Illinois Court Denies Motion to Dismiss and Motion to Strike or Deny Class Allegations Against MSP Recovery

By on July 20, 2018
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Another shot was fired in the ongoing battle between MSP Recovery LLC and insurers. On July 13, 2018 an Illinois District Court denied two motions brought by State Farm, one to dismiss based on the Second Amended Complaint and a second to strike or deny class allegations.

As we recently reported, MSP Recovery was recently slapped on the wrist by the Illinois Court regarding standing in another action the law firm brought against State Farm. In Recovery v. State Farm Mut. Auto. Ins. Co., MSP Recovery appears to have regained a small win.

Attempting to build off of their recent win, State Farm alleged that MSP Recovery lacked standing, or in the alternative, that Plaintiffs have failed to state a claim upon which relief can be granted. More specifically, State Farm brought a factual challenge to standing, arguing that Plaintiffs did not hold valid assignments from Medicare Advantage Organizations.

State Farm disputed that Plaintiffs held valid assignments to pursue rights of recovery under the Medicare Secondary Payer Act (MSP) provisions. In support of this argument, Plaintiffs contended that Florida Healthcare Plus (FHP), an HMO with appropriate standing, assigned its right of recovery under the MSP to La Ley Recovery (LLR) which then assigned its rights of recovery to MSP Recovery. A second assignee, SummaCare, was also alleged to have assigned its right of reimbursement as well. However, the Court found ultimately this agreement could not confer standing as, interestingly, documentation assigning such right was signed after[1] the claim was filed. Regardless, the Court disagreed with State Farm.

Referring to a document titled “Recovery Agreement” the Court found intent by FHP to transfer claims under the MSP to La Ley Recovery (LLR) which in turn assigned its rights to MSP Recovery LLC. The Court did note that the agreement between FHP and LLR required any assignee must be approved by FHP. This was shown through settlement agreements between FHP and some of the Plaintiffs.

State Farm then attempted to argue that even if valid assignments existed, no injuries were suffered to the exemplar beneficiary in this matter. State Farm contended that they had notified CMS of the injury to a representative beneficiary and then paid a series of medical bills under that representative beneficiary’s car insurance policy which then exhausted the policy coverage limits. The Court noted that according to 42. C.F.R § 411.24(i), a “primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” As payments were not made to FHP/LLR standing in the place of the Agency, the court found a question as to whether an injury was suffered. And as the court “need only find that one plaintiff has standing to permit the case to go forward” the motion was denied. As such, the Court ruled that Plaintiffs sufficiently alleged their claims and subsequently, their Motion to Dismiss based upon lack of standing was dismissed. This is specifically of note as typically when benefits have been exhausted, Medicare has not pursued recovery where a primary plan demonstrated that the policy had been exhausted.

The Court then turned to the argument that contract law would require dismissal. However, this position was unsuccessful as the Court held that 42 C.F.R § 411.24(e) could be enforced over State Farm’s contract argument and federal law supersedes state laws, regulations, contract requirements, or other standards that would otherwise apply to MAOs. In other words, a state cannot take away an MAO’s right under federal law and the MSP regulations to bill or to authorize providers and suppliers to bill for services for which Medicare is not the primary payer. This is a bit startling as in many similar cases the argument of state contract was wholly separate from the MSP Private Cause of Action provision. However, this departure in the District Court of Illinois could be the presage to the winds of change in these cases going forward.

Finally, the Court found State Farm’s Motion to Strike Class Allegations as premature. As a result, Recovery v. State Farm will continue to be litigated.

In summary, the ongoing rollercoaster that is MSP/MAO litigation is continuously keeping us on our toes. One case may provide victory for the recovery agents and one may not, but it is of the utmost importance to keep abreast of the constant litigation. Gordon & Rees will continue to vigilantly follow these cases and report accordingly.

Should you have any questions regarding the above or need any Medicare compliance assistance, please do not hesitate to contact Gordon & Rees Medicare Compliance Group. 

[1] Constitutional standing must exist at the time the lawsuit is filed.

Filed under Medicare, Medicare Secondary Payer, Medicare Set Aside

MSP Recovery v. Travelers

By on July 16, 2018
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On June 21, 2018, the U.S. District Court for the Southern District of Florida granted with prejudice, Travelers’ motion to dismiss MSP Recovery’s claim against it for recovery under the Medicare Secondary Payer Act (MSP). This motion was granted, and the case dismissed, based on lack of subject matter jurisdiction. In MSP Recovery Claims v. Travelers Cas. & Sur Co., the court was faced with deciding whether MSP Recovery had standing under the private cause of action provision of the MSP to bring suit against Travelers for recovery of medical payments made to Medicare beneficiaries. See generally MSP Recovery Claims v. Travelers Cas. & Sur. Co., 2018 U.S. Dist. Lexis 105078.

As a brief background, MSP Recovery, LLC is an entity whose business model is relatively simple- it sets out to obtain assignments from Medicare Advantage Organizations (MAOs) in order to attempt to sue and recover for payments made by the MAO for medical treatment of a Medicare beneficiary that allegedly should have been made by a different insurer, or primary payer. This case is similar to a multitude of cases that MSP Recovery and its subsidiaries have filed against insurers across the country, alleging recovery on behalf of an MAO under the MSP. Gordon & Rees has previously covered, and will continue to provide updates on similar cases such as Recovery v. State Farm Mut. Auto. Ins. Co –

In the case at hand, the court did not have to decide whether MSP Recovery’s arguments for recovery here were valid, as it must first determine whether MSP Recovery had standing to bring the case in the first place. MSP Recovery argues that has received an executed assignment from Health First Administrative Plans, Inc. (HFAP), and therefore should be permitted to bring this case under the MSP. While MSP Recovery may have very well received such an assignment, it has been made very clear in several cases now that HFAP is not an MAO, and therefore does not have standing to bring a cause of action against Travelers under the Medicare Secondary Payer Act. The court here agrees with and relies on the reasoning of other district courts in other similar cases, including MSP Recovery Claims, Series LLC v. Auto-Owners Insurance Co. and Recovery v. State Farm Mut. Auto. Ins. C., in holding that HFAP is in fact not an MAO, and at most, the administrative arm of another company that may have an MAO. Given that HFAP, and therefore MSP Recovery, is not an MAO it has not suffered an injury and further, lacks standing under the MSP, this case was dismissed based on lack of subject matter jurisdiction.

While this case represents an unsuccessful attempt by MSP Recovery, LLC to bring a case on behalf of a Medicare Advantage Organization under the MSP, the landscape surrounding MAO recovery rights continues to grow and change. Gordon & Rees will continue to provide the most up to date information as these cases develop.

 

Filed under CMS, In the News, Medicaid Third Party Liability Recoveries, Medicare, Medicare Secondary Payer, Medicare Set Aside