By: Lisa Hill, Esq.
The Medicare Advantage program, created in 1997, allowed private health insurance companies (“Medicare Advantage Organizations” or “MAO’s”) to contract with CMS to deliver Medicare benefits for a fixed fee per month per enrollee (“capitated payment’). Medicare Advantage Organizations have become increasingly popular and in 2022 close to half of all Medicare eligible beneficiaries are enrolled in a Medicare Advantage Plan. While the Medicare Secondary Payor Act and Federal Codes state that MAOs have the same recovery rights as traditional Medicare, the primary cause of action for MAOs to enforce their rights is through a freestanding provision in the MSP Act, which is separate from the provisions granting the United States the right to seek reimbursement that “there is established a private right of action for damages (which shall be in an amount double the otherwise provided) in the case of a primary plan which fails to provide for primary payment…” 4s U.S.C. 1395y(b)(3)(A). This section does not identify which individuals or entities may take advantage of this private right of action nor against whom these actions may be taken.
These omissions have led to a series of suits attempting to determine the boundaries of this private right of action. In 2012, The U.S. Court of Appeals for the Third Circuit held, in a groundbreaking decision, that an MAO did have a private right of action under the MSP Act and the ability to seek double damages. In re Avandia Mktg., Sales Practice & Product Liab. Litig., 685 F.3d 353 (3rd Cir. 2012). Following the Third Circuit, the Eleventh Circuit agreed in 2018. Since that time no other Circuit Courts have heard or ruled on the ability of an MAO to use the MSP private right of action until now. The Second Circuit has joined the 3rd and 11th Circuits and agrees that an MAO does indeed have a private right of action.
A Medicare Advantage recipient was injured at Big Y Inc. supermarket in Connecticut. The claim was settled but no one reimbursed the Medicare Advantage Organization. The MAO filed an MSP private right of action against Big Y Inc. The lower courts, following the reasoning of the 3rd and 11th Circuits, agreed that an MAO may use the private right of action to recover from the primary payor and awarded double damages under the statute. Big Y appealed.
The Second Circuit Court of Appeals agreed with the district court and found in favor of the MAO for double damages. The Court even used the 2020 passage of the PAID Act to show congressional support in streamlining the reimbursement process for MAOs. The Court also struck down an Ahlborn type of argument by Big Y in which they asserted that medical costs were never discussed in the settlement and therefore the payment was not for medical services. The Court quickly dismissed this argument, stating that the injured party’s claim against Big Y included a claim for medicals and the settlement resolved all of her claims including medical. This is great news for Medicare Advantage Plans and hopefully this momentum continues and spreads to the other Circuit Court.