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MSP Private Cause of Action Assignments: Worth Billions?
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MSP Private Cause of Action Assignments: Worth Billions?

Many people in the Medicare Secondary Payer industry know that some courts have granted Medicare Advantage Plans recovery of conditional payments from primary payers (primary plans) under the Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b)(2) et seq. (MSP) and its MSP private cause of action provision, 42 U.S.C. § 1395y(b)(3)(A).  What may not be apparent is that many of the cases involving Medicare Advantage Plans are related by something other than just the type of insurance involved.  There is a group of companies based in South Florida, most represented by the same law firm, that uses a proprietary data collection system to help pursue these claims.[1]  If you haven’t seen or heard any news about the many lawsuits seeking these recoveries based on assignments from Medicare Advantage Plans, you probably will soon.  Just this week, a U.S. District Court in Wisconsin examined two such cases and while it recognized the general right of an assignee to sue based on an assignor’s injuries, dismissed the cases for lack of standing when plaintiffs failed to include sufficient facts about the assignments from Medicare Advantage Plans to establish standing.[2]  The MAO-MSO RECOVERY II et al. v. American Family Mutual Insurance Company court cited to over a dozen other similar cases by similar plaintiffs (represented by the same law firm mentioned below, or affiliates of same), many of which are in the initial pleading phase across the country.[3]  

Medicare Advantage Plans a/k/a Medicare+Choice plans or Part C Plans, fall under Medicare Part C[4], and are often referred to in case law as Medicare Advantage Organizations (MAOs).  MAOs allow Medicare beneficiaries to elect benefits through private HMO plans or other managed care arrangements administered by private entities instead of by the government agency responsible for implementing the Medicare program, the Centers for Medicare & Medicaid Services (CMS).  Our prior blog article discussed the 3rd Circuit (In re Avandia[5]) and 11th Circuit (Western Heritage[6]) appellate cases that paved the way for MAOs in those circuits to pursue MSP[7] private cause of action claims for double damages[8], when suing to recover conditional payments from primary plan payers[9] under the MSP.

MSP Law Firm, PLLC (MSP Law Firm) based in Miami, has been active in helping clients get assignments from MAOs and in pursuing suits asserting the MAOs’ rights as secondary payers, for double damages pursuant to the MSP private cause of action.  Numerous entities the firm represents or has represented (over 30 named LLCs are listed on the Florida Department of State website, many with common ownership) have sued primary plans such as no-fault insurers in this manner.  It appears that these entities have been part of lawsuits in at least 23 states with some of the cases being classified as multidistrict litigation cases (MDL), with many filed as class actions.  The firm’s website lists 79 class actions with two of the state-based cases having obtained class certification.  On November 16, 2017, one of the class certified cases had a preliminary $5 million settlement approval granted.[10]  According to an April, 2017 Daily Business Review article, John Ruiz, a MSP Law Firm partner, indicated there was a possibility of over a billion dollar verdict in another class action case, and in an August, 2017 Bloomberg BNA Daily Healthcare Report article, he indicated that the MSP Law Firm was readying 1,500 more lawsuits to be filed.[11]

The MSP Law Firm clients referenced in these MAO cases have alleged that they were assigned MSP private cause of action claims from the MAOs so that they could “step into the shoes” of the MAOs for those assigned rights.[12]  It is hard to say whether these cases will succeed when so many are still in the initial pleading phase.  On January 9, 2018, there was early signal, if not an indication, that at least one court in the 7th Circuit[13] may follow the 3rd  and 11th Circuits in granting the MSP private cause of action right to a MAO or its assignee, for claims against primary plans that fail to provide for primary payment or appropriate reimbursement.[14]  The MAO-MSO RECOVERY II et al. v. State Farm Mut. Auto. Ins. Co. (State Farm) case is another example of this type of MAO assignment case, this time in a U.S. District Court case in Illinois.  Because the Amended Complaint in the State Farm case was dismissed (with an allowance for the MAO-MSO entity to amend within 21 days), the court’s side discussion of the legal issues, known in the legal field as dicta, cannot be used as precedent.  However, the court recognized that other federal district courts have followed the reasoning and holdings of the 3rd Circuit (In re Avandia) and 11th Circuit (Western Heritage) cases.[15]  The State Farm court gave an indication that it confirmed both the right of a MAO to the MSP private cause of action and the right of an entity that has been assigned that right, to enforce it, signaling a strong potential that this court will follow the In re Avandia and Western Heritage reasoning if the Amended Complaint is amended a second time, and the case proceeds.

A similar issue arose in a U.S. District Court case in South Florida with some of the same plaintiffs in MAO-MSO Recovery II, LLC v. Boehringer, where in October 2017, the District Court for the Southern District of Florida dismissed a first Amended Class Action Complaint when plaintiffs failed to say which MAOs they received assignment from or “the dates of the assignments, or essential terms.”[16] In the second Amended Complaint, plaintiffs added a new plaintiff named MSP Recovery Claims, Series, LLC after finding a Medicare Advantage Plan member who had suffered an injury from taking Boehringer’s blood thinning drug, Pradaxa.  While many of these cases have been lodged against no-fault carriers with contractual payment obligations, the required “demonstrated responsibility” under the MSP for payment in the Boehringer case arose from tort liability.  Because the Pradaxa defendants settled a liability case, they became primary plan payers under the MSP by virtue of the settlement, regardless of whether they admitted liability.  On December 12, 2017 the Boehringer court dismissed the case for lack of standing because the most recent assignment for a newly named plaintiff took place after the original lawsuit was filed.  A new case will likely be filed by the entity the court said would have standing.

It is likely that these cases and other similar cases pursuing MSP private cause of action claims[17] will be active again very soon.  When complaints get dismissed, they are most often dismissed without prejudice, allowing the matters to proceed with amended pleadings.  If the plaintiffs in the above-described subject cases provide more specific descriptions of the assignments (such as naming the MAO’s they received assignment from under protective order if the MAO’s do not wish to be named, attaching copies of assignments to their complaints, and naming individual Medicare Advantage Plan members negatively affected by no payment or slow payment by primary plan payers), the proverbial floodgates of litigation could be opened.

Not all of the above-described MSP private cause of action MAO assignment cases are being held up at the pleading phase.  Yesterday, on February 21, 2018 a U.S. District Court in the Southern District of Maryland allowed two of these putative class action cases by MAO-MSO Recovery II, LLC, et al. to proceed against Government Employees Insurance Company (GEICO), one involving GEICO as a no-fault insurance primary plan and the other involving GEICO as a liability primary plan concerning settlements paid on behalf of its insureds, after denying GEICO’s motions to dismiss for lack of standing and failure to state a claim upon which relief could be granted.[18]  This means that responsive pleadings will need to be filed and discovery will get underway.  While it does not necessarily mean that class actions will be certified for these cases, (the judge ruling that issue would not be ready to be heard until a motion for class certification was filed by plaintiffs), now two additional MSP private cause of action MAO assignment cases are proceeding.

Take Aways:

  • There seem to be a growing number of courts recognizing the right of MAOs to the MSP private cause of action.  In addition to the 3rd and 11th Circuits, the right to the private cause of action by MAOs has also been favorably decided in federal district courts in the Eastern District of Virginia, the Eastern District of Tennessee, the Eastern District of Louisiana and the Western District of Texas.[19]
  • Primary payers including no-fault carriers, workers’ compensation carriers, liability carriers and self-insureds, should understand that Medicare Advantage Plans or their assigns, are filing MSP private cause of action of suits regularly and asking for double damages.
  • Prior to settlement, steps should be taken by all parties to expand lien search inquiries beyond traditional Medicare, Medicaid and SSDI searches to rule out Medicare Advantage Plan membership.
  • If a Claimant/Applicant is a Medicare Advantage Plan member and any payments by the Medicare Advantage Plan should have been paid by a primary payer, steps should be taken to get those conditional payments reimbursed promptly.
  • No-fault carriers that deny initial bills but later pay their policy limits for claims might still be held liable for amounts above those limits if courts rule in favor of MAOs or their assigns in MSP private cause of action claims for double damages (with the double portion of the double damages reaching past those limits).
  • The Court in the settled MSPA Claims 1 class action case listed in endnote 1 and 8 below examined the data mining “system” developed by the MSPA Claims 1 plaintiffs and its counsel.  Based on testimony from plaintiffs’ counsel and system experts, the Ocean Harbor court determined that plaintiffs could identify the amounts owed by using the Ocean Harbor’s electronic data, the MAO’s data, and data acquired from outside sources like the Department of Motor Vehicles, ISO and CMS. [J.A. 001484:13-18, Ruiz Testimony, June 2, 2016; J.A. 002000:15-25, 002001:1-3, Ruiz Testimony, Sept. 13, 2016].
  • If the plaintiffs in these MAO assignment cases can find the information, then the defendants should also be able to find the amounts claimed as owed under the MSP.  It seems that the information was all obtained during discovery and unless prevented through motions for protective orders (never guaranteed), will likely continue to be sought and obtained during litigation by these or similar plaintiffs.
  • Have a litigation plan in place and discuss it with your counsel.  With so much on the line, it is clearly time to set up operations to help minimize payment delays and the likelihood of a double damages claim!

[1] See Samantha Joseph, Deep Data Dive Lets Miami Firm Accomplish What Erin Brockovich Couldn’t, DAILY BUSINESS REVIEW, January 22, 2018, available at https://msprecovery.com/in-the-media/?dzsvg_startitem_dzs-video0=0&dzsvg_startitem_dzs-video1=0 (reporting on firm’s clients’ proprietary data mining  “system” using algorithms to cull data from automobile crash reports, medical files and government databases); See also, MSPA Claims 1, LLC v. Ocean Harbor Cas. Ins., No. 2015-1946-CA 06 (Fla. Cir. Ct Miami-Dade February 02, 2017) (class action settlement of $5 million given preliminary approval November 16, 2017).

[2] MAO-MSO Recovery II, LLC, MSP Recovery LLC, and MSPA Claims 1, LLC v. American Family Mut. Ins. Co. and American Family Ins., Case Nos. 17-cv-175-JDP; 17-cv-262-JDP, 2018 WL 835160 (W.D. Wi. Feb 12, 2018).

[3] Id. at 1. (citing MAO-MSO Recovery II, LLC v. Allstate, No. 17-cv-2370 (N.D. Ill.) (motion to dismiss pending); MAO-MSO Recovery II, LLC v. Erie Indemnity Co., No. 17-cv-81 (W.D. Pa.) (motion to dismiss pending); MAO-MSO Recovery II, LLC v. Farmers Ins. Exch., No. 17-cv-2559 (C.D. Cal.) (motion to dismiss granted with leave to replead); MAO-MSO Recovery II, LLC v. GEICO, No. 17-cv-964 (D. Md.) (motion to dismiss [denied – see endnote 18 below]); MAO-MSO Recovery II, LLC v. Liberty Mut. No. 17-cv-10564 (D. Mass.) (amended complaint filed); MAO-MSO Recovery II, LLC v. Mercury Gen., No. 17-cv-2557 (C.D. Cal.) (motion to dismiss granted with leave to replead); MAO-MSO Recovery II, LLC v. Nationwide, 17-cv-00263 (S.D. Ohio) (motion to dismiss pending); MAO-MSO Recovery II, LLC v. Progressive, No. 17-cv-686 (N.D. Ohio) (motion to dismiss pending); MAO-MSO Recovery II, LLC v. State Farm, No. 17-cv-321 (S.D. Ill.) (motion to granted with leave to replead); MAO-MSO Recovery II, LLC v. USAA, No. 17-cv-21289 (S.D. Fla.) (motion to dismiss pending); MAO-MSO Recovery II, LLC v. USAA Cas. Ins. Co., No. 17-20946-CIV (S.D. Fla.) (motion to dismiss granted with leave to replead); MAO-MSO Recovery II, LLC v. Boehringer Ingelheim Pharm., Inc., No. 17-cv-21996-UU (S.D. Fla.) (motion to dismiss granted with leave to replead). Plaintiffs filed at least one other similar case and then voluntarily dismissed it. MAO-MSO Recovery II, LLC v. AAA Auto Club, No. 17-cv-601 (C.D. Cal.)).

[4] 42 U.S.C. 1395w(21)-(27).

[5] In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012).

[6] Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016).

[7] 42 U.S.C. 1395y(b).

[8] 42 U.S.C. 1395y(b)(3)(A).

[9] Primary plans regarding liability claims are known under the MSP as “applicable plans” and include the following: workers’ compensation laws or plans, no fault insurance, automobile or liability insurance policies or plans (including self-insured plans) all of which are categorized by Centers for Medicare & Medicaid Services (CMS) as Non Group Health Plans; meaning entities responsible for payment by contract or by liability settlement, judgment or award.

[10] MSPA Claims 1, LLC v. Ocean Harbor Cas. Ins., No. 2015-1946-CA 06 (Fla. Cir. Ct Miami-Dade February 02, 2017) (class action settlement of $5 million given preliminary approval November 16, 2017) (see also Samantha Joseph, Deep Data Dive Lets Miami Firm Accomplish What Erin Brockovich Couldn’t, DAILY BUSINESS REVIEW, January 22, 2018, available at https://msprecovery.com/in-the-media/?dzsvg_startitem_dzs-video0=0&dzsvg_startitem_dzs-video1=0 (reporting on firm’s clients’ proprietary data mining  “system” using algorithms to cull data from automobile crash reports, medical files and government databases); MSPA Claims 1, LLC v. IDS Property Casualty Ins., No. 2015-27940 (approval given by judge to plaintiffs to send class action notices in January 2018).

[11] Eric Topor, Managed Care Lawsuit Wave Inundating No-Fault InsurersBLOOMBERG BNA HEALTH CARE DAILY REPORT, August 18, 2017 (Entities described included MAO-MSO Recovery, LLC (now there is also a MAO-MSO Recovery II, LLC),MSPA Claims 1, LLC, MSP Recovery, LLC and MSP Recovery Claims, Series, LLC and while attorney Ruiz said none of the principals or partners at the MSP Recovery Law Firm have any ownership in the corporate entities that have been assigned the Medicare Advantage claims, his son is one of several owners of MSP Recovery Services, LLC, which owns MSPA Claims 1) available at http://msprecoverylawfirm.com/in-the-media/;  Celia Ampel, How a Miami Law Firm Plans to Recover Billions for Medicare, DAILY BUSINESS REVIEW, April 6, 2017, available at https://www.law.com/dailybusinessreview/almID/1202783135691; Katheryn Hays, 11th Circuit Puts Insurers on the Hook to Repay Billions, TUCKER DAILY REPORT, Sept. 2, 2016, available at  https://www.law.com/dailyreportonline/almID/1202766635114/?slreturn=20180012144002.

[12] MSP Recovery, LLC v. Allstate Ins. Co., 835 F.3d 1351 (11th Cir. 2016)(holding that the assignment interest was valid, partially relying on CMS regulations 42 C.F.R. §422.22(a) and (b) for guidance, finding that a contractual obligation from a settlement may serve as sufficient demonstration of responsibility for payment under the MSP private cause of action without a need to first sue for breach of contract to prove said responsibility.

[13] Covering Illinois, Indiana and Wisconsin.

[14] MAO-MSO Recovery II, LLC, MSP Recovery LLC, and MSPA Claims 1, LLC v. State Farm Mut. Auto. Ins. Co., Case No. 1:17-cv-01537-JBM-JEH, 2018 WL 340020 (C.D. Ill Jan. 9, 2018).

[15] Id.  (citing Humana Ins. Co. v. Paris Blank LLP, 187 F.Supp. 3d 676, 681 (E.D. Va. 2016); Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 94 F.Supp.3d 1285, 1290–91 (S.D. Fla. 2015); Cariten Health Plan, Inc. v. Mid-Century Ins. Co., No. 14-476, 2015 WL 5449221, *5-*6 (E.D. Tenn. Sept. 1, 2015); Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653, 664–65 (E.D. La. 2014); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F.Supp.3d 983, 986 (W.D. Tex. 2014).

[16] MAO-MSO Recovery II, LLC v. Boehinger Ingelheim Pharm, Inc., No. 1:17-cv-21996-UU, 2017 WL 4682335 (S.D. Fla. Oct. 10, 2017).

[17] MAO-MSO Recovery II, LLC; MSP Recovery, LLC; MSPA Claims 1, LLC v. Infinity Prop. & Cas. Group, 2017 WL 6998950 (N.D. Oh. Aug. 23, 2017) (Pleading phase – Plaintiff’s Memorandum in Opposition to Defendant’s Motion to Dismiss); MAO-MSO Recovery II, LLC; MSPA Claims 1, LLC v. Liberty Mut. Holding Co., (D. Mass. June 28, 2017) (Pleading phase – Defendant’s Motion for More Definite Statement).

[18] MAO-MSO Recovery II, LLC, et al., v. Government Employees Ins. Co., Additional Plaintiff Party Names: MSP Recovery, LLC, MSPA Claims 1, LLC, No. PWG-17-711,PWG-17-964, 2018 WL 999920 (D. Md. Feb. 21, 2018).

[19] Humana Ins. Co. v. Paris Blank LLP, 187 F.Supp. 3d 676 (E.D. Va. 2016); Cariten Health Plan, Inc. v. Mid-Century Ins. Co., No. 14-476, 2015 WL 5449221 (E.D. Tenn. Sept. 1, 2015); Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653 (E.D. La. 2014); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F.Supp.3d 983 (W.D. Tex. 2014).

 

 

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