Eleventh Circuit Court of Appeals Opines that Reporting a Settlement to Medicare Constitutes a Primary Plan’s “Constructive Knowledge” of Conditional Payment Obligations

Yesterday, the Eleventh (11th) Circuit Court of Appeals reversed and remanded a Florida District Court’s dismissal involving claims under the Medicare Secondary Payer (“MSP”) Act. MSP Recovery Claims, Series LLC v. Metro. Gen. Ins. Co., No. 21-11547, 2022 U.S. App. LEXIS 19763 (11th Cir. July 18, 2022). As discussed further below, the 11th Circuit concluded that a primary payer’s “CMS filings” constitutes constructive knowledge of its potential responsibility to reimburse a Medicare Advantage Plan (“MAP”) for primary conditional payments. Id. at 19.

Factual Overview & Ruling

The plaintiffs, MSP Recovery Claims, Series LLC, MSPA Claims 1, LLC, and MAO-MSO Recovery II LLC, Series PMPI (collectively, “MSP Recovery”), filed suit against various insurance carriers, Metropolitan General Insurance Company, Metropolitan Casualty Insurance Company, Metropolitan Group Property & Casualty Insurance Company, Metlife Auto & Home Group, and Metropolitan P&C Insurance Company (“Defendants”), alleging failure to reimburse medical expenses owed to MSP Recovery’s assignors under the MSP Act.

MSP Recovery brought this class action lawsuit against Defendants pursuant to the MSP private cause of action (available to private Medicare plans and their assignees) — § 1395y(b)(3)(A) — on the basis that Defendants failed to reimburse MSP Recovery’s assignors for conditional payments made in connection with beneficiaries’ accident-related medical expenses.

Originally, the District Court dismissed MSP Recovery’s complaint because it did not sufficiently allege that Defendants were responsible for conditional payment reimbursement. In fact, the District Court determined that the complaint was “completely devoid of non-conclusory factual allegations.” Id. at 10. On appeal, however, the Eleventh Circuit ultimately reasoned that MSP Recovery plausibly alleged that Defendants had a “demonstrated responsibility” to reimburse MSP Recovery’s assignors because 1) Defendants had contractual obligations and settlement agreements with beneficiaries (which was illustrated via an exhibit listing accompanying the complaint), and 2) Defendants reported such obligations and settlements to CMS via Section 111 reporting. Id. at 21. The following summation by the Court is noteworthy:

In summary, to survive a motion to dismiss on Medicare Secondary Payer Act claims, a plaintiff must plausibly allege that a defendant's responsibility to pay had been demonstrated before filing suit, and a defendant must have (at least constructively) known of such obligation. A defendant's responsibility can be shown in many ways, including by having a contractual obligation to pay and entering into a settlement agreement with a beneficiary for accident-related medical expenses. As to the knowledge requirement, a defendant’s CMS filings evidence constructive knowledge that the defendant owed primary payments (emphasis added). Id. at 19.

Sanderson Firm Commentary

The MSP Act requires a primary plan to reimburse Medicare only “if it is demonstrated that such primary plan has or had responsibility to make payment with respect to such item or service. § 1395y(b)(2)(B)(ii). This decision highlights and interprets the MSP Act that a primary plan’s Section 111 reporting (referred to in this case as “CMS filings”) constitutes “constructive knowledge” of the primary plan’s responsibility to pay primary to Medicare and/or a MAP. This is not the first time that such an argument was accepted by the Eleventh Circuit, so it is noteworthy that the Eleventh Circuit elected to adhere to established precedent. See MSP Recovery Claims, Series LLC v. Ace Am. Ins. Co., 974 F.3d 1305 (11th Cir. 2020).

This decision is significant given the relatively recent enactment of the Provide Accurate Information Directly (PAID) Act, which as of December 11, 2021, requires CMS to return MAP and Part D enrollment data to primary plans.  Because the 11th Circuit has taken the position in this decision that Section 111 Reporting constitutes “constructive notice” that conditional payments may be owed, it would seem to imply that if a primary plan is aware of a Medicare beneficiary’s enrollment in traditional Medicare or a MAP/Part D plan, then proactive reimbursement of conditional payments to Medicare or the MAP must be accomplished or potential double damages liability under the MSP Act may ensue.

Primary workers’ compensation, general liability, and no-fault plans after this decision may be more motivated to proactively communicate with MAPs and resolve conditional payment claims because this case implies that primary plans now have an affirmative obligation to do so.

At Sanderson Firm, we have recently become aware of some of our primary payer clients receiving recovery demand letters from MSP Recovery regarding MAP claims asserting that double damages are owed even though MSP Recovery has not issued prior notice or filed suit to pursue said recoveries. If your organization has received such letters, we strongly recommend that you contact our attorneys for a consultation.

If you have any questions regarding this decision or wish to retain Sanderson Firm for Medicare Secondary Payer services, please contact us.

If you would like to learn more about this decision and how to best approach traditional Medicare and MAP conditional payment recoveries, join us tomorrow, July 20, 2022, for a free webinar at 1:30 PM EST. Heather Schwartz Sanderson, Esq. will be joined by Brian Bargender, CSRP to talk about what primary workers’ compensation, general liability, and no-fault payers need to know now about both traditional Medicare and Medicare Advantage Plan (MAP) conditional payment recoveries.

Register: https://us06web.zoom.us/webinar/register/WN_Cz4VDpQbTL2Zg-TBt92R5Q