June 2012 Lien Update

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The Third Circuit held in In re Avandia Marketing, Sales Practices and Products Liability Litigation, 2012 WL 2433508 (3rd Cir. June 28, 2012) that the Medicare Secondary Payer Act (“MSP”) provides Medicare Advantage (“MA”) plans with a  private cause action to seek recovery against a primary payer.

This is the first time a federal court has issued such a flawed opinion (see our New York May 2012 Subrogation and June 2011 Lien Updates).  In coming to this conclusion the court held that the language of the MSP Act, the policy behind the Federal Medicare Advantage (“MA”) program, and the regulations created by the Centers for Medicare and Medicaid Services (“CMS”) warranted this finding.  Until now, the federal courts have routinely denied MA plans any right to recovery with the exception of state contractual claims.  Specifically, as parties engage in settlement negotiations the lien resolution process for both sides will likely, now, have to include both conditional payments made by CMS and these private MA plan insurers.  In short this decision is a disaster for both plaintiffs and defendants in personal injury actions as it will lead to delay, cost and unnecessary litigation.

Here, the court emphasizes that § 1395y(b)(3)(A) does not designate what entity may bring such an action, supporting Humana’s position that any private party may bring suit when that party is a secondary payer seeking recourse from a primary payer.  Then, the court finds that denying MA plans a private right of action places these poor defenseless health insurance companies at a competitive disadvantage with Medicare parts A & B, which the Third Circuit believes is against legislative intent.  Lastly, the court discusses CMS regulation 42 C.F.R. § 422.108, constantly cited by these plans as being persuasive, and concludes that CMS’s interpretation of the MSP statute is reasonable, under a Chevron analysis, and thus finds deference is warranted.

The bottom line is that the Third Circuit has held that MA plans have an equal and parallel private right of action to sue primary payers where those payers fail to provide for payment or appropriate reimbursement to them.  Again, the court clearly got this one wrong, as all other federal and state courts have found the correct result and this decision will throw a wrench into the personal injury world for both sides to deal with.  To read the full decision, please click here.