Humana Medical Plan, Inc. v. Western Heritage Insurance Co., case number 15-11436.

Liability insurers beware, as the 11th Circuit held that Medicare Advantage Organizations (MAO) are entitled to the same rights Medicare itself would have in actions against primary payers for reimbursement of conditional healthcare treatment costs.

The Medicare Secondary Payer Act (MSP) entitles Medicare to reimbursement for the medical costs incurred by the government to cover beneficiaries who later recover money related to an injury. In this instance, the law treats Medicare as a “secondary payer,” meaning Medicare is entitled to reimbursement from the “primary payer” (i.e., tortfeasors or liability carriers). In the Humana case, the 11th Circuit determined that the MSP permits MAOs (like Humana) to invoke the same rights Medicare has in seeking reimbursement against primary payers.

Relevant Case History

Humana, a private insurer and authorized MAO, offers plans under contract with the Centers for Medicare and Medicaid Services (CMS) to provide Medicare managed care plan products to beneficiaries. In January 2009, one such beneficiary suffered a slip and fall at a condominium. When the enrollee sought medical treatment for her injuries, her providers billed Humana, which paid $19,155.41. The enrollee then sued the condominium and entered a settlement with its liability insurer for $115,000. After unsuccessful efforts to collect from the enrollee, Humana sued the liability insurer, Western Heritage, seeking reimbursement under the MSP.

On March 15, 2015, the district court ruled in favor of Humana, finding that Humana could not only sue Western Heritage, the liability insurer, but that it was entitled to double damages—$38,310.82. On August 8, 2016, the 11th Circuit denied Western Heritage’s appeal, upholding the ruling and affirming Humana’s entitlement to reimbursement from it as the primary payer.

Key Takeaways

  • Under the Medicare Secondary Payer Act, Medicare Advantage Organizations are entitled to reimbursement from primary payers. So, private insurers offering Medicare Advantage Plans can sue primary insurers.
  • Liability settlements between a Medicare beneficiary and a primary insurer should provide for satisfaction of Medicare liens. Failure to do could prove costly—resulting in judgments of double damages.
  • Both Medicare Advantage Organizations and primary insurance carriers should implement processes and workflows with regard to settlements. The proper protocols and workflows will result in savings for parties who take steps to account for third party reimbursement under the Medicare Secondary Payer Act.