Medicare Advantage Plans Win and Lose in Arizona

Posted in Healthcare

With Mandatory Insurer reporting and the Medicare Secondary Payer Act (MSP) at the forefront of everyone’s minds, Medicare Advantage Plans (MAPs) are working to leverage certain MSP provisions to establish the favorable recovery hierarchy enjoyed only by Medicare.

MAPs are private organizations granted Medicare contracts under Part C. The goal was to offer Medicare Part A and Part B in a cost competitive market. The MSP Act discusses MAPs, but the law is still unsettled as to what extent a MAP may utilize the MSP to recover and pursue payments made on behalf of beneficiaries.

Presently courts are split as to whether a MAP shares the full set of rights bestowed upon Medicare. The Third Circuit Court of Appeals held a MAP is always a secondary payer, and like Medicare, is entitled to recoup double damages under the MSP’s penalty provisions. See In re Avandia Mkt’ing Sales Practices and Prods. Liab. Litig., 685 F.3d 353, 355 (3d Cir. 2012). However, the Ninth Circuit Court of Appeals has declined to put MAPs on equal footing with Medicare, instead opining that a MAP’s recovery right is contractual. See Parra v. PacifiCare of Ariz, Inc., 715 F.3d 1146, 1153 (9th Cir. 2013). Litigation is currently pending in other districts to address the rights of MAPs and their ability to utilize Medicare’s private cause of action provision found in the MSP.

Most recently, a state court issued an important ruling that thoroughly discusses the rights of MAPs. In Estate of Ethridge v. Recovery Management Systems, Inc. No. 1 CA-CV 12-0740, the Arizona Court of Appeals held that Part C of the Medicare Act and its associated regulations preempt Arizona’s anti-subrogation doctrine and thus, an MAP may seek reimbursement for medical expenses it paid for one if its enrollees from the settlement of claims that sought compensation for those expenses on behalf of the enrollee.

Deborah Ethridge contracted to receive Medicare benefits from Mercy Care Advantage, a MAP. Pursuant to the plan, Mercy Care paid for certain medical services including treatment necessitated by purported nursing home neglect. Ethridge later died. A subsequent lawsuit ended with her estate and beneficiaries accepting $1.2 million. After the settlement, Mercy Care requested reimbursement from the Estate of sums paid for Ethridge’s medical care. The Estate in turn sued Mercy Care seeking a declaratory judgment that Mercy was not entitled to reimbursement under Arizona’s anti-subrogation doctrine.

The Court examined whether Congress intended Medicare Part C and its associated regulations to preempt state common law doctrines. The Court offered a brief history of the MSP and current litigation pertaining to MAPs. Paying homage to Parra, the Court noted that Medicare Part C, by itself, does not create a private right of action to pursue reimbursement. The Court further noted that Medicare Part C’s reference to S1395y(b)(2) does not grant MAPs the same right to reimbursement enjoyed under traditional Medicare. Rather, the reference simply explains when a MAP is secondary to a primary plan and allowed to seek reimbursement. Without the private cause of action, MAPs lose the ability to pursue double damages and interest, a lucrative tool.

The Court went on to note, however, that other provisions of Part C do grant MAPs the right to obtain reimbursement from the settlement of claims seeking recovery of medical expenses paid for plan enrollees and this right preempts Arizona’s anti-subrogation doctrine. Specifically, the Court noted Medicare Part C’s express preemption provision and concluded Congress’ intention was clear. The Court also relied upon provisions of the Code of Federal Regulations which state that MAPs have the same right to reimbursement for conditionally paid medical expenses as does Medicare:

A state cannot take away an MA organizations’ 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 recovery 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. S422.108(f).

With so little case law nationwide regarding the rights of MAPs, Ethridge will be considered by all courts when confronting similar litigation. On the one hand, Ethridge is a small victory for MAPs in that the court recognized MAPs as having the same rights as Medicare in some situations. But Ethridge also hurts the cause of MAPs because the Court favored Parra thus precluding a MAP from utilizing the most lethal tool available to Medicare: the penalty and interest provisions of the MSP.

We anticipate MAPs will not be discouraged by this partial loss in Ethridge, but will continue to fight for full equality with Medicare in all respects.

Jennifer Burke Santoro

Jennifer Burke Santoro

Jennifer Burke Santoro, is a Medicare Set-Aside Certified Consultant practicing in the firm's Chicago office. In addition to her Medicare work, Jennifer defends employers in Workers' Compensation matters and maintains an active general liability defense practice.