United States District Court, E.D. Louisiana
ORDER & REASONS
ELDON E. FALLON, District Judge.
Before the Court is a Motion for Summary Judgment filed by Defendant Wellcare Healthcare Plans, Inc. ("Wellcare"). (Rec. Doc. 18). The Court has reviewed the briefs and applicable law, and having heard oral argument on the motion, now issues this Order & Reasons.
This case arises out of a payment that Defendant WellCare Healthcare Plans, Inc. made for Plaintiff Aimie Collins' medical bills incurred as a result of an automobile accident. Collins filed a Petition for Declaratory Judgment in the 32nd Judicial District Court for the Parish of Terrebonne. According to Collins, she was injured in an automobile accident on August 21, 2009 and required medical treatment as a result of that accident. Collins claims that Wellcare, a Medicare Advantage Organization ("MAO"), provided a Medicare Advantage Private-Fee-For-Service health insurance plan to her and that Wellcare paid medical expenses on her behalf to several providers. Collins admits that she instituted an action against the tortfeasor and recovered damages. Her attorney then deposited the amount paid by Wellcare into a special account. Collins now seeks a declaratory judgment that Wellcare is not entitled to subrogation or reimbursement for the amounts paid.
Wellcare removed the case to this Court pursuant to the Court's diversity jurisdiction. On January 6, 2014, Wellcare filed an Answer and a Counterclaim. Wellcare claims that the Medicare Advantage Plan at issue has a statutory right of reimbursement and subrogation which expressly pre-empts contrary State Law. According to Wellcare, Collins has not exhausted her administrative remedies and her declaratory action should be dismissed. In its Counterclaim, Wellcare claims that it paid a total of $181, 261.97 for medical care and treatments received by Collins and is entitled to reimbursement from Collins' tort settlement.
II. Motion for Summary Judgmentm
A. Wellcare's Motion to Dismiss and Motion for Summary Judgment (Rec. Doc. 18)
Wellcare filed the present Motion for Summary Judgment on August 29, 2014 seeking dismissal of Collins' Complaint and the granting of Wellcare's Counterclaim. Although Wellcare fashioned the motion as a Motion for Summary Judgment, the Court interprets the motion as a Motion to Dismiss Plaintiff's Claim pursuant to Federal Rule of Civil Procedure 12(b)(1), and a Motion for Summary Judgment on Wellcare's Counterclaim pursuant to Federal Rule of Procedure 56. Wellcare argues that the Court should dismiss Collins' claim because she failed to exhaust the mandatory Medicare exhaustion requirements pursuant to § 405(g), and the Court therefore lacks subject matter jurisdiction over her claim. (Rec. Doc. 18-1 at 12).
Wellcare also asks the Court to grant its Motion for Summary Judgment on its Counterclaim. Wellcare argues that MAOs are secondary payers under the Medicare Secondary Payer Statute ("MSP") and "share the same exact rights under the MSP as provided to [the United States Government under] traditional Medicare." (Rec. Doc. 18-1 at 13). Wellcare goes on to state that Medicare Part C "specifically gives MA[O]s... a statutory right of secondary payer reimbursement where conditional benefits have already been paid...." (Rec. Doc. 18-1 at 14) (citing 42 U.S.C. § 1395 w-22(a)(4)). Wellcare further argues that "[c]ongressional intent supports the conclusion that MA[O] plans are entitled to the same recovery rights as traditional Medicare." (Rec. Doc. 18-1 at 15).
Wellcare also urges the Court to defer to the Centers for Medicare and Medicaid Services' ("CMS") agency regulations and administrative interpretations. (Rec. Doc. 18-1 at 15). Wellcare argues that "[t]he Secretary has long made clear that an MA[O]... will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.'" (Rec. Doc. 18-1 at 16) (citing 42 C.F.R. § 422.108(f)). Wellcare avers that its claim for reimbursement is thus consistent with agency regulations and guidance. (Rec. Doc. 18-2 at 17).
B. Collins' Opposition to Wellcare's Motion for Summary Judgment
Collins filed an Opposition to Wellcare's Motion for Summary Judgment on September 10, 2014. Collins argues that she is not required to exhaust administrative remedies because she brought the action in state court based on state law causes of action and does not seek any Medicare benefits or services. (Rec. Doc. 23 at 8). Collins contends that the contract between the parties states that the administrative requirement is "invoked only if you have problems getting the Part C medical care or service you request, or payment (including the amount you paid) for a Part C medical care or service.'" (Rec. Doc. 23 at 8). Collins cites a Ninth Circuit case where the court found that a wrongful death action against a private Medicare provider did not "arise under" the Medicare Act. (Rec. Doc. 23 at 8) ( citing Ardary v. Aetna Health Plans of California, Inc., 98 F.3d, 496, 500 (9th Cir. 1996)).
In response to Wellcare's Counterclaim, Collins argues that other courts have consistently held that 42 U.S.C. § 1395mm(e)(4), a provision identical to the MAO Statute, does not provide for a private cause of action but merely affords parties the right to include subrogation provisions in their contracts. (Rec. Doc. 23 at 3-4) (citing Parra v. PacificCare of Arizona, Inc, 715 F.3d 1146, 1153-54; Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003); Nott v. Aetna U.S. Healthcare, Inc., 303 F.Supp.2d 565, 571 (E.D. Pa. 2004)). Collins contends that Wellcare could only demand reimbursement from Collins if the contract incorporated this subrogation right, and as the contract does not contain such a term, Wellcare does not have a claim for reimbursement. (Rec. Doc. 23 at 4).
Collins argues that Wellcare does not have a private right of action under the MSP because Wellcare's claim is against Collins, and Collins does not constitute a group plan as required by the statute. Collins also avers that the MSP does not afford a private cause of action to MAOs. (Rec. Doc. 23 at 4-5). Relying on Parra v. PacifiCare, Collins argues that her settlement with a third party tortfeasor does not constitute a primary plan under the MSP. (Rec. Doc. 23 at 5-6). Collins further argues that Wellcare failed to satisfy a prerequisite of a secondary payer claim because the payment did not constitute a conditional payment. Here, Collins contends that Wellcare failed to ascertain "whether a payment could reasonably be expected' to be made by a primary plan and if so, whether the primary plan had made a payment or could reasonably be expected to make a prompt payment." (Rec. Doc. 23 at 10) (citing Thompson v. Goetzmann, 337 F.3d 489 (5th Cir. 2003); Bio-Med Applications of Tenn., Inc. v. Cent States Se. and Sw. Areas Health and Welfare Fund, 656 F.3d 277, 286 (6th Cir. 2011)). Collins notes she had no duty to inform Wellcare of a third party payment, pursuant to the contract between Collins and Wellcare. (Rec. Doc. 23 at 12). Finally, Collins argues that any Wellcare claims are prescribed. (Rec. Doc. 23 at 13).
C. Wellcare's Reply to Collins' Opposition
Wellcare filed a Reply to Plaintiff's Opposition on September 15, 2014. Wellcare contends that numerous other courts have held that parties must exhaust their administrative remedies for disputes over subrogation rights. (Rec. Doc. 27 at 2) (citing Einhorn v. CarePlus Health Plans Inc., 14-61135-CIV-BLOOMVALLE, 2014 WL 4385912 at *2-3 (S.D. Fla. Sept. 2, 2014); Cupp v. Johns, et al., No. 2:14-cv-02016, 2014 WL 916489 at *3; Potts, 987 F.Supp.2d at 188; Phillips v. Kaiser Found. Health Plan, Inc, 953 F.Supp.2d 1078, 1089 (N.D. Cal. 2011)). Wellcare argues that because the Court has jurisdiction pursuant to its diversity jurisdiction,  Wellcare can enforce its rights under the Medicare Act and does not require a private cause of action. In response to Collins' assertion that Wellcare does not have subrogation rights because the contract does not include a reimbursement term, Wellcare contends that the right to reimbursement is statutory and not contractual. (Rec. Doc. 27-3 at 5).
Wellcare avers that Plaintiff's assertion that Wellcare cannot bring a private cause of action because Collins is not a "group plan" is without merit under the MSP. (Rec. Doc. 27-3 at 7). Wellcare argues that a primary plan includes an automobile or insurance policy under the MSP, and Collins recovered settlement funds from an automobile or insurance policy. (Rec. Doc. 27-3 at 7-8). Wellcare thus argues that it is "entitled to reimbursement of its conditional payments under 42 U.S.C. § 1395w-22(a)(4)(B), 42 U.S.C. § 1395mm(e)(4), and 42 C.F.R. § 422.108(d)." (Rec. Doc. 27-3 at 8).
Wellcare counters Collins' argument that it did not make a conditional payment and asserts that it is not required to notify any defendant or carrier of a lien's existence. (Rec. Doc. 27-3 at 9). Furthermore, Wellcare argues that Collins' prescription argument is without merit as she failed to respond to any of Wellcare's inquiries, and in any event, the applicable statute of limitations for Medicare reimbursement actions is six years. (Rec. Doc. 27-3 at 9).
III. Law and Analysis
The Court understands the confusion caused by the Medicare acronyms, so to help assuage such confusion for the duration of this analysis, the Court will again summarize the acronyms to be used. "MSP" refers to the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b), and "MAO" refers to a Medicare Advantage Organization. The "MAO Statute" refers to Medicare Part C, 42 U.S.C. § 1395w-21-1395w-29, or the part of the Medicare Act that specifically regulates MAOs.
Wellcare's motion presents the Court with a number of complicated issues, many of which are dispositive to the outcome of this motion. The Court will first proceed with the Motion to Dismiss and examine whether the Court lacks subject matter jurisdiction over Collins' claim due to Collins' failure to exhaust her administrative remedies. The Court will then examine the Motion for Summary Judgment on Wellcare's Counterclaim.
To put this matter in perspective and attempt to illuminate this obscure legal terrain, a brief summary of the Medicare regime is helpful. Congress enacted the Medicare Act in 1965 by adding a new Title, Title XVIII, to the Social Security Act, and it functions as a "federally funded health insurance program for the elderly and the disabled." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 506 (1993). The Medicare Statute consists of five parts - Part A, B, C, D, and E. Part A and Part B "create, describe, and regulate traditional fee-for-service, government-administered Medicare." In re Avandia Mktg. Sales Practices and Products Liability Litigation, 685 F.3d 353, 357 (3d Cir. 2012) (citing 42 U.S.C. §§ 1395c to 1395i-5; §§ 1395-j to 1395-w). Part C outlines the Medicare Advantage program, described in more detail below, and provides that Medicare beneficiaries may elect for private insurers to deliver their Medicare benefits to them. 42 U.S.C. §§ 1395w-21-29. Part D provides for prescription drug coverage for Medicare beneficiaries, and Part E contains the "miscellaneous provisions."
Initially, Medicare served as the primary payer and paid its beneficiaries' medical costs when other entities were responsible for those costs, such as private health insurance. See Taransky v. Sec'y of U.S. Dep't of Health& Human Servs., 760 F.3d 307, 309 (3d Cir. 2014). In 1980, Congress altered the Medicare payment scheme in an effort to reduce escalating costs and added the Medicare Secondary Payer provisions ("MSP") to the Medicare Act. Omnibus Reconciliation Act of 1980, Pub. L. No. 90-499, 94 Stat. 2599. Under the MSP, codified at 42 U.S.C. § 1395y, Medicare is the "secondary payer" to other sources who are considered the "primary payer." "In other words, Medicare serves as a back-up insurance plan to cover that which is not paid for by a primary insurance plan.'" Caldera v. Insurance Co. of the State of PA, 716 F.3d 861, 863 (5th Cir. 2013) (quoting Goetzmann, 337 F.3d at 496). The statute provides that Medicare cannot pay medical expenses when "payment has been made or can reasonably be expected to be made under a workman's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance." 42 U.S.C. § 1395y(b)(2)(A)(ii). If a primary plan "has not made or cannot reasonably be expected to make payment, " the Secretary can make a conditional payment. 42 U.S.C. § 1395y(b)(2)(B)(i). Since Medicare remains the secondary payer, the primary plan must reimburse Medicare for the conditional payment. 42 U.S.C. § 1395y(b)(2)(B)(ii).
In 1997, Congress amended the Medicare Act to afford beneficiaries the option to receive their Medicare benefits through private organizations, MAOs. Pursuant to these amendments, most Medicare beneficiaries can now elect to receive their benefits through Original Medicare or through an MAO. "The congressional goal in creating the Medicare Part C option was to harness the power of private sector competition to stimulate experimentation and innovation to create a more efficient and less expensive Medicare system." D. Gary Reed, Medicare Advantage Misconceptions Abound, 27 Health Law 1, 3 (2014); See also Parra, 715 F.3d at 1152 (quoting H.R.Rep. No. 105-149, at 1251 (1997)) ("Part C is intended to allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service Medicare and enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options.'").
Beneficiaries who elect Original Medicare and those who elect a MAO plan both receive Medicare benefits. The process works as follows: CMS pays the MAOs a fixed amount for each enrollee to deliver their benefits. 42 U.S.C. §§ 1395w-21, 1395w-23. The MAO then delivers Medicare benefits to the enrollee, and the MAO assumes the risks related to insuring those beneficiaries. "The MAO is required to provide the benefits covered under Parts A and B to enrollees, but it may also provide additional benefits to its enrollees." In re Avandia, 685 F.3d at 358 (citing 42 U.S.C. § 1395w-22(a)(1)-(3)).
Interpretation and application of the Medicare Act is no simple feat. As the Fourth Circuit observed, the Medicare Act is "among the most completely impenetrable texts within human experience." Rehab Ass'n v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994). The issues presented to this Court support that statement.
B. Plaintiff's Failure to Exhaust Her Claim for Declaratory Judgment
The Plaintiff in this case did not assert a claim for benefits to the administrative agency and to the Secretary as required by 42 U.S.C. § 405(h). Instead she filed a declaratory action in state court which has been removed to this Court. "Section 405 (h) of Title 42 is more than an exhaustion requirement; it precludes federal courts from relying on 28 U.S.C. § 1331 for exercising jurisdiction over claims arising under the Medicare Act." Mason v. Sebelius , Civ. No. 11-2370, 2012 WL 1019131 at *4 (D.N.J. March 23, 2012). Under 42 U.S.C. § 405(h), which is made applicable to the Medicare Act by 42 U.S.C. § 1395ii,
No findings of fact or decision of the [Secretary] shall be reviewed by any person, tribunal, or governmental agency except as herein provided [in § 405(h)]. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section ...