MA Plans Can Sue to Recover Cost of Care

Medicare Advantage (MA) organizations can bring a lawsuit against the proceeds of a settlement or an organization that inflicted harm on a beneficiary, to reclaim the cost of providing care to Medicare beneficiaries according to the United States Court of Appeals for the Third Circuit.  This ability for MA organizations to sue to recover the cost of treatment was explained in a case where an MA organization sued the manufacturer of a drug whose drug resulted in numerous side effects to beneficiaries that the MA organization had to treat, but this case could allow an MA organization to come after a beneficiary’s settlement for damages or against other businesses that inflicted a harm on beneficiaries.

The MA organization argued that the Medicare Secondary Payer (MSP) statute allowed them to bring a lawsuit against this manufacturer.  The manufacturer argued that the MSP law did not provide a private cause of action and that only the government, on behalf of Medicare, could sue to recover costs. In addition,  the drug manufacturer argued that if the MA organization sought to recover these amounts they should have included the right to come after the settlement amount the beneficiary received in their contract with the beneficiary. 

Legislative Intent

The court reasoned that Congress’ intent in adopting 42 U.S.C. §1395y(b)(3)(A), which states that “there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment…” was to ensure that MA organizations have the same ability to compete and survive as traditional Medicare. The court concluded that it was the belief of Congress that the MA program would “continue to grow and eventually eclipse original fee-for-service Medicare as the predominant form of enrollment under the Medicare program,” quoting from the Conference Committee Report on Balance Budget Act  which established the Medicare Advantage program. The court continued by saying, “if Medicare could threaten recalcitrant primary payers with double damages, and MA organizations could not, MA organizations would be at a competitive disadvantage, unable to exert the same pressure and thus forced to expend more resources collecting from such payers.”  The court summed it up by saying, it would be difficult to believe that it would have been the intent of Congress based on the statement of the conference committee report to hamstring MA organizations in this manner.

The court found that the drug manufacturer was a primary payer. The drug manufacturer, which pays out of its own pocket to settle the claims for the harms it drug causes is self-insured and thus a primary payer.  As a primary payer, it has the responsibility under the MSP statute at 42 U.S.C. §1395(b)(2)(B)(i) to pay for treatments for Medicare beneficiaries for which it was responsible. 42 U.S.C. §1395(b)(2)(B)(ii) goes on to say that if the primary payer fails to reimburse Medicare the United States may bring an action against any and all entities that are or were required or responsible  to make payment under a primary plan.  The court found that it was Congress’ intent to extend the private right to action established at 42 U.S.C. §1395y(b)(3)(A) was to MA organizations seeking to recover the cost of treating beneficiaries harmed by the manufacturer’s drug.


The court also reasoned that if the statute was ambiguous to this point, of an MA organizations ability to bring a law suit to recover damages, MA organizations would have a right to bring a  suit as CMS gave them that right in its regulations at 42 C.F.R. §422.108 where it states that “MA organizations  will exercise the same rights to recover from a primary plan, entity or individual that the Secretary exercises under that MSP regulations…”  The court argued that where a statute is ambiguous deference is to be given to the agency’s interpretations of the statutes in its regulations.  That deference extends only if the regulation is not arbitrary or capricious, and in this case, the court determined it decidedly was not.