Second Circuit Court of Appeals Joins Eleventh and Third Circuits in Recognizing Medicare Advantage Organizations’ Rights to a Double Damages Private Cause of Action

On October 26, 2022, the Second (2nd) Circuit Court of Appeals confirmed that Medicare Advantage Organizations (“MAOs”) may bring suit under the Medicare Secondary Payer (“MSP”) Act’s private cause of action, 42 USC §1395(y)(b)(3)(A), for double-damage recoveries against primary payers who fail to reimburse MAOs for conditional payments. Aetna Life Ins. Co. v. Big, 2022 U.S. App. LEXIS 29797. Prior to this decision, the Second (2nd) Circuit Court of Appeals had never directly addressed whether MAOs could bring suit under the MSP Act’s private cause of action. Now, the Second (2nd) Circuit joins the Eleventh (11th) and Third (3rd) Circuits in formally recognizing an MAO’s right to wield the MSP Act’s private cause of action.

Factual Overview

In 2015, Nellina Guerrera, a Medicare beneficiary, sustained injuries after falling at a Big Y store in Monroe, Connecticut. Ms. Guerrera sought treatment for her injuries, and Aetna, her MAO provider, issued payment for a portion of her medical treatment. In total, Aetna paid $9,854.16 for Ms. Guerrera’s medical treatment. Aetna notified Big Y of its right to reimbursement; however, Big Y refused to reimburse Aetna’s $9,854.16. Even after Ms. Guerrera entered into a $30,000.00 settlement agreement with Big Y in 2016, Big Y maintained that it was not legally obligated to reimburse Aetna.

Ruling and Sanderson Firm Commentary

The Second Circuit Court of Appeals reached its decision rather easily and directly cited to its “sister” courts’ (the Eleventh and Third circuits) landmark decisions. See Humana Med. Plan Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016); In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012). The Second Circuit, no doubt, found such prior decisions highly persuasive. Notably, the Court even referenced a recent Sixth Circuit decision—MSP Recovery Claims, Series LLC v. Nationwide Mut. Ins. Co., LEXIS 55717 (S.D. Ohio Mar. 28, 2022)—as evidence that courts across the country appear to be slowly trending towards the Eleventh and Third Circuits’ interpretation (our prior blog regarding the Nationwide decision is located here).

Given the relative ease with which the Second Circuit reached its decision, this case may set the stage for a potential “domino effect” of other circuits recognizing enhanced MAO-recovery rights. There will not be a lack of opportunity for courts to review this issue either. The number of Medicare eligible individuals that elect to enroll in a Medicare Advantage Plans continues to increase rapidly. In 2019, 22.4 million (37% of the 60 million Medicare eligible individuals) enrolled in a Medicare Advantage Plan. That number increased to 24.4 million in 2020, and it has further jumped to 28.4 million in 2022. In fact, nearly half (48%) of all Medicare beneficiaries are enrolled in MAOs. These statistics, combined with increased MAO aggression and increased court-friendly MAO rulings mean that primary payers must take MAO recovery rights more seriously, regardless of jurisdiction.

For those handling workers’ compensation, general liability and no-fault claims in jurisdictions that fall within the Second Circuit (Connecticut, New York, and Vermont), we recommend renewed caution in verifying and resolving MAO conditional payments.

Sanderson Firm offers a full suite of Medicare conditional payment services, to include verification, dispute, and resolution of MAO conditional payments. If you have any questions regarding this case or Sanderson Firm’s Medicare Advantage conditional payment resolution services, please contact us.