This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, May – June 2014 issue, @2014 by Steven J. Bruzonsky, Esq.
May/June 2014 Lien Updates
Medicare Advantage Liens – Arizona Anti-Subrogation Case Law Preempted by Federal Law:
The Arizona Court of Appeals, Division One, in Estate of Ethridge Ex Rel. Pradia v. Recovery Management Systems, Inc., No. 1 CA-CV 12-0740 (Az. Ct. App. Feb. 13, 2014), recently held that “Part C of the Medicare Act and its associated regulations preempt Arizona’s anti-subrogation doctrine, and thus a Medicare Advantage plan may recover the medical expenses it paid for one of its enrollees from the settlement of personal injury claims asserted on behalf of the enrollee.” Division One remanded the case for further proceedings consistent with this opinion. In this case, the injury settlement was $1.2 million, both for Wrongful Death, with two surviving daughters claiming their damages, and for violations of the APSA(Adult Protective Services Act), with the Estate of the deceased claiming damages including the deceased incident-related medical bills. The deceased’s Mercy Care Medicare Advantage Plan claimed a lien for $348,166.20 incident-related medical benefits paid by the plan. Presently a Motion for Reconsideration is pending before Division One. And I would expect that either side will appeal to the Arizona Supreme Court an adverse ruling.
Medicare Advantage plans cite as authority for their lien claims 42 C.F.R. § 422.108(f), which provides that Medicare Advantage Organizations exercise “the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” Since it is mandatory that Medicare liens be reduced to cover procurement costs (pro-rata attorney’s fees and costs), per 42 C.F.R. § 411.37, then if courts hold that state law anti-subrogation doctrine is preempted by federal law, the doesn’t the Medicare Advantage plan have to give at minimum the same procurement cost reduction that Medicare gives? In the Ethridge case, prior to litigation, the plan reduced the lien by 48% (the procurement cost percentage) to $181.046.43 without stating that the reduction was the mandatory Medicare Secondary Payer (MSP) procurement cost reduction. However, as the trial court held that the lien was invalid in its entirety, the issue of procurement cost reduction was never resolved at the trial court. Division One does not address the procurement cost lien reduction, apparently leaving this to be determined upon remand.