In a case of first impression in the 11th Circuit, the Court of Appeals held that a private insurance company operating as a Medicare Advantage Organization can sue a primary payor that refuses to reimburse the MAO for a secondary payment.
Prior to 1980, Medicare paid for all medical treatment within its scope and left private insurers to pick up the rest. In 1980, in an effort to lower Medicare costs, Congress enacted the Medicare Secondary Payer Act (MSP), which inverted that system: private insurers paid first and Medicare paid what was left.
42 U.S.C. § 1395y(b)(2)(B), entitled “Conditional payment,” describes the manner in which Medicare can make a conditional payment notwithstanding its status as secondary payer. When the primary plan does not fulfill its duties, the government may make a payment conditioned on reimbursement from the primary insurer. If the primary insurer does not reimburse the government, then it is liable in the amount of twice the payment owed.
Under the Medicare Advantage program, private insurance companies can operate as Medicare Advantage Organizations. As a MAO, the insurer agrees to provide Medicare benefits in return for a per capita fee from the government.
In this case, Mary Reale was injured at a condominium complex and brought suit against the complex. Humana, as a MAO, covered Mrs. Reale’s medical bills. In the meantime, Mrs. Reale settled with the complex and its insurer, Western Heritage Insurance Co. Because the MSP provides that Medicare payments are secondary if any other insurer, including a tortfeasor’s insurer, is liable, Humana sought to recover from Western Heritage. Western Heritage refused to pay, arguing that the Medicare statute only allows the Secretary of Health and Human Services to make conditional payments.
The Court looked to the regulations governing the Centers for Medicare & Medicaid Services. Under 42 C.F.R. §422.108(f), an MAO “will exercise the same rights to recover from a primary plan…that the Secretary exercises under the MSP regulations….” The Court then applied 42 U.S.C. § 1395y(b)(3)(A), which provides that, if a primary insurer fails to reimburse the Government, then damages “shall be in an amount double the amount otherwise provided.” Therefore, the Court upheld an order awarding Humana twice the amount it was originally owed by Western.
*The case opinion can be found at Humana Medical Plan, Inc. v. Western Heritage Ins. Co., 2016 WL 4169120 (11th Cir. Aug. 8, 2016).