Eleventh Circuit Expands the Potential Pool of Plaintiffs Who May Recover Double Damages Under the Medicare Secondary Payer Act. What Is Your Exposure?

Under the Medicare Secondary Payer Act, self-insured businesses, trades or professions, and workers’ compensation, automobile, liability, or no-fault insurers are determined to have primary payment or reimbursement obligations for medical care and services it could reasonably expect to be responsible for paying. These insurers and self-insured entities are defined as primary plans under the Act. However, the Act allows the government to make conditional payments for medical care and services when a primary plan fails to pay, or promptly pay, a medical service provider. To ensure primary plans observe their payment obligations, the Act creates a private cause of action for damages, in an amount double the conditional payment, against a primary plan that fails to meet its primary payment obligation.

The language establishing the private cause of action reads:

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

42 U.S.C. § 1395(b)(3)(A).

Before 2001, there was slight use of this permitted private cause of action to recover conditional payments. Since then, the government and third parties have increasingly utilized the private cause of action to recover these conditional payments. One of the legal issues frequently disputed in these types of recovery lawsuits is the plaintiff’s entitlement to double damages and general standing to recover conditional payments.

On September 4, 2020, the Eleventh Circuit United States Court of Appeals issued an opinion in MSP Recovery Claims, Series LLC v. ACE American Insurance Company, 974 F.3d 1305 (11th Cir. 2020), that many interpret as greatly expanding the category of plaintiffs entitled to double damages and general standing to recover conditional payments. However, with its decision, the Eleventh Circuit only expanded standing to include downstream actors in the Medicare Advantage system.

In the underlying case, MSP Recovery Claims, Series LLC, and its affiliate company, MSP Claims 1, LLC, filed a number of suits against various liability insurers seeking double damages under the Act. MSP Recovery and MSP Claims 1—described by the Eleventh Circuit as collection agencies—alleged they had standing to sue through assignments received from Medicare Advantage Organization subcontractors that acted as independent physician associations or management services organizations. The district court dismissed the suit, finding that, while the Act allowed Medicare Advantage Organizations to pursue a private cause of action, this right did not extend to Medicare Advantage Organization subcontractors.

The Eleventh Circuit, in vacating the dismissal, opined that the statutory language providing the private cause of action was broadly worded. It discussed how courts have interpreted the objective of the language to allow third parties to “help the government recover conditional payments from insurers or other primary payers” and reduce the costs borne by Medicare in doing so. Further, the Eleventh Circuit recognized that the language has been interpreted to allow any plaintiff who has a connection to Medicare’s unreimbursed conditional payment to pursue a private cause of action. The reasoning behind this interpretation is the presumption that plaintiffs will be in a better position, when incentivized by the double damages, “to recover on behalf of Medicare than the government itself.” The Eleventh Circuit then reviewed the entities, in addition to the federal government, it previously had determined had standing to pursue a private cause of action under the Act. These entities included: Medicare beneficiaries, medical care providers who had already received conditional payments from Medicare and Medicare Advantage Organizations.

In reaching its decision that Medicare Advantage Organization subcontractors, such as independent physician associations and management services organizations, may have standing to pursue Medicare Secondary Payer claims under the Act, the Eleventh Circuit rejected multiple defense arguments against the expansion. However, the Eleventh Circuit’s decision focused on the alleged fact that the subcontractors made conditional payments or fully reimbursed the Medicare Advantage Organization for conditional payments made. The focus of the Eleventh Circuit was the plaintiffs’ nexus to the conditional payment. The Eleventh Circuit also rejected arguments that the Act requires plaintiffs to provide pre-suit notice of claims to defendants, as long as the plaintiffs can establish that the defendant knew or should have known of its primary payment or reimbursement obligation. An attorney affiliated with the plaintiff has told news organizations that his client owns billions of dollars in claims assigned by Medicare Advantage Organizations and their subcontractors. In light of this decision, insurers and self-insured entities in Florida should exercise renewed vigilance in addressing and resolving conditional payments.

*Sam is a shareholder in our Tampa, Florida office. He can be reached at (813) 898-1806 or schigginbottom@mdwcg.com.

_{Defense Digest, Vol. 27, No. 1, January 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}