April 20, 2023

Rasa Fumagalli, JD, MSCC, CMSP-F

MSP Recovery Claims, Series LLC, and MSPA Claims 1, LLC have filed several cases on behalf of Medicare Advantage Organizations (MAOs) against insurers for failing to reimburse the MAOs for injury-related medical payments made on behalf of their enrollees. These cases often originate from a glitch in the coordination of benefits process during initial treatment. This article provides an overview of the Medicare Secondary Payer (MSP) billing policies and recent cases, including the consolidated MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and MSPA Claims 1, LLC v. Covington Specialty Insurance Company cases (Nos. 21-12439, 21-12428) in the United States Court of Appeals, Eleventh Circuit.

The Medicare Secondary Payer Act and regulations provide a framework for Medicare to recover conditional payments from settlements involving Medicare beneficiaries and to avoid making improper payments. The Act prohibits Medicare from making payments for services “to the extent that payment has been made or can reasonably be expected to be made under any of the following: (i) workers’ compensation; (ii) liability insurance; (iii) no-fault insurance” (42 C.F.R. § 411.20; 42 U.S.C. § 1395y(b)(2)(A)). A primary payer’s obligation to reimburse Medicare for conditional payments may be shown by a judgment, payment conditioned upon release of liability, or other means. If Medicare makes a conditional payment, it has the right to recover payments from providers, suppliers, physicians, attorneys, state agencies, or private insurers that have received a primary payment (42 CFR Sections 411.24). Medicare Advantage Plans have the same recovery rights as traditional Medicare.

Chapter 3 of the Medicare Secondary Payer (MSP) Internet Only Manual (IOM) provides detailed instructions to providers to enable them to bill a primary plan before Medicare is billed. Providers are instructed to alert the MSP contractor, the entity responsible for coordination of benefits, whenever they receive a request from an attorney or insurance company for a copy of the billing or medical records of a Medicare beneficiary. Providers are also instructed to obtain information regarding possible MSP situations. This may be done by asking the Medicare patients if the requested services are for treatment of an injury resulting from an automobile accident or other incident for which liability or no-fault insurance may pay, or for which another party may be responsible. Section 20.2.1 provides model admission questions to ask Medicare beneficiaries to enable proper coordination of benefits.

In addition to the guidance in the Manual, the Medicare Learning Network (MLN) periodically releases memos for physicians and other providers about billing procedures in situations where Medicare is a Secondary Payer. The February 19, 2020 memo discusses the use of a Medicare Set-Aside Arrangement (MSA) to pay for injury-related services. The February 23, 2021 memo advises providers about the appeal process to follow when Medicare denies treatment due to an open or closed Liability, No-Fault, or Workers’ Compensation MSP record on the beneficiary’s Medicare file.

Despite the IOM and MLN guidance provided by CMS, providers may, at times, submit bills to Medicare or the MAO plans instead of the primary payer. This can result in cases settling without the primary payer reimbursing the MAO plan for their payments. As noted above, this fact pattern has been the subject of numerous cases brought by MSP Recovery on behalf of MAOs against various insurance companies.

The most recent consolidated cases, MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and MSPA Claims 1, LLC v. Covington Specialty Insurance Company, Nos. 21-12439, 21-12428 before the United States Court of Appeals, Eleventh Circuit (February 22, 2023 These cases involve situations where United Automobile Insurance Company and Covington Specialty Insurance Company settled cases without reimbursing the MAO plans for their payments. Rather than seeking reimbursement from the injury victims and their attorneys, MSP Recovery Claims and MSPA Claims pursued the insurance plans for double damages.

MSPA Claims 1 LLC, as the assignee of the Florida Healthcare Plus Inc, a Medicare Advantage Organization, brought an exemplar claim against Covington in a putative class action. It involved a Medicare beneficiary, known as “P.M.” who injured her ankle and foot in February of 2014 when she fell down stairs at a property owned by 3550 Palm Beach Holdings, LLC. Although Covington insured the property under general liability and no-fault policies, P.M.’s medical providers billed the Florida Healthcare Plus plan and received payment for her medical expenses. Florida Healthcare Plus’s right to reimbursement as a secondary payer was assigned to MSPA.

MSPA advised Covington of its reimbursement rights in July of 2015. Covington declined to reimburse the Florida Healthcare Plus plan, arguing that the medical expenses were not reported to Covington within the policy’s one-year provision from the date of the accident. Covington settled the claim directly with P.M in 2016. MSPA argued that the claims filing deadline in the Covington Insurance policy was preempted by the Medicare Secondary Payer Act. The district court granted summary judgment in favor of Covington. MSPA Claims 1, LLC brought this appeal.

The US Court of Appeals, 11th Circuit, was not persuaded by MSPA’s argument that there is no time limit for an MAO seeking reimbursement from a primary plan. Although the Medicare Secondary Payer Act applied a three-year claim filing period to employer group health plans, there was no basis for the Court to infer that the provision preempts a claims-filing deadline in a no-fault or general liability policy. MSPA’s attempt to argue that Covington’s primary payer status could be established based on its settlement with P.M. was also barred since it was not pled in the complaint. Since MSPA’s initial argument focused on Covington’s status as a primary payer based on the terms of its insurance policy, Covington’s defense that was based on the one-year claims-filing deadline was valid. The Court affirmed the district court’s ruling that granted summary judgment.

The MSP Recovery Claims, Series LLC v. United Auto cases involved two exemplar Medicare beneficiaries, “W.T.” and “W.M.,” who sustained injuries in accidents covered under United Auto’s no-fault policies. United Auto sought summary judgment based on MSP Recovery’s failure to send United Auto a “pre-suit demand letter” as required by the Florida Motor Vehicle No-Fault Law. Although MSP Recovery argued that the Medicare Secondary Payer Act preempted Florida’s pre-suit demand requirements, the district court granted summary judgment to United Auto.

The US Court of Appeals agreed with the district court’s ruling. Although MSP Recovery argued that the Court’s prior decisions compelled the conclusion that the Medicare Secondary Payer Act preempted this provision of the Florida Motor Vehicle Act, the Court disagreed with MSP Recovery’s interpretation of their decisions. The Court also declined to hold as a matter of first impression that the Medicare Secondary Payer Act preempts the Florida Motor Vehicle Act’s requirement of a pre-suit demand letter. In reaching this decision, it considered the three classes of preemption. Preemption exists when a congressional legislative scheme is so pervasive that Congress left no room for the states to supplement it; when the text of a federal statute explicitly manifests Congress’ intent to displace state law, and when it is physically impossible to comply with both federal and state law. The Court found that the provisions of the Florida Motor Vehicle Code do not create an unconstitutional obstacle to the operation of the Medicare Secondary Payer Act.

Although MSP Recovery Claims, Series LLC, and MSPA Claims 1 did not prevail in these cases against the insureds, it would appear that they may have prevailed in their collection efforts against the injured party and/or their counsel. This path, however, is inconsistent with MSP Recovery’s business model that targets insurers. Considering the potential exposure that an injured party and their counsel may face, best practices dictate the need to proactively address payments made by any MAOs in connection with a settlement. Whenever insurance information is available, it should also be shared with the providers so that the correct plans may be billed before Medicare.

In conclusion, these cases highlight the importance of proper coordination of benefits in the Medicare Secondary Payer system. Providers must follow the guidance provided by the Medicare Secondary Payer Act and regulations, as well as the Medicare Learning Network, to ensure that they bill the primary payer before billing Medicare or an MAO. Insurers must also be aware of their obligations to reimburse MAOs for conditional payments made on behalf of their enrollees. Failure to comply with these requirements can result in costly litigation and potentially double damages for insurers.