Humana Medical Plan, Inc. v. Western Heritage Insurance Company, 2016 U.S. App. LEXIS 14509

Background

Humana, a Medicare Advantage Organization (MAO), paid $19,155.41 for medical care to its enrollee Mary Reale and issued an Organization Determination to recover that amount as a secondary payer under the Medicare Secondary Payer (MSP) scheme.
The Reales sued the condominium defendant; the defendant and its liability insurer Western Heritage settled with the Reales for $115,000 and represented there were no Medicare liens; Humana was not paid from the settlement.
Humana pursued reimbursement through administrative processes and multiple lawsuits: it sued the Reales (dismissed/vacated), the Reales sued Humana in state court (jurisdictional reversal), then Humana sued Western for reimbursement and double damages under 42 U.S.C. § 1395y(b)(3)(A).
The district court granted summary judgment to Humana, holding (1) an MAO may bring the MSP private cause of action against a primary plan and (2) Humana was entitled to double damages ($38,310.82). Western appealed.
The Eleventh Circuit (majority) affirmed: it held the MSP private cause of action applies to MAOs, Western was a primary plan that failed to reimburse, and double damages are mandatory under § 1395y(b)(3)(A).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an MAO may sue a primary plan under the MSP private cause of action (§ 1395y(b)(3)(A))	MAO may sue because § 1395y(b)(3)(A) is broadly worded and applies whenever a primary plan fails to provide payment or reimbursement; CMS regulations and § 1395w-22(a)(4) support parity	MSP limits causes of action to Secretary/Trust Fund context; MAOs are governed by § 1395w-22(a)(4) not § 1395y(b)(2)/(3); MAO is not the Secretary nor the Trust Fund	MAO may sue under § 1395y(b)(3)(A); statute read in context includes MAOs and CMS regulations corroborate that result
Whether Western was a "primary plan" and failed to provide appropriate reimbursement	Humana: Western is a liability insurer/primary plan that settled with beneficiary and knew of Humana’s lien; did not reimburse within regulatory period	Western: lacked constructive knowledge of Medicare/MAO status and placing funds in trust satisfied obligations	Western was a primary plan and had constructive knowledge; payment into trust did not satisfy direct reimbursement obligation under CMS regulations
Whether the recovery amount was fixed and procurement costs reduce Humana’s recovery	Humana: Organization Determination fixed the recoverable amount; procurement costs do not offset MAO recovery after litigation	Western: challenges the amount and argues beneficiary procurement costs should reduce recovery	Organization Determination fixed $19,155.41; procurement costs do not offset MAO recovery; Humana recovered full amount
Whether double damages are mandated	Humana: § 1395y(b)(3)(A) uses mandatory "shall" for double damages	Western: (argued against double damages or applicability)	Double damages are mandatory under § 1395y(b)(3)(A); judgment for $38,310.82 affirmed

Key Cases Cited

In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012) (held MAOs may sue under MSP private cause of action)
Stalley ex rel. United States v. Orlando Reg'l Healthcare Sys., Inc., 524 F.3d 1229 (11th Cir. 2008) (MSP private cause of action is not qui tam; available to beneficiaries)
Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006) (MSP private cause of action available against primary plan that pays settlement to beneficiary but fails to reimburse Medicare)
Mich. Spine & Brain Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787 (6th Cir. 2014) (healthcare providers may bring MSP private cause of action)
Baxter Int'l, Inc. v. United States, 345 F.3d 866 (11th Cir. 2003) (discussion of remedies and double damages under MSP)
King v. Burwell, 135 S. Ct. 2480 (2015) (statutory interpretation principles: read words in context and in overall statutory scheme)