The Ghost of Cases Past – MSPA Claims LLC, v. Scottsdale Insurance Co.

For those familiar with the slew of MSP Recovery cases that have been ruled upon in the past six (6) months, it will come as no surprise that another court, specifically the United States District Court for the Southern District of Florida, found that MSPA Claims LLC lacked standing when bringing suit against the Defendant.

Echoing the recently decided cases brought by MSP Recovery and its subsidiaries, the Court again in MSPA Claims v. Scottsdale Insurance found that Plaintiff lacked standing as proof of assignment of rights was not present and as such, granted Defendant’s motion for dismissal. Facts that are almost identical to MSPA Claims 1, LLC v. Ocean Harbor and MSPA Claims 1, LLC. v United Auto. Ins. Co., 204  F. Supp. 3d 1342, 1345 (S.D. Fla. 2016), Plaintiff asserted rights were assigned from Florida Healthcare Plus to La Ley Recovery which then assigned rights of recovery to MSP Recovery. The Court disagreed and specifically noted that although Plaintiff argued Florida Healthcare Plus approved assignment to La Ley to MSPA Claims, prior to receivership, the assignment did not predate the receivership. More pointedly, the Court stated it “is unclear how Florida Healthcare Plus could have approved the assignment…valid if MSP Claims was not yet formed as a company in 2014 when the receiver took over Florida Healthcare Plus[1].”

As such, the Court granted Defendant’s motion for dismissal without prejudice.

With yet another ruling dismissing a claim brought by MSP Recovery, the Floridian courts appear to sharpen their scrutiny regarding cases brought by assignees of rights by Medicare Advantage Plans. The pressing question however, is will other jurisdictions look to these cases as persuasive case law in their own courts? The Gordon Rees Medicare Group will continue to monitor these cases and bring you updates as they become available.


[1] MSPA Claims 1. LLC v. Scottsdale Ins. Co., 2018 U.S. Dist. LEXIS 218675

CMS Issues updated Section 111 NGHP User Guide

As of January 4, 2019, CMS has issued an updated version of the MMSEA Section 111 NGHP User Guide. While version 5.5 of the User Guide has few changes, there are some noteworthy additions. The changes made to the latest version of the User Guide are as follows:

– Ch. III of the User Guide now clarifies that beginning January 1, 2019, the threshold for liability insurance settlements, judgments, awards, or other payments will remain at $750. CMS will also maintain the $750 threshold for no-fault insurance and workers’ compensation settlements, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibly for medicals. This is outlined in Section 6.4 of Ch. III and in short, simply restates the fact that the TPOC dollar thresholds remain at $750 for liability, no-fault, and workers’ compensation insurance.

– The definition of the ‘Funding Delayed Beyond TPOC Start Date 1’ data field has been updated. This definition can be found in line 82 of Table A-3 and states “If funding is determined after the settlement date (TPOC Date), provide actual or estimated date of funding determination.” The previous definition simply stated “If funding for the TPOC Amount is delayed, provide actual or estimated date of funding.” The same verbiage has been added to lines 95, 98, 101, and 104 of Table A-5 Auxiliary Record, updating the definition of this field for all possible additional TPOCs (TPOCs 2 – 5).

– Ch. IV of the User Guide also provides updated versions of the excluded ICD-9 and ICD-10 tables in order to match the excluded lists that are available through the Section 111 MRA application (https://www.cob.cms.hhs.gov/Section111). These tables can be found in Appendices I and J.

– Lastly, version 5.5 of the User Guide has been updated to only include information from the last four User Guide releases in order to reduce the number of version and revision history pages.

Each chapter of the Section 111 NGHP User Guide, version 5.5 can be downloaded here.

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 at mstockdale@grsm.com or 412-588-2277

New Year, New Changes to the Workers’ Compensation Medicare Set-Aside Reference Guide

Today CMS issued an announcement that they have released Version 2.9 of the Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide (Reference Guide), which can be found here. Per the new version, the changes included in this version of the guide are as follows:

  • To eliminate issues around Development Letter and Alert templates auto populating with individual Regional Office (RO) reviewer names and direct phone numbers, these will now display the generic “Workers’ Compensation Review Contractor (WCRC)” and the WCRC customer service number “(833) 295-3773” (Appendix 5).
  • Per CMS’ request, certain references to memoranda on cms.gov have been removed.
  • The CDC Life Table has been updated for 2015 (Section 10.3).
  • Updates have been provided for spinal cord stimulators and Lyrica (Sections 9.4.5 and 9.4.6.2)

The most noteworthy changes are those in regards to the spinal cord stimulators and Lyrica. In regards to the spinal cord stimulators, CMS specifically included in this version that “Routine replacement of the neurostimulator pulse generator includes the lead implantation up to the number of leads related to the associated code. Revision surgeries should only be used where a historical pattern of a need to relocate leads exist” …and “Surgery pricing may include physician, facility, and anesthesia fees. SCS pricing is based on identification of: 1.) Rechargeable vs. Non-rechargeable and 2.) Single vs. Multiple Arrays (leads). If unknown, CMS will default to non-rechargeable single array.” These pricing clarifications appear to be in line with the approved MSAs that CMS has approved over the last few months.

Lyrica has been a hotly discussed topic over the last few months. Those who are active in the industry have noted that Lyrica has been included more and more in many MSAs for conditions that are not related to a spinal cord injury, when this has been historically argued as an off-label usage. However, CMS seems to have quashed this debate with the release of the updated language regarding this prescription. Per the new update, “Lyrica (Pregabalin) is cited in MicroMedEx for an off-label medication use related to neuropathic pain from spinal cord injury, and a number of scientific studies indicate that Pregabalin shows statistically significant positive results for the treatment of radicular pain (a type of neuropathic pain). Spinal cord neuropathy includes injuries directly to the spinal cord or its supporting structures causing nerve impingement that results in neuropathic pain. Lyrica is considered acceptable for pricing as a treatment for WCMSAs that include diagnoses related to radiculopathy because radiculopathy is a type of neuropathy related to peripheral nerve impingement caused by injury to the supporting structures of the spinal cord.” In other words, a diagnosis of radicular/neuropathic pain would now support the inclusion of Lyrica in a MSA. Again, this has been in line with the recent approvals issued by CMS wherein this prescription medication has been included for radicular pain, such as radicular pain noted into the upper and/or lower extremity pain. However, in its attempts to clarify Lyrica’s accepted usage CMS has muddied the waters in the language when indicating “injury to the supporting structures of the spinal cord”. This could open the door to inclusion for conditions that are arguably unrelated to the spine simply because other areas of the body touch the spine. I.e. If prescribed for pain that originates not at the spine (ex. radicular pain from a shoulder injury).

The Gordon and Rees Medicare group will continue to follow this issue closely and will update you as soon as additional information is available.

Proposed Rule Regarding Section 111 Penalties Issued by Office of Management and Budget

Another notice relevant to the world of MSP compliance has been issued by the Office of Management and Budget. The notice, which was issued following the notice regarding Liability Medicare Set-Asides we previously reported on earlier this week, is titled “Civil Money Penalties and Medicare Secondary Payer Reporting Requirements” ,which can be found here. Per the abstract:

“Section 516 of the Medicare Access and CHIP Reauthorization Act of 2015 amended the Social Security Act (the Act) by repealing certain duplicative Medicare Secondary Payer reporting requirements. This rule would propose to remove obsolete Civil Money Penalty (CMP) regulations associated with this repeal. The rule would also propose to replace those obsolete regulations by soliciting public comment on proposed criteria and practices for which CMPs would and would not be imposed under the Act, as amended by Section 203 of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act).”

Although this is only a Notice of Proposed Rulemaking (NPRM), this issue is expected to be decided upon in September 2019, corresponding with the Notice of Proposed Rulemaking for Liability Medicare Set-Asides as well.  Of note, the actual rule was not available for review.

The Gordon and Rees Medicare group will continue to follow this issue closely and will update you as soon as additional information is available.

New Conditional Payment Portal Functionality Expected in January

Long awaited improvements to the Medicare conditional payment reimbursement process may be available at the start of the new year, according to a November 19 alert from The Centers for Medicare and Medicaid Services (CMS). Back in August, CMS announced the Medicare Secondary Payment Recovery Portal (MSPRP) would offer enhanced functionality in 2019, including the ability for authorized Non-Group Health Plan (NCHP) users to self-report leads on liability, auto, no-fault or workers’ compensation cases. According to the alert, this functionality will be effective on January 7, 2019.  CMS is hosting a webinar regarding this enhancement on December 18th, 2018 at 1:00PM EST. A link to register for this webinar can be found here>>CMS 12.18.18 Webinar Registration

The ability to self-report leads will generate Medicare Conditional Payment information that authorized parties can review and/or dispute in accord with their reimbursement obligations under the Medicare Secondary Payer laws. Such enhanced portal functionality should eliminate several weeks of wait time per claim in obtaining Medicare conditional payment information.

This enhancement was initially introduced as a possible improvement for 2019 during a webinar CMS conducted on August 16. A second enhancement allowing online payment of Medicare conditional payments to the MSPRP was also referenced at that time as a possible improvement for 2019. The November 19 CMS alert makes reference to online payment.

Stay tuned to the Gordon & Rees MSPulse for a summary of the December webinar. In the meantime, please contact us should you have any questions.

CMS Low Dollar Recovery Threshold Remains $750 for 2019

There will be no change in the low dollar threshold for Medicare conditional payment reimbursement in 2019. The SMART (Strengthening Medicare And Repaying Taxpayers) Act of 2012 serves to avoid governmental waste by setting an annual amount in which the costs associated with reimbursement outweigh the benefits. The SMART Act provides that the Secretary must calculate and publish not later than November 15th a low dollar threshold amount applicable in the following year for settlements, judgments, awards or other payments in which Medicare Conditional Payment reimbursement need not be reimbursed given the costs associated with recovery. This threshold corresponds also to the $750 threshold for Medicare Mandatory Insurer Section 111 reporting requirement.

On Friday, November 15th, The Centers for Medicare and Medicaid Services released their updated Computation of Annual Recovery Thresholds for Non-Group Health Plans.  Below are the Agency’s findings:

  • The 2019 reporting threshold remains $750 for no-fault, workers’ compensation and liability cases.
  • The estimated cost to process any individual case is $297
  • The average Medicare conditional payment demand amount for settlements of $500 is $368 (74%)
  • The average Medicare conditional payment demand amount for settlements around $750 is $518 (69%)

These metrics once again demonstrate exceedingly high percentages of cost versus recovery for low dollar settlements. The SMART Act applies a common sense approach to recovery efforts, given such costs associated with reimbursement and the interest of avoiding wasteful spending of government money,. The complete notice can be found in the link here>> CMS Computation-of-Annual-Recovery-Thresholds-for-NGHP–2019.pd

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 at mstockdale@grsm.com or 412-588-2277

CMS Issues New WCMSA Reference Guide and Section 111 NGHP User Guide

As of October 1, 2018, CMS has issued updated versions of both the WCMSA Reference Guide and the Section 111 NGHP User Guide.

 WCMSA Reference Guide Version 2.8:

The updates found in version 2.8 of the Workers’ Compensation Medicare Set-Aside Reference Guide are as follows:

– As a part of an ongoing process, CMS must discontinue use of Social Security Number-based Medicare identifiers and distribute new randomly selected Medicare identification numbers to all beneficiaries, referred to as Medicare Beneficiary Identifiers (MBIs). Accordingly, all fields formerly labeled HICN are now labeled “Medicare ID” and will accept either an individual’s HICN or MBI (if assigned)

– The link to the CDC Life Expectancy Table has been updated. This link can be found at bullet #7 of Chapter 10.3 of the Reference Guide.

– The Verifying Jurisdiction and Calculation Method for medical reviews has been updated. This information can be found in Tables 9-1 and 9-2 in Chapter 9.4.4 of the Reference Guide.

– Version 2.8 of the WCMSA Reference Guide can be found here.

NGHP Section 111 User Guide Version 5.4:

The updates found in version 5.4 of the Section 111 Non-Group Health Plan User Guide are as follows:

– To meet Section 111 requirements, a Paperwork Reduction Act (PRA) disclosure statement has been added to this guide. This disclosure can be found on page iii of the User Guide.

– The contact protocol for the Section 111 data exchange escalation process has been updated. This escalation process can be found in Sect. 8.2 of the User Guide and in short, provides the contact information for the newly appointed EDI Director.

– In order to ensure updates are applied to recovery cases appropriately, RREs are asked to submit the policy number uniformly with a consistent format. When reporting updates enter the policy number exactly as it is entered on the original submission whether blank, zeros, or a full policy number. This requirement is discussed in greater detail in Sect. 6.6.5 of the User Guide

The excluded and no-fault excluded ICD-10 diagnosis codes have been updated for 2019. These codes can be found in Table I-1 and J-1 of Chapter V of the User Guide.

– The placement of the decimal point in the excluded ICD-10 “Y codes” of table I-1 has been corrected. For example, in version 5.3 of the User Guide these codes were written as Y921.10 whereas it should be written Y92.110. These codes are now written correctly.

Each chapter of the Section 111 NGHP User Guide, version 5.4 can be found here.

Gordon & Rees remains committed to bringing you the most up to date information regarding all things Medicare Secondary Payer related. Please do not hesitate to contact us should you have any questions about the newest versions of these reference guides.

 

Ocean Harbor Class Certification Reversed, Remanded

Another blow was just dealt to MSP Recovery. On September 26, 2018, the Third District Court of Appeal for the State of Florida reversed and remanded the class action certification that had gained so much attention when it was granted last year.

This case has its genesis with MSPA Claims 1, LLC, a subsidiary of MSP Recovery acting on behalf of Florida Healthcare Plus, Inc., a now defunct Medicare Advantage Organization (MAO), and other similarly situated entities. MSPA filed a class action against Ocean Harbor Casualty Insurance Company for failure to reimburse medical bills. MSPA sought double damages via the Medicare Secondary Payer Act’s private cause of action, 42 U.S.C. § 1395Y(b)(3)(A). MSPA contended that class action was appropriate as some or all of the thirty-seven (37) MAOs in Florida might be in a similar situation. The trial court determined that common issues existed because the Plaintiffs’ right to reimbursement was “automatic,” given that a payment was made on behalf of a Medicare enrollee who was also insured by the Defendant and that such payment was not reimbursed.

In order to understand the Appeal Court’s ruling, the underlying class certification must be first examined. According to Fla. R. Civ. P. 1.220(a), the prerequisites to class certification are numerosity, commonalty, typicality and adequate representation, in additional to the satisfaction of other requirements under Fla. R. Civ. P. 1.220(b). Under 1.220(b), one of three subsections must be satisfied. The subsections are: (b)(1) prosecution of individual actions for members of the class creates a risk of inconsistent adjudications and incompatible standards of conduct; (b)(2) relief sought by the class is injunctive or declaratory in nature, rather than predominantly monetary damages, or (b)(3) that common issues of law or fact predominate over issues affecting only individual class members, and thus the class action is superior to other methods of adjudication.  The trial court certified this class based on subsection (b)(3), referencing Porsche Cars N. Am., Inc. v. Diamond, “In a (b)(3) class action, not all issues of fact and law are common, but common issues predominate over individual issues.” 140 So. 3d 1095-96 (Fla. 3d DVA 2014) (citing Fla. R.Civ. P. 1.220(b)(3)).

The Appeal Court reconsidered predominance under Fla. R. Civ. P. 1.220(b)(3), stating “the appropriateness of the class certification turns largely on whether issues common to the class will predominate.” The Appeal Court noted that this matter was an “intersection” of Florida class action law, Medicare Secondary Payer law and Florida no-fault insurance law. In exploring the obligation to reimburse Medicare under the MSP Act and also Florida no-fault insurance law, the Court aptly examined not only that a payment was made by Medicare, but also whether Ocean Harbor was required to make the payment in the first place. Through this exercise, the Appeal Court questioned the “automatic” requirement to reimburse Medicare simply due to a demonstrated responsibility to make a payment, as the MSP does not eliminate the terms and conditions of the state no-fault law. Specifically, the Court referenced 42 C.F.R Section 411.51, stating “Medicare does not pay until the Beneficiary has exhausted his or her remedies under no-fault insurance” (emphasis added). In blending the federal Medicare law with the state no-fault law, the Court first observed that the MSP’s private cause of action does not arise until a payment could reasonably be expected to be made under no-fault insurance. In turn, the Court stated that MSPA must prove that not only was a proper conditional payment made, but that Ocean Harbor was required to make the payment in the first place under the state no-fault law.

MSPA relied upon the holdings in In re: Avandia Marketing[1], and Humana Medical Plan v. Western Heritage Ins[2], two predominant circuit court cases conferring the private cause of action on the Plaintiff(s). In each of these two cases, the responsibility to make a payment was in reference to the primary plan’s pre-existing settlement of a claim relating to the tort from which the medical bills arose. The Appeal Court distinguished the facts of Ocean Harbor from these two landmark cases, in that no pre-existing settlement was being referenced as creating a responsibility for payment. Rather, the demonstrated responsibility was to be established “by other means,” thereby cancelling these cases out as precedent, bringing this matter within the MSP Recovery LLC v. Allstate[3] tutelage. In Allstate, the 11th Circuit held that even without a settlement, a demonstrated responsibility for payment could be established through proof of the primary plan’s contractual obligation to make a payment. The burden of proving this is on the Plaintiff.

According to Florida no-fault law, there are exclusions from the obligation to make payments, and also necessary procedures that if not followed, are grounds to decline payment. The Appeal Court observed that “payment under Florida no-fault law proceeds on a factually intensive bill-by-bill and case-by-case basis,” and that MSPA would be required to prove the Defendant was required to pay each particular bill. Ocean Harbor would likewise be permitted to raise defenses regarding each particular bill, thus resulting in a series of mini-trials to determine whether payment is required under Florida no-fault law. The Appeal Court stated in its conclusion “Proof that certain medical bills paid by MSPA’s alleged assignor should have been paid by Ocean Harbor as a primary payer will not establish that other medical bills paid by a different MAO should also have been paid by Ocean Harbor as a primary payer.” Accordingly, a finding of predominance was precluded, rendering the case inappropriate for class action certification. As such, the class certification was reversed and the case remanded.

Practitioner’s Note: This Court delves into interesting territory in its determination that common issues of law or fact do not predominate over issues affecting only individual class members if there is a question about whether payment of each individual bill was ever required to begin with. A similar analysis can be applied as to whether it is appropriate to file suit for Medicare conditional payment reimbursement when each individual Medicare conditional payment may not be “ripe” for reimbursement. Like Florida no-fault law, there are processes and procedures in obtaining Medicare conditional payment information, as well as for making timely reimbursement. There are defenses. There is a statute of limitations. There are reasons why payments made by Medicare may be proper payments rather than conditional payments. This decision touches on the concept of exhaustion of administrative remedies, and references the SMART Act (Strengthening Medicare and Repaying Taxpayers Act of 2012), which provides primary payers an appeal process for Medicare conditional payment matters.  Many of the various court rulings in MAO litigation focus on demonstrated responsibility for reimbursement without considering whether it is actually timely or appropriate to reimburse Medicare. If MAOs wish to assert the same rights of reimbursements as traditional Medicare Parts A and B under the MSP laws, it would stand to reason that the same processes and procedures would apply. In day-to-day practice, the mere existence of Medicare conditional payments does not necessarily trigger the obligation to reimburse.

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[1] In re: Avandia Marketing, 685 F.3d 353, (3rd Cir. 2012)

[2] Humana Medical Plan v. Western Heritage Ins, 832 F.3d 1229, (11th Cir. 2016)

[3] MSP Recovery, LLC v. Allstate Insurance Company, 853 F. 3d 1351 (11th Cir. 2016)

Busy Southern District of Florida dismisses one MSP Recovery case; allows another to proceed, for now…

The United States District Court for the Southern District of Florida has been busy lately reviewing more litigation in front of them, courtesy of MSP Recovery LLC. Recently, the Court granted a motion to dismiss with prejudice another claim brought by not MSP Recovery LLC directly, but instead a subsidiary of MSP Recovery LLC, complicating the assignment relationships and ultimately leading to a dismissal for lack of subject matter jurisdiction.

As we recently reported, MSP Recovery LLC has had two pending claims either dismissed or sent back for amendment due to issues with subject matter jurisdiction. In both of these previous cases, there were questions surrounding who the original assignor of the recovery benefits was and/or if a valid assignment of those rights was made.

On July 31, 2018, the case of MSPA Claims 1, LLC v. Liberty Mutual Fire Insurance Company was dismissed due to the same issues recounted above.

In MSPA Claims v. Liberty Mutual, the Defendant Liberty Mutual brought motion to dismiss Plaintiff’s third amended complaint for lack of subject matter jurisdiction and failure to state a claim. As similarly discussed in Recovery v. State Farm, which was issued just last month, the Court again noted that standing must be present when the lawsuit was filed and cannot amend to add new plaintiffs.

The background is similar to the most recently reported cases including MSP Recovery, and the Plaintiff’s allege that they are the assignee of FHCP, HFAP, and IMCG and representatives that were Medicare beneficiaries who were enrolled in plans managed by FHCP, HFAP, and IMCG. Plaintiff’s further alleged that the Assignors paid for the Beneficiaries’ medical expenses which should have been paid by Defendant, the primary payer.

However, the Court in MSPA Claims v. Liberty Mutual specifically notes that Plaintiffs are not MAOs, Medicare beneficiaries or direct health care providers. Rather, they have obtained claims for reimbursement via assignments from the Assignors. Notably, the documentation reportedly showing this assignment was provided with the third amendment of the complaint. As such, Defendants argued that the case should be dismissed because Plaintiff lacked standing at the time the lawsuit was filed. Ultimately, the Court agreed with the Defendant and that Plaintiff lacked standing when the suit was originally filed and thus, cannot amend in an attempt to confer standing and failed to allege facts sufficient to show that any of the alleged Assignors have standing under the MSPA. Quoting various other courts rulings on the issue of FHCP and standing, the Court based its rationale on the cases that came before the one at hand.

In summary, the facts and findings of this case are almost identical to the two previous claims that have recently been reported upon. Lack of subject matter jurisdiction seems to continue to be found by courts involving these claims.

Just three days later another, less damaging order was entered in the Southern District of Florida, this time, in favor of MSP Recovery. On August 3, 2018, the court here entered an order granting MSP Recovery’s motion for leave to file a third amended complaint and denied plaintiff’s motion to dismiss. In this advancement in the case of MSP Recovery Claims, Series LLC v. Hanover Ins. Co. we see the court permitting MSP Recovery to amend its second amended complaint in order to change the named defendant from Hanover Insurance to it subsidiary which underwrites the insurance policy that is at the heart of this case. See generally MSP Recovery Claims, Series LLC v. Hanover Ins. Co., 2018 U.S. Dist. Lexis 131211. Hanover argues that MSP Recovery’s motion should not be granted based on futility and lateness, stating that the amendment would be futile because the plaintiff did not have standing at the commencement of the lawsuit and therefore could not correct this mistake without filing a new suit, and further, that MSP Recovery has provided no legitimate reason for the delay in correcting this mistake and therefore should not be provided the opportunity for leave to amend. Id. at 3. However, the court in citing to MSP Recovery Claims, Series LLC v. United Services Automobile Assoc., states that there appears to be a legitimate disagreement as to standing, and therefore amending the complaint would not be futile, and further, that MSP Recovery has provided appropriate reasoning for the delay in naming the correct defendant in arguing that the delay is due to Hanover’s failure to properly disclose the proper underwriter of the policy in question.

Thoughts: Two specific facts are interesting about these cases. First, in MSPA Claims I, the Court specifically acknowledges that this is the Plaintiff’s third attempt at amending the Claimant to meet the requirements for standing, in almost the same fashion that we see in Hanover. Secondly, the Court also makes a point to cite several previous cases in which standing was found to be lacking and even noted that “Plaintiff’s attempts to characterize HFAP as an MAO are disingenuous.” From these statements, it can be garnered that the courts are now aware of MSP Recovery’s tactics and the issues surrounding their filings and will be taking a much closer look at these cases going forward.

Gordon & Rees will continue to monitor these cases and provide updates.  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 at mstockdale@grsm.com or 412-588-2277

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

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 at mstockdale@grsm.com or 412-588-2277

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