to state a claim for PCA liability under the MSP.[28]

As of this writing, MAO-MSO’s suits against Mercury and Farmers remain in active litigation. Going forward, it will be interesting to see if, and how, the court ultimately rules regarding whether it believes the insurers in these cases have PCA liability based on the facts.

Do you have a California MAP game plan?

When the dust settles, we find that at least one California court has allowed MAPs to sue insurers for double damages. While it is unknown where the Ninth Circuit (or other California courts) may ultimately fall on this issue, for now, the Central District of California is part of a growing number of jurisdictions finding that MAPs can sue insurers for PCA damages under the MSP. Regardless of the MAP PCA question, it is important to keep in mind that MAPs, as noted above, may still have recovery rights under the MAP statutes and regulations. 

Against this backdrop, California claims payers need to assess whether they have adequate MAP recovery practices in place. While a detailed examination into all the factors necessary to build a “MAP game plan” is beyond the scope of this article, here are some starter points for consideration:

  1. Recognize that the MAP recovery issues apply to all non-group health claims across the board, including liability, no-fault, med pay, and workers’ compensation—and MAP enrollment continues to grow.
  2. Understand there is currently no centralized process or database that can be tapped to determine whether the claimant is, or was, a MAP enrollee at any point. Accordingly, claims payers must develop claim investigation and discovery practices aimed at obtaining this information.
  3. Keep in mind that most beneficiaries can switch their Medicare program or plan each year during open enrollment, which runs October through December. Thus, the longer a claim stays open, the greater possibility that there could be multiple recovery claims, including the prospect of a MAP lien claim (or claims) and a traditional Medicare conditional payment claim. Investigation and discovery practices should include regular status update inquiries to ascertain any change in a claimant’s Medicare program or plan.
  4. Ensure MAP recovery claims are proactively addressed, disputed (if applicable), and resolved. Pay attention to the specific jurisdiction of your claim and the impact any relevant court decisions may have on the issues. Remember also to include appropriate settlement language clearly delineating all relevant obligations and responsibilities regarding MAP reimbursement.

Please feel free to contact the author if you have any questions on the above or MAP matters in general.

ISO Claims Partners – Medicare Advantage services

ISO Claims Partners has been at the forefront of the MAP issue from day one, and we offer an array of services to assist claims payers in meeting the growing MAP challenge, including MAP protocol design, negotiation and dispute of MAP lien claims, and case consultation. Learn more about our MAP services  and review our state-by-state guide to Medicare Advantage in the courts


[1] See Humana Ins. Co. v. Bi-Lo, LLC, 2019 WL 4643582 (D. South Carolina, September 24, 2019), at *3.

[2] Medicare Advantage 2020 Spotlight: First Look, Henry J. Kaiser Family Foundation, Data Note, October 2019, p. 1.

[3] A Dozen Facts About Medicare Advantage in 2019, Henry J. Kaiser Family Foundation, Data Note, June 2019, p.4.

[4] Id. at p.1.

[5] Id. at p. 2.

[6] Id. These states include Hawaii (44%), Florida and Minnesota (43%), Oregon (42%), and Wisconsin (41%). Puerto Rico’s MAP enrollment rate is 71%. Id.

[7] The statutes on this point are 42 U.S.C. §1395mm(e)(4) and 42 U.S.C. § 1395w-22(a)(4).

42 U.S.C. §1395mm(e)(4) is entitled “Payments to health maintenance organizations and competitive medical plans” and states as follows:

Notwithstanding any other provision of law, the eligible organization may (in the case of the provision of services to a member enrolled under this section for an illness or injury for which the member is entitled to benefits under a workmen’s compensation law or plan of the United States or a State, under an automobile or liability insurance policy or plan, including a self-insured plan, or under no fault insurance) charge or authorize the provider of such services to charge, in accordance with the charges allowed under such law or policy— (A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or (B) such member to the extent that the member has been paid under such law, plan, or policy for such services.

Similar provisions are contained in 42 U.S.C. § 1395w-22(a)(4). This section is entitled “Organization as secondary payer” and provides that:

Notwithstanding any other provision of law, a Medicare+Choice organization [now called Medicare Advantage] may (in the case of the provision of items and services to an individual under a Medicare+Choice plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section— (A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or (B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.

Additional regulations for consideration are 42 C.F.R. § 422.108(f) and 42 C.F.R. § 417.528 (b).

42 C.F.R. § 422.108(f) states:

MSP rules and State laws. Consistent with § 422.402 concerning 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. 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.

Meanwhile, 42 C.F.R. § 417.528 (b) provides that:

Charge to other insurers or the enrollee. If a Medicare enrollee receives from an HMO or CMP covered services that are also covered under State or Federal worker’s compensation, automobile medical, or any no-fault insurance, or any liability insurance policy or plan, including a self-insured plan, the HMO or CMP may charge, or authorize a provider that furnished the service to charge— (1) The insurance carrier, employer, or other entity that is liable to pay for these services; or (2) The Medicare enrollee, to the extent that he or she has been paid by the carrier, employer, or other entity.

[8] In general, these decisions have held that the MAP statutes permit (but do not mandate) MAPs to contract for subrogation rights but that these provisions do create an implied federal private cause of action right under the MSP. See, e.g., Nott v. Aetna, 303 F.Supp.2d 565, 571-572 (D. Pa. 2004). In Care Choice HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003), the court opined that “[i]f an [Medicare] HMO chooses to include such a provision in its insurance policy, its remedy would be based on a standard insurance contract claim and not on any federal statutory right.” Id. at p. 790. Similarly, in Parra v. PacifiCare, 2011 WL 13119115 (D. Arizona 2011), the court indicated that the MAP statutes do not create a federal private cause of action right and do “no more that protect [a MAP’s] right to charge and/or bill a beneficiary for reimbursement, notwithstanding [any] state law or regulation to the contrary.” Id. at *4.

[9] The Third Circuit’s jurisdiction includes federal district courts in Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands.

[10] Very generally, the defendant argument here centered on that part of the PCA statute that referenced “in accordance with paragraphs (1) and (2)(A),” which is a reference to 42 U.S.C. § 1395y(b)(2)(A). In this regard, the defendant argued that use of the word “subchapter” in this statutory section referred only to payments made by the government in relation to traditional Medicare and excluded MAP payments. The court, however, disagreed based on its review of the text and wording in other parts of the MSP statute and looking at Congressional intent. From this, the court concluded that “[t]his language makes clear that ‘subchapter’ refers to the Medicare Act as a whole. Since the MSP Act and its private cause of action provision do not attach any narrowing language to “payments made under this subchapter,” that phrase applies to payments made under Part C as well as those made under Parts A and B. Accordingly, that language cannot be read to exclude MAOs from the ambit of the private cause of action provision.” In re Avandia, 685 F.3d. 353 at 360.

[11] While a detailed analysis into these reasons is beyond the scope of this article, in general, the court indicated that even if the PCA statute was considered ambiguous, it would reach the same result by applying Chevron deference to 42 C.F.R. § 108(f), which provides, in part, that an “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. In re Avandia, 685 F.3d. 353 at 366-367. In addition, the court cited legislative history and policy considerations in support of is conclusion that the MSP’s PCA statute extended to MAPs. Id. at 363-366.

[12] The Eleventh Circuit’s jurisdiction includes federal district courts in Alabama, Georgia, and Florida.

[13] While a complete analysis of the complex set of facts at play in Western Heritage is beyond the scope of this article, it is noted that the Eleventh Circuit ultimately imposed double damages against the insurer even though the insurer attempted to name the MAP as a payee on the settlement draft and had placed the disputed amount into trust per a state court order. Notwithstanding, the court found the insurer failed to provide “appropriate reimbursement,” because it did not reimburse the MAP’s demand for reimbursement within 60 days of the plaintiff failing to do so after he had received the settlement funds per 42 C.F.R. § 411.24(i)(1).

[14] Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653 (E.D. La. 2014); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F.Supp.3d 983 (W.D. Tex. 2014); Cariten Health Plan, Inc. v. Mid-Century Ins. Co., No.: 2015 WL 5449221(E.D. Tenn. 2015); Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp.3d 676 (E.D. Va. 2016); Aetna v. Guerrera, 300 F.Supp.3d 367 (D. Conn. March 13,2018); Humana v. Shrader, 584 B.R. 658 (S.D. Tex. March 16, 2018); and MAO-MSO Recovery II, LLC v. State Farm, 2018 WL 340021 (C.D. Ill. January 9, 2018).

[15] MSP Recovery Claims Series LLC v. Plymouth Rock Assurance Corporation, 2019 WL 3239277 (D. Massachusetts, July 18, 2019), Humana Ins. Co. v. Bi-Lo, LLC, 2019 WL 4643582 (D. South Carolina, September 24, 2019), MSP Recovery Claims, Series LLC v. Phoenix Insurance Company, 2019 WL 6770981 (N.D. Ohio, December 12, 2019); MSP Recovery Claims, Series LLC v. Grange Insurance Company, 2019 WL 6770729 (N.D. Ohio, December 12, 2019); and MSP Recovery Claims, Series LLC v. Progressive.

[16] The Ninth Circuit’s jurisdiction includes federal district courts in the following states: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. The Ninth Circuit also includes Guam and the Northern Mariana Islands. 

[17] Parra v. Pacificare of Arizona, Inc., 715 F.3d 1146, 1154-1155 (9th Cir. 2013).

[18] Id.

[19] MAO-MSO’s action against Mercury has resulted in multiple court opinions addressing a host of different issues over the past several years as follows: MAO-MSO Recovery II, LLC v. Mercury Insurance, 2017 WL 5086293 (November 2, 2017); MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 (C.D. Calif. May 23, 2018); and MAO-MSO Recovery II, LLC v. Mercury Insurance, 2019 WL 4277802 (C.D. Calif. July 29, 2019). For the purposes of this article, the author cites to the applicable decision in relation to the informational point subject to endnote citation.

[20] MAO-MSO’s action against Farmers has resulted in multiple court opinions addressing a host of different issues over the past several years as follows: MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2017 WL 5634097 (C.D. Calif. November 20, 2017); MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 2106467 (C.D. Calif. May 7, 2018); MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 5086623 (C.D. Calif. August 13, 2018); and  MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2019 WL 2574121 (C.D. Calif. June 12, 2019). For the purposes of this article, the author cites to the applicable decision in relation to the informational point subject to endnote citation.

[21] In addition to the actual MAPs themselves, the plaintiff also brought its action as a purported assignee of “HMOs, MSOs and IPAs” which, as the court explained, are considered “first tier” or “downstream” entities under the MSP, “meaning they contract with [MAPs] or related entities to provide certain services for Medicare enrollees.” MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 at *7, citing 42 C.F.R. 422.2. Regarding these entities, the court disagreed with the insurer’s position that only Medicare beneficiaries, healthcare providers who initially treated a Medicare beneficiary, and MAPs can assert PCA rights under the MSP. Rather, the court found, in part, that the PCA statute places no limitation as to the types of entities that may bring suit. Further, the court found that the HMOs, MSOs, and IPAs as alleged in the plaintiff’s complaint “would suffer the same injury as [MAPs] when a primary payer failed to pay or reimburse them,” and that without further explanation from the insurers as to why this would not be true, the court rejected the contention that HMOs, MSOs, and IPAs are not secondary payers. Id. Accord, MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 5086623 (C.D. Calif. August 13, 2018), at *15.

[22] MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 (C.D. Calif. May 23, 2018), at *10.

[23] MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 (C.D. Calif. May 23, 2018), at *10.

[24] Id.

[25] MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 2106467 (C.D. Calif. May 7, 2018), at *10.

[26] Id.

[27] Id. MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 2106467 (C.D. Calif. May 7, 2018), at *10.

[28] Id. at *11.


Mark Popolizio, J.D., is vice president of MSP compliance and policy at ISO Claims Partners, a Verisk business. You can contact Mark at mpopolizio@verisk.com.