This article has been published in “The Advocate”, a publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, September-October 2013 issue, @2013 by Steven J. Bruzonsky, Esq.
Recent Medicare Advantage Lien Cases, Part 1
This is the first part of a two part series of articles discussing recent Medicare Advantage lien cases. This article, the first part, discusses the recent Ninth Circuit Parra v. PacifiCare of Arizona, Inc.The following article will discuss the recent Maricopa County Superior Court Pradia v. Recovery Management System, the Third Circuit In re Avandia Marketing Sales Practices and Products Liability Litigation and some other less significant cases.
Parra v. PacifiCare of Arizona, Inc., ___ F.3d ___. 2013 WL 1693713
(9th Cir. 4-19-2013):
This is an appealfrom the U.S. District Court, District of Arizona, in Parra v. PacifiCare of Arizona, Inc., 2011 WL 1119736 (Dist. Az 2011) (CV 10-008-TUC-DCB).
After Manuel Parra died from injuries suffered in an accident, his surviving wife and children made a demand for wrongful death damages against the driver’s $500,000 GEICO automobile insurance policy. PacifiCare, a Medicare Advantage plan, made a claim against the GEICO policy for the $136,630.90 it expended for Parra’s care. Parra’s Survivors filed a complaint in the U.S. District Court seeking declaratory and injunctive relief, contending that the settlement proceeds were not subject to Pacificare’s claims on the basis that (1) the survivors’ wrongful death settlement was only for the survivors’ damages, per A.R.S. § 12-613 (allowing damages in
a wrongful death action “with reference to the injury resulting from the death to the surviving
parties”) and Gartin v. St. Joseph’s Hosp. & Med. Ctr., 749 P.2d 941, 943–45 (Ariz. Ct. App. 1988) (which held that wrongful death awards are not subject to a decedent’s debts); and (2) PacifiCare as a Medicare Advantage plan has no greater rights than Medicare, and Medicare will not seek reimbursement from wrongful death proceeds that do not include payment for the decedent’s medical expenses. PacifiCare counterclaimed that it was entitled to reimbursement
under the terms of its contract with Parra (Count I) and also directly under the Medicare Act (Count II).
The motions were referred to a magistrate judge sua sponte who recommended dismissal of the action for lack of subject matter jurisdiction. The district court, rather than dismissing Count II for lack of jurisdiction, granted the Survivors’ motion for summary judgment for failure to state a claim upon which relief can be granted, finding that PacifiCare “does not have a private cause of action under the Medicare statute or the Medicare Secondary Payer (MSP) Act”; and declined to exercise supplemental jurisdiction over Pacificare’s contract claim (Count I).
The Ninth Circuit affirmed the district court’s dismissal of the causes of action arising under the Medicare Act (Count II) for failure to state a claim, and also affirmed the district court’s decision to decline to exercise supplemental jurisdiction over Pacificare’s contract claim (Count I).
The Court cites In re Avandia Mktg., 685 F.3d 355, 357 (3d Cir. 2012) that “[B]ecause interpretation of the federal Medicare Act presents a federalquestion,” the district court had subject matter jurisdiction to determine whether the Medicare Act created a cause of action of PacifiCare against the Survivors.
The Ninth Circuit holds that PacifiCare does not have a private right of action to pursue reimbursement under the MAO (Medicare Advantage Organizations) statute, 42 U.S.C. § 1395w-22(a)(4).
Medicare Part C, enacted, by Congress in 1997, provides for private MAOs (Medicare Advantage Organizations). Medicare Part C and the MAO (Medicare Advantage Organizations) statute, 42 U.S.C. § 1395w-22(a)(4), “authorizes, but does not compel, a MAO to charge a primary plan for medical expenses paid on behalf of a participant”. - - - The MAO Statute simply allows PacifiCare to provide via its contracts that its insurance is secondary to other available plans and allows recovery from a primary plan that refuses to reimburse the MAO for payments made on behalf of a participant. In the end, the MAO’s claim thus arises by virtue of its decision to include provisions allowing such recovery in its contract with plan participants.” The Ninth Circuit cites in this regard Care Choices HMO v. Engstrom, 330 F.3d 786, 788-90 (6th Cir. 2003), that 42 U.S.C. § 1395mm(e)(4), a provision virtually identical to the MAO statute governing Medicare HMOs, merely permitted HMOs to create a contractual right of reimbursement; and Nott v. Aetna U.S. Healthcare, Inc.,303 F. Supp. 2d 565, 571 (E.D. Pa. 2004), that “[W]hile granting statutory
permission to include recovery provisions in their contracts, Congress did not create a mechanism for the private enforcement of subrogation rights of Medicare substitute[s].”.
The MAO statute cross-references 42 U.S.C. § 1395y(b)(2)(B)(iii), which provides that the United States may bring an action against any or all entities that are required or responsible to make payment under a primary plan. This “cross-reference - - - simply explains when MAO coverage is secondary to a primary plan - - - under the same circumstances when insurance through traditional Medicare would be secondary, and does not create a federal cause of action in favor of a MAO.”
42 C.F.R. § 422.108(f) provides that MAOs exercise “the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” This “regulation adds nothing to a MAO’s claim to a private right of action. See Alexander v. Sandoval, 532 U.S. 275, 291 (2001) (“Language in a regulation may invoke a private right of action that Congress through statutory text created, but it may not create a right that Congress has not.”); Opera Plaza Residential Parcel Homeowners Ass’n v. Hoang, 376 F.3d 831, 836 (9th Cir. 2004) (“[I]t is the relevant laws passed by Congress, and not rules or regulations passed by an administrative agency, that determine whether an implied cause of action exists.”).
The Ninth Circuit holds that PacifiCare does not have a private right of action to pursue reimbursement under the “Private Cause of Action” statute, 42 U.S.C. § 1395y(b)(3)(A).
The Ninth Circuit notes that “PacifiCare relies heavily on In re Avandia Mktg., 685 F.3d at 356, which held that § 1395y(b)(3)(A) provided a MAO a private right of action against third-party tortfeasors for medical expenses advanced on behalf of plan participants. We need not resolve whether Avandia was decided correctly because it does not aid PacifiCare.” The Private Cause of Action statute, 42 U.S.C. § 1395y(b)(3)(A), “was intended to allow private parties to vindicate wrongs occasioned by the failure of primary plans to make payments. See Woods, 574 F.3d at 98 (“[T]he MSP allows a private party . . . to bring suit in the party’s own name to remedy the wrong done to it . . . .”). This statute, which allows recovery of double damages, was not intended to apply to a primary plan which, for all intents and purposes, has interpleaded a sum subject to conflicting claims. Indeed, had GEICO filed an interpleader action rather than tendering the joint check to PacifiCare and the Survivors, the district court would not have had jurisdiction under 28 U.S.C. § 1335, because PacifiCare and the Survivors are all citizens of Arizona. We see no warrant in the Private Cause of Action to reach a different result here, and we hold that the district
court properly dismissed the causes of action arising under the Medicare Act for failure to state a claim.”
The Ninth Circuit holds thatthe doctrine of complete preemption (which would confer
federal subject matter jurisdiction over the question of whether there is a private right of action for a MAO to pursue reimbursement under the MAO statute is inapplicable. This doctrine “confers exclusive federal jurisdiction in certain instances where Congress intended the scope of a federal law to be so broad as to entirely replace any state-law claim. - - - But we need not tarry over this issue. Complete preemption is plainly not applicable here – Medicare contains no civil enforcement scheme, and Congress has not indicated any intent to permit removal of all disputes over insurance proceeds to the federal courts. See Nott, 303 F. Supp. 2d at 570–73.”
The Ninth Circuit holds that the district court did not abuse its discretion by not exercising supplemental jurisdiction and dismissing the remaining state claims. “However, once the district court, at an early stage of the litigation, dismissed the only claim over which it had original jurisdiction, it did not abuse its discretion in also dismissing the remaining state claims. 28 U.S.C. § 1367(c)(3).”
(For more Medicare Advantage lien information and discussion of other Medicare Advantage lien cases not discussed in this article, please see my previous “Liens Corner” articles May – August 2009 “Federal Medicare Advantage Liens Update” and June 2011 “Litigation Update: Medicare Advantage Liens and the Recent Parra v. Pacificare Case”.)