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Fifth Circuit District Court Allows MAO Action Seeking Reimbursement from Tort Settlement Fund to Go

On March 16, 2018, the United States District Court for the Southern District of Texas denied defendant’s Motion to dismiss in Humana, Inc. v. Shrader Sc Associates, LLP., 2018 U.S. Dist. LEXIS 43884, *13. The matter originated from a suit by Humana, Inc., United Healthcare Services, Inc., and Aetna, Inc. (“Plaintiffs”) for reimbursement from settlement funds being held by law firm Shrader & Associates, LLP (“Shrader”). Shrader represented several claimants who suffered asbestos injuries and successfully sued for damages. As a result of said suit, a trust was established from which to pay claims, and Shrader holds said settlement funds for at least 15 claimants. Plaintiffs assert that, among other things, they administer Medicare Advantage Plans (“MAPs”) that conditionally paid for claimants’ medical treatment for asbestos injuries. As such, Plaintiffs argue that the Medicare Secondary Payer Act (“MSP”) entitles them to reimbursement for those conditional payments and have filed suit against Shrader under the private cause of action (PCOA) provision of the MSP.

Shrader argued that Plaintiffs’ suit should not be permitted to go forward because: 1) the asbestos trust disbursements Plaintiffs’ seek to recoup are not “primary plans” under the MSP; 2) Plaintiffs did not allege facts establishing that a primary plan failed to make a payment required by the MSP; and 3) construing the PCOA provision of the MSP to afford Plaintiffs a private right of action “renders Medicare Part C’s secondary-payer provision superfluous.”

The court determined that the 2003 Medicare Modernization Act shows that Congress intended the term “self-insured plan” be given a broad definition. In making its decision, the court relied on a prior holding from the Fourth Circuit Court of Appeals that a tort settlement constitutes a primary plan. See Brown v. Thompson, 374 F.3d 253 (4th Cir. 2004). Under this broad definition, the court held that the asbestos trust constitutes a “self-insured primary plan” under the MSP. As such, Plaintiffs may seek reimbursement from the trust.

The court also did not accept Shrader’s argument that a PCOA can only be brought if Medicare, not a Medicare Advantage organization, makes the conditional payment. The court held that this argument was not supported by the MSP or the regulations. In so deciding, the court cited the Third Circuit’s decision in In re Avandia.

Citing holdings in the Eleventh, Sixth and Third Circuit Courts of Appeals, as well as holdings by district courts in the Eastern District of Louisiana and the Western District of Texas, the court dispatched with the argument that Plaintiffs’ suit should not go forward because Medicare Advantage Plans are not entitled to proceed under the PCOA provision of the MSP. The court acknowledged that “the circuit courts to have addressed this issue have held that this section permits an MAO to sue a primary plan that fails to reimburse an MAO’s secondary payment.” Finally, Shrader argued that extending the PCOA to Plaintiffs would render Medicare Part-C language superfluous. However, the court found that the Medicare Part C language is distinguishable from the MSP and, therefore, Plaintiffs still may assert a private right of action under the MSP.

This holding further illustrates the broadening definition of what constitutes a primary plan and reiterates prior holdings that MAOs have the same rights of recovery as Medicare. As always, we will keep you updated on any developments.

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