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Please note that Attorney Bruzonsky has been doing this regular “Liens Corner” column since April 2006. His last “Liens Corner” article was for the November/December 2017 issue of The Advocate, having stepped down from this regular column, as he now works part-time (and is part-time retired) exclusively handling large subrogation/lien claims in very large personal injury and medical malpractice cases for other attorneys. However, attorney Bruzonsky may add notes to this website under the subject lien article headers from time to time. (Please keep in mind that this site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiair with all the facts and circumstances of your specific case and relevant law.) 

 

 

2011-06: Parra v Pacificare Medicare Advantage Lien Case

October 16th, 2017 03:36:26 pm


This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, June 2011 issue, 

@2011 by Steven J. Bruzonsky, Esq.

 

 

Litigation Update: Medicare Advantage Liens and the RecentParra v. PacificareCase

 

(For more Medicare and Medicare Advantage lien information, please see my previous “Liens Corner articles on these subjects, including my June – September 2008 “Medicare Liens – A Brief Primer” and May – August 2009 “Federal Medicare Advantage Liens Update” articles)

 

 

Federal Medicare and Medicare Advantage Statutes, Regulations and Case Law

Prior To the 2005 Amendments to the Medicare Advantage Regulations

 

Both regular Medicare and Medicare Advantage healthplans (which substitute for regular Medicare) do not pay for services to the extent that Medicare (or Medicare Advantage) is not the primary payer. Primary payers are defined to include other health insurance, medical payment, no fault/personal injury protection,  liability insurance, uninsured motorist, underinsured motorist, self-insured, or  third party. When Medicare (or Medicare Advantage) is not the primary payer, conditional payment may be made conditioned upon reimbursement from the enrollee, who may be billed and who is liable for payments made to the enrollee by primary payers.  See 42 U.S.C. § 1395y(b)(2)(A) and (B),42 U.S.C. § 1395mm(e), 42 U.S.C. § 1395w-22(a)(4), 42 U.S.C. § 1395W-26(b)(3), 42 C.F.R. § 422.108(b), 42 C.F.R. § 422.108(d), 42 C.F.R. § 417.452 and 42 C.F.R. § 417.454.

 

The U. S. is authorized to “bring an action against any or all entities” to recover” Medicare’s payment of medical benefits when Medicare is not the primary payer. 42 U.S.C. §1395y(b)(2)(B)(iii).  The U. S. “shall be subrogated” in recovering Medicare’s payment of medical benefits when Medicare is not the primary payer. 42 U.S.C. § 1395y(b)(2)(B)(iv). However, in enacting the Medicare Advantage statutes at 42 U.S.C. §§ 1395w-21 - 1395w-28, and 42 U.S.C. § 1395mm, Congress failed to give Medicare Advantage plans “subrogation” or the right to bring an “action” to recover plan payments of medical benefits when the plan is not the primary payer.

 

In Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003), the 6th Circuit dismissed the action for lack of federal subject matter jurisdiction because no Medicare Advantage plan private right of action exists under the Medicare statute; that any lien claim would have to be brought in state court (under state law); and mentioned that 42 U.S.C § 1395mm(e)(4) gives Medicare Advantage plans the option to seek reimbursement from their members under certain circumstances but that the provision didn’t create any lien or subrogation rights.

 

In Nott v. Aetna U.S. Healthcare, Inc.,No. 03-CV-4044 (Eastern District Penn., Jan. 23, 2004), the U.S. District Court held that although the MA statutes permit a Medicare Advantage plan to contract with their insureds for subrogation, that it does not provide a mechanism for the plan to enforce its private contractual rights in federal court; and that due to lack of federal subject matter jurisdiction, the action was remanded to state court.

 

2005 Amendments to Federal Medicare Advantage Regulations:

 

On January 28, 2005, amendments were issued to the Medicare Advantage regulations:

 

“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.” 42 C.F.R  §  422.108(f).

 

“The standards established under this part [Part  422 Medicare Advantage Plans] supersede any State law or regulation (other than State  licensing laws or State laws relating to plan solvency) with respect to the MA plans that are offered by MA organizations.” 42 C.F.R. § 422.402.

 

The 2006 U.S Supreme Court Decision in Empire Healthchoice Assurance:

 

EmpireHealthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006) is a FEHBA (Federal Employees Health Benefits Act of 1959) (5 U.S.C. §§ 8901-8914) lien case. The U.S. OPM’s (Office of Personnel Management) contract with BCBSA, a FEHBA healthplan, required  express lien or subrogation rights  in the BCBSA Summary Plan Descriptions.  The U.S. Supreme Court held that there was no federal subject matter jurisdiction and that the lien or subrogation rights are governed by state law (in this case, state anti-subrogation case law applied). Although the Court mentioned the FEHBA preemption clause, 5 U.S.C. § 8902(m)(1) [which provides that the terms of any contract under FEHBA “which relates to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any state or local law, or any regulation issued there under, which relates to health insurance or plans”], the Court didn’t consider that preemption clause significant and refused to preempt state anti-subrogation law where the Federal FEHBA statutes create no express “lien” or “subrogation” rights. FEHBA and Medicare Advantage healthplan lien claims are similar in that both of them do not have federal express statutory subrogation or lien language or authority to bring actions in federal court.

 

Federal Medicare Advantage Case Law Subsequent to the 2005 Amendments to the Medicare Advantage Regulations:

 

Humana Medical Plan v. Reale(2011), No. 10-21493 (S.D. Fla., Jan. 31, 2011):

 

“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.” 42 C.F.R  §  422.108(f).  Humana contended that this 2005 amendment gave Humana federal Medicare Advantage lien rights. However, the U.S. District Court for the Southern District of Florida summarily dismissed Humana’s Medicare Advantage lien claim for failing to bring a claim arising under federal law. The court noted that under 42 U.S.C. § 1395y(b)(2)(B)(i), the Secretary’s authority is limited to making payments “conditioned on reimbursement to the appropriate Trust  Fund”; and that “The United States is vested with full authority to bring an action for reimbursement, not the Secretary. 42 U.S.C. § 1395y(b)(2)(B)(iii) - - - Therefore, because the Secretary does not have the authority to bring an action for reimbursement, Humana cannot claim such a right under 42 C.F.R. §422.108(f).”

 

Parra v. PacifiCare (2011), CV 10-008-TUC-DCB (D. Arizona, March 28, 2011):

 

Plaintiffs are the surviving beneficiaries who recovered a $500,000 wrongful death settlement against the driver of the car that hit the decedent. PacifiCare, a Medicare Advantage plan, sought reimbursement for having paid the decendent’s accident-related medical expenses. The court agreed with the Magistrate Judge’s analysis (2011 WL 1119761, Feb. 4, 2011) “that the Medicare statutory and regulatory scheme does not reflect any congressional intent to create a private cause of action. - - - The Court finds that the Medicare statutes at issue, here, do no more than create a federal right. They stop short of creating a federal private right of action to enforce that right and do not contain any jurisdictional provision granting the federal courts exclusive jurisdiction over Medicare reimbursement claims. - - - Congress and the Secretary did no more than protect PacifiCare’s right to charge and/or bill a beneficiary for reimbursement, notwithstanding any state law or regulation to the contrary.”

 

The court that “PacifiCare fails to recognize that recovery actions taken by the Secretary involve detailed administrative procedures, which are required to be exhausted before a beneficiary can challenge a claim for reimbursement to the federal courts. - - - Jurisdiction over beneficiary challenges to a Medicare claim for reimbursement exists under 42 U.S.C. § 405(g), which requires agency decision in advance of judicial review. Practically speaking, this means the Secretary cannot proceed directly to federal court in circumvention of the beneficiary’s rights and must issue a final decision before bringing legal action for reimbursement.” The court rejected PacifiCare’s contention that there is complete preemption. “To find complete preemption the Medicare statutes at issue would have to provide the exclusive cause of action for PacifiCare’s claim - - - and also set forth the procedures and remedies governing the cause of action. - - - The statutes reviewed here fail to provide the same type of comprehensive enforcement scheme provided by the  Employee Retirement Income Security Act (ERISA), one of the two federal laws found to completely preempt state law, the other being the Labor Management Relations Act (LMRA). Both federal statutes provide detailed enforcement schemes and expressly provide for federal court jurisdiction.”

 

The court dismissed PacifiCare’s case for “failure to state a claim”, finding “that PacifiCare cannot state a federal claim for relief  because there is no private cause of action for its claim of reimbursement.”  Interestingly, the court further stated: “There being no jurisdiction in this Court for PacifiCare’s claim, it must proceed in  state court. This is the better approach because the parties dispute the breadth of the settlement agreement between Plaintiffs and the third party insurer. Arguably, if the settlement was for wrongful death, then Plaintiff’s did not recover pursuant to liability insurance which is subject to reimbursement because Arizona’s wrongful death statute does not provide payment for medical damages. Arguably, if the settlement was broader, then PacifiCare may seek reimbursement and/or assert subrogation rights. - - - The Court agrees with the Magistrate Judge that the state courts are better suited to consider what is essentially a contract claim, pursuant to Arizona law, and are as capable as this Court to address the preemption questions relevant to resolving the merits of the claim for reimbursement.”   

  

Arizona Medicare Advantage healthplans are already claiming that this case creates a federal Medicare Advantage lien right which preempts Arizona anti-subrogation case law. However, keep in mind that the court dismissed the healthplan’s reimbursement claim, not on the merits, but for failure to state a claim.  Absent federal preemption, Arizona Medicare Advantage lien claims  will be treated in Arizona courts no different than other premium based health insurance lien claims – they will be dismissed as a matter of public policy as required by a long line of Arizona case law.

 

An appeal has been filed to the Ninth Circuit Court of Appeals with no decision yet on whether the Ninth Circuit will hear the case.



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