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Alert! Eleventh Circuit: Contractual Obligation Sufficient to Establish “Demonstrated Responsibility

What qualifies as a “demonstrated responsibility” sufficient to proceed under the private cause of action provision of the Medicare Secondary Payer Act has been a recent hot topic of discussion. Following the Eleventh Circuit’s decision in Glover v. Liggett Group, several courts found that a contractual relationship alone would not suffice. Recently, however, the Eleventh Circuit Court of Appeals issued a decision that will change the way that we think about this requirement when it comes to no-fault or personal injury protection (PIP) cases.

This case, MSP Recovery, LLC v. Allstate Ins. Co., 2016 U.S. App. Lexis 15984, involves seven consolidated cases that all presented the question of whether a contractual obligation alone can satisfy the “demonstrated responsibility” requirement of the private cause of action provision of the MSPA. Defendants are all insurance companies that provide personal injury protection (PIP)/ no-fault insurance in Florida. All cases involve a Medicare Advantage Plan enrollee who was injured in an automobile accident. The Advantage Plan provider, Florida Healthcare Plus (FHCP), made conditional payments on behalf of the injured enrollees to cover medical expenses in each of the accidents. FHCP assigned its claims to Plaintiffs. Plaintiffs argue that Defendants were primary plans under the Medicare Secondary Payer Act (MSPA) and that Defendants were obligated to pay some of their insureds’ medical costs. According to Plaintiffs, Defendants’ responsibility to pay is demonstrated by the insurance contracts the injured persons entered into with Defendants.

In each of the cases, the District Court for the Southern District of Florida dismissed the case based on the Eleventh Circuit’s decision in Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006). Glover held that when the primary plan’s responsibility to pay arises from tort liability, the responsibility to pay must be demonstrated through a judgment or agreement that is separate from the MSP claim. Accordingly, the district courts dismissed Plaintiffs’ suits because the Plaintiffs did not obtain a judgment on the insurance contracts prior to bringing the MSP claims. On appeal, Plaintiffs argue that Glover applies only when the responsibility to pay arises from tort and that the existence of a contractual obligation to pay is sufficient to demonstrate a primary payer’s responsibility under the MSPA private cause of action provision. Defendants, on the other hand, continue to assert that Glover’s requirement for a separate adjudication or agreement applies whether the responsibility is derived from contract or tort.

The MSPA requires a primary plan to reimburse Medicare if it demonstrates that the primary plan has or had responsibility to pay for the item or service. Responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means. Here, the question before the court is whether the phrase “by other means” allows demonstration of responsibility under contractual obligation.

In its analysis, the Court outlined the important difference between tort liability and contractual liability. Obligations created by the contract exist as soon as it is executed, whereas an alleged tortfeasor has no obligations until he is adjudged liable. Further, the Court reasoned, if the Defendants were correct that a judgment or settlement agreement must always preempt suit under the MSPA, then there are no “other means” that may demonstrate responsibility, therefore rendering that part of the statute superfluous.

Based on the reasoning above, the Court held that a plaintiff suing a primary plan under the private cause of action provision of the MSPA may satisfy the “demonstrated responsibility” prerequisite by alleging the existence of a contractual obligation to pay. The Court went on to vacate the judgments of the district courts and remand the cases for further proceedings not inconsistent with this opinion.

This decision clearly evidences the expanding recovery efforts of Medicare Advantage Organizations. Timely discovery and resolution of all Medicare Advantage liens is an important aspect of settlement in each case involving an enrollee. If you have any questions about Medicare Advantage or Medicare Part D liens, please do not hesitate to let us know.

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