The issue of whether Medicare Advantage [MA] plans enjoy an enforceable right of subrogation (like Medicare Part A and B plans) was raised yet again in an August 2011 class action suit brought in New York state court. Rebecca Meek-Horton, an MA Health plan beneficiary, settled a personal injury suit involving medical bills paid by the plan. The plan, which thereafter sought to recover $149,307.69 in injury related medical and hospital expenses. Ms. Meek-Horton took umbrage and brought suit against the plan, Healthfirst, Inc., its agent, Trover Solutions, and 40 other defendants as well as other unnamed Medicare Advantage Health Insurance Companies, claiming that such subrogation efforts violate New York State Genl. Obl. Law §5-335 which in essence prohibits subrogation. Meek-Horton v. Trover, et al, State of New York, Supreme Court, Case NO. 11108804-2011. This suit follows on the heels of a New York trial court decision which held, without extensive discussion, that the Medicare Act does not create a statutory right of reimbursement for Medicare Advantage plans but merely permits them to include subrogation rights in its contracts with beneficiaries. Trezza v. Trezza, 21 Misc. 3d 1209(A), 2011 WL 2640794 (N.Y.Sup.), 2011 N.Y. Slip Op. 51237(U) (June 23, 2011).
This issue is far from decided and we urge defense practitioners to exercise caution in settling claims involving MA payments.
It is true that recent federal district court decisions have opined that the Medicare scheme fails to create a federal private cause of action. In re Avandia, MDL No. 1871, 2011 WL 2413488 (E.D.Pa., June 13, 2011); Para v. PacificaCare, No10-1008, 2011 WL 1119736 (D.Ariz., March 28, 2011) and Humana v. Reale, No. 10-21493, 2011 WL 335341 (S.D.Fla., Jan. 31,2011). While recognizing the right of an MA to make itself a secondary payor these decisions have carefully avoided addressing the question of whether state anti-subrogation statutes are preempted by 42 CFR 422.108(f). This regulation provides that “the rules established under this section supersede any State Laws that would otherwise apply to MA plans. A State cannot take away an MA organizations’ right under Federal law and the MSP regulations to bill …for services for which Medicare is not the primary payer.” The Courts in the In Re Avandia and Pacifica decisions expressly stated that a state cause of action exists and the latter further noted that states are as capable as the federal courts to address preemption questions such as that presented by the regulation. Earlier decisions reaching a similar conclusion on the lack of a federal private cause of action, Care Choices v. Engstrom, 330 F.3d. 786 (6th Cir. 2003) and Nott v. Aetna US Healthcare, 303 F. Supp. 2d 565 (E.D.Pa.2004), were decided before the implementation of 42 CFR 411.108(f) in 2005.
Until the preemption issue has been resolved we urge practitioners to utilize the same defensive strategies applied in settling regular Medicare cases, i.e. hold harmless agreements and escrow provisions, to name a few. We also take this opportunity to remind the practitioner that these should be agreed upon as part of, not after, the settlement discussion.