Humana Medical Plan, Inc. v. Reale

Third District Court of Appeal
State of Florida
Opinion filed December 2, 2015.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D12-2883
Lower Tribunal No. 10-31906
________________
Humana Medical Plan, Inc.,
Appellant,
vs.
Mary Reale, et al.,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, Lester Langer,
Judge.
McDermott Will & Emery and M. Miller Baker (Washington, DC);
GrayRobinson and Daniel Alter and Jeffrey T. Kuntz (Fort Lauderdale); Lawrence
& Russell and Eileen Kuo (Memphis, TN), for appellant.
Philip D. Parrish; Donna B. Michelson, for appellees.
Before SHEPHERD, ROTHENBERG and SALTER, JJ.
SHEPHERD, J.
Humana Medical Plan, Inc., a Medicare Advantage organization, appeals a
final judgment determining its right to reimbursement of conditional Medicare
payments under Florida subrogation law, including Florida’s collateral sources of
indemnity statute, section 768.76, Florida Statutes (2012). Because we find that
the court below did not have subject-matter jurisdiction to review this dispute and
that Florida’s collateral sources of indemnity statute is on its face inapplicable, and
Florida subrogation law is expressly preempted by the Medicare Act, we vacate the
judgment below and reverse and remand with instructions to dismiss the
complaint.
BACKGROUND
Humana, the appellant in this case, administers Medicare benefits to
enrollees in its Medicare Advantage plans pursuant to a contract with the Centers
for Medicare and Medical Services. At all relevant times, Mary Reale, the
appellee, was enrolled in a Humana Medicare Advantage plan (Humana Gold Plus
H1036-054C). In January 2009, Mrs. Reale sustained injuries resulting from a fall
at Hamptons West Condominiums. Between the date of the fall and April 2009,
Humana paid conditional Medicare benefits for Mrs. Reale’s medical treatment.
The parties have stipulated that Humana expended $19,155.41.
Mrs. Reale and her husband, August Reale, filed a personal injury action
against the Hamptons West Condominiums, a home health aide who was accused
2
of causing the fall, and a resident of Hamptons West who employed the home
health aide. The parties settled the lawsuit in the amount of $135,000 for Mrs.
Reale’s economic and non-economic damages and Mr. Reale’s loss of consortium
claim. The Reales’ attorney, Donna Michelson, has set aside, in trust, sufficient
funds for the amount of benefits paid by Humana. In a letter dated March 11,
2010, Humana presented Ms. Michelson with a payment report and informed her
of its determination that it was entitled to reimbursement of the full amount of
conditional Medicare benefits it provided. The Reales, through counsel, declined
to reimburse Humana in the amount requested and did not initiate an
administrative appeal of Humana’s determination. Ms. Michelson and the Reales
have agreed that Ms. Michelson may keep as additional attorney’s fees any portion
of those funds she can avoid having to reimburse to Humana.
In May 2010, Humana brought an action against Mrs. Reale and Ms.
Michelson in the United States District Court for the Southern District of Florida
seeking reimbursement of the $19,155.41 pursuant to the Medicare Secondary
Payer Act, 42 U.S.C. § 1395y(b). Mrs. Reale moved to dismiss for lack of subject-
matter jurisdiction on the theory that the Medicare Act did not provide Humana
with an express or implied right of action for reimbursement. The court granted
the motion. Humana Med. Plan, Inc. v. Reale, 2011 WL 335341 (S.D. Fla. 2011),
vacated (Sept. 26, 2011). Humana then filed a motion to amend or correct the
3
order of dismissal, which was partially granted. The court vacated its order and
scheduled a hearing on Humana’s motion. Humana subsequently dismissed the
action for recovery against Mrs. Reale and her attorney and instead brought a
federal action for reimbursement against Western Heritage Insurance Company,
Hampton West’s liability insurer, which funded the Reales’ settlement. On March
16, 2015, the United States District Court entered an order granting Humana’s
motion for summary judgment, finding that Humana could maintain a private right
of action for double damages against Western Heritage pursuant to 42 U.S.C. §
1395y(b)(3)(A).1 Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 94 F. Supp. 3d
1285 (S.D. Fla. 2015). Western Heritage has appealed, and Humana’s
reimbursement claim remains unsatisfied.
During the ongoing initial federal action for reimbursement that Humana
brought against Mrs. Reale and Ms. Michaelson, Mr. and Mrs. Reale brought this
action in the circuit court below for a declaration of Humana’s right to
reimbursement, asserting that Humana’s payments constituted a collateral source
of indemnity and that Florida’s collateral sources of indemnity statute, section
768.76, Florida Statutes (2012), and not Medicare’s Secondary Payer Act,
1 42 U.S.C. § 1395y(b), the Medicare Secondary Payer Act, makes Medicare a
secondary payer in relation to other sources, such as liability insurers, which are
considered primary plans. If Medicare has made payments for services for which a
primary plan is ultimately responsible, reimbursement is required. See infra pp. 9-
11. 42 U.S.C. § 1395y(b)(3)(A) establishes a private cause of action for double
damages when a primary plan does not provide reimbursement.
4
provided Humana’s right of recovery. Humana moved to dismiss for lack of
subject-matter jurisdiction and failure to state a cause of action based on three
separate grounds:
1. Mrs. Reale did not exhaust the mandatory administrative appeal process for
disputing Medicare benefits, and even if she had, jurisdiction would lie
exclusively in the federal courts.
2. Federal law preempts Florida’s collateral sources of indemnity statute.
3. By its terms, the collateral sources statute does not apply to claims for
Medicare benefits.
After temporarily staying the lower court proceedings to allow resolution of
the initial federal action, the circuit court denied Humana’s motion to dismiss.
Humana then filed a motion for summary judgment based on the same three
grounds, which was also denied. To expedite the process, the parties stipulated to
the relevant facts, and the Reales filed a motion for final judgment. On October
30, 2012, the circuit court entered final summary judgment, finding that it had
subject-matter jurisdiction pursuant to section 86.011, Florida Statutes, and Care
Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003). The court also found
that Florida subrogation law, including the collateral sources statute, was
applicable in determining Humana’s right to reimbursement. Pursuant to the
formula in section 768.76(4), Florida Statutes, for calculating the amount of
5
recovery for “[a] provider of collateral sources that has a right of subrogation or
reimbursement[,]” the court calculated Humana’s total reimbursement to be
$3,685.03.2 Humana timely appealed.
THE MEDICARE FRAMEWORK
Because of the complex nature of the Medicare Act, we begin by providing a
brief overview of the Medicare framework and the provisions at issue in this case.
Title 42, chapter 7, Subchapter XVIII of the United States Code (also designated
Title XVIII of the Social Security Act) is entitled “Health Insurance for Aged and
Disabled.” Popularly referred to as “the Medicare Act,” it has been described as
“one of the most completely impenetrable texts within the human experience.”
E.g., Parra v. PacifiCare of Arizona, Inc., 715 F.3d 1146, 1149 (9th Cir. 2013)
(quoting Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3d Cir.2010)).
Medicare benefits are divided into four parts: Part A, “Hospital Insurance Benefits
for Aged and Disabled” (42 U.S.C. §§ 1395c to 1395i-5); Part B, “Supplementary
Medical Insurance Benefits for Aged and Disabled” (42 U.S.C. §§ 1395j to 1395w-
5); Part C, “[Medicare Advantage] 3 Program” (42 U.S.C. §§ 1395w-21 to 1395w-
2 The circuit court found that Mrs. Reale’s $135,000 settlement was 33.75% of the
full value of her claims; therefore, the court took 33.75% of the total benefits paid
by Humana ($19,155.41), which amounts to $6,464.95. The court further reduced
that amount by 43% for fees and costs incurred in securing the settlement, bringing
the total reimbursement amount to $3,685.03.
3 The current Part C Medicare Advantage program was formerly known as
“Medicare+Choice,” and many Part C provisions still use that terminology. When
Congress made revisions to the program and changed the name in 2003, it
6
28); and Part D, “Voluntary Prescription Drug Benefit Program” (42 U.S.C. §§
1395w-101 to 1395w-154). There is also a Part E for “Miscellaneous Provisions”
(42 U.S.C. §§ 1395x to 1395lll).
PART C: THE MEDICARE ADVANTAGE PROGRAM
This case involves benefits received under Part C. The Medicare Act allows
eligible individuals to obtain hospital and medical benefits through one of two
programs: “(A) through the original medicare fee-for-service program under parts
A and B . . . or (B) through enrollment in a [Medicare Advantage] plan under [part
C].” 42 U.S.C. § 1395w-21(a); see also In re Avandia Mktg., Sales Practices &
Prods. Liab. Litig. 685 F.3d 353, 357 (3d Cir. 2012). “Congress's goal in creating
the Medicare Advantage program was to harness the power of private sector
competition to stimulate experimentation and innovation that would ultimately
create a more efficient and less expensive Medicare system.” In re Avandia Mktg.,
685 F.3d at 363 (citing H.R. Rep. No. 105–217, at 585 (1997), 1997 U.S.C.C.A.N.
176, 205–06 (Conf. Rep.)); see also Parra, 715 F.3d at 1152-53 (“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
provided that “any reference to the program under part C of title XVIII of the
Social Security Act shall be deemed a reference to the Medicare Advantage
program and, with respect to such part, any reference to ‘Medicare+Choice’ is
deemed a reference to ‘Medicare Advantage’ and ‘MA’.” Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, PL 108–173, December 8,
2003, 117 Stat 2066.
7
program to utilize innovations that have helped the private market contain costs
and expand health care delivery options.’” (quoting H.R. Rep. No. 105–149, at
1251 (1997))).
The Centers for Medicare & Medicaid Services (“CMS”) administers the
Medicare program on behalf of the Secretary of Health and Human Services.4 Part
C allows eligible individuals to obtain benefits through Medicare Advantage plans,
which are administered by private insurers known as Medicare Advantage
organizations (“MAOs”) that enter into contracts with CMS.5 42 C.F.R. § 422.503
(“In order to qualify as an MA organization, enroll beneficiaries in any MA plans it
offers, and be paid on behalf of Medicare beneficiaries enrolled in those plans, an
MA organization must enter into a contract with CMS.”). CMS pays MAOs a
fixed amount for each enrollee, which is determined pursuant to 42 U.S.C. §
1395w-23. In exchange, the MAOs provide the same (or more) benefits an
4 Compare 42 U.S.C § 1395kk(a) (“[T]he insurance programs established by this
subchapter shall be administered by the Secretary. The Secretary may perform any
of his functions under this subchapter directly, or by contract[.]”) with Health Care
Financing Administration; Statement of Organization, Functions, and Delegations
of Authority, 46 FR 56911-03 (1981) (“The mission of the Health Care Financing
Administration (HCFA) is to administer the Medicare and Medicaid programs and
related provisions of the Social Security Act[.]”) and 42 C.F.R. § 400.200 (2012)
“(CMS stands for Centers for Medicare & Medicaid Services, formerly the Health
Care Financing Administration (HCFA).”).
5 CMS also relies on private contractors to carry out many of its administrative
functions for Parts A and B. 42 U.S.C. § 1395h(a) (“The administration of [Part
A] shall be conducted through contracts with medicare administrative contractors
under section 1395kk-1 of this title”); § 1395u(a) (same as to Part B).
8
enrollee would receive under the original Medicare fee-for-service program (Parts
A and B). See 42 U.S.C. § 1395w-22(a); 42 C.F.R. § 422.100(c) (“An MA plan
includes at a minimum basic benefits, and also may include mandatory and
optional supplemental benefits.”).
THE MEDICARE SECONDARY PAYER ACT
In 1980, Congress enacted the Medicare Secondary Payer (“MSP”) Act “in
an effort to contain the costs of the Medicare program.” Potts v. Rawlings Co.,
LLC, 897 F. Supp. 2d 185, 188 (S.D.N.Y. 2012). The MSP Act, 42 U.S.C. §
1395y(b),6 makes Medicare a “secondary payer” in relation to certain other
sources, which are considered “primary payers.” Id. Under the Act, Medicare
payments “may not be made” if “payment has been made or can reasonably be
expected to be made under a workmen’s compensation law or plan of the United
States or a State or under an automobile or liability insurance policy or plan
(including self-insured plan) or under no fault insurance.” 42 U.S.C. §
1395y(b)(2)(A); see also Potts, 897 F. Supp. 2d at 188. However, conditional
Medicare payments may be made if a primary payer “has not made or cannot
6The MSP Act is found in the “miscellaneous provisions” of Part E. Recent court
decisions have held that provisions in Part E that use the language “this
subchapter,” apply to the entire Medicare Act (Subchapter XVIII), including Part
C. See, e.g., In re Avandia Mktg., 685 F.3d at 359-60 (finding that the “payments
under this subchapter” language in 42 U.S.C. § 1395y(b)(2)(A) makes the MSP
private cause of action provision, § 1395y(b)(3)(A), applicable “to payments made
under Part C as well as those made under Parts A and B.”).
9
reasonably be expected to make payment . . . promptly.” 42 U.S.C. §
1395y(b)(2)(B). When conditional payments are made, the MSP Act requires
reimbursement. Id.
In practice, this system works as follows: In a situation
where another party is ultimately responsible for paying
the healthcare costs of a Medicare enrollee, the money
may not be available at the time the services are
provided. For example, if an enrollee is injured in an
accident caused by a third party tortfeasor, that tortfeasor
(or its insurer) is ultimately responsible for the payment
of the enrollee's healthcare costs as a result of the
accident. But the enrollee will not likely receive the
proceeds of any settlement with, or judgment against, the
tortfeasor in time to pay her hospital bills. In such a
situation, Medicare will pay the hospital bills on the
condition that either the tortfeasor reimburse the
Medicare Trust Fund directly, or the enrollee reimburse
the Trust Fund, to the extent she has already received
monies from the tortfeasor.
Potts, 897 F. Supp. 2d at 188.
Part C includes a similar provision that “cross-references § 1395y(b)(2) for
its definitions of primary payer and its positioning of Medicare as a secondary
payer.” In re Avandia Mktg., 685 F.3d at 358. The Part C provision states:
Notwithstanding any other provision of law, [an MAO]
may (in the case of the provision of items and services to
an individual under [an MA] plan under circumstances in
which payment under this subchapter is made secondary
pursuant to section 1395y(b)(2) of this title) charge or
authorize the provider of such services to charge, in
accordance with the charges allowed under a law, plan,
or policy described in such section--
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(A) the insurance carrier, employer, or other entity which
under such law, plan, or policy is to pay for the provision
of such services, or
(B) such individual to the extent that the individual has
been paid under such law, plan, or policy for such
services.
42 U.S.C. § 1395w-22(a)(4).
ANALYSIS
Because the parties stipulated to the relevant facts, the circuit court’s ruling
was based on pure issues of law. We review pure issues of law de novo. Rittman
v. Allstate Ins. Co., 727 So. 2d 391, 393 (Fla. 1st DCA 1999). Whether a court has
subject-matter jurisdiction involves a question of law and is also reviewed de novo.
Nissen v. Cortez Moreno, 10 So. 3d 1110, 1111 (Fla. 3d DCA 2009).
I. SUBJECT-MATTER JURISDICTION
Humana argues that the circuit court lacked subject-matter jurisdiction
because the Reales failed to exhaust mandatory administrative remedies and, even
if exhaustion had occurred, the Reales’ claim is subject to exclusive federal
jurisdiction. We agree.
Certain provisions of the Social Security Act are made applicable to the
Medicare Act through 42 U.S.C. § 1395ii.7 One of those provisions is 42 U.S.C. §
405(h), which states, in relevant part:
742 U.S.C. § 1395ii is found in Part E of the Medicare Act and, by its language,
applies to the entire Medicare Act (subchapter XVIII), including Part C. Cf. supra
11
No findings of fact or decision of the [Secretary of
Health and Human Services]8 shall be reviewed by
any person, tribunal, or governmental agency except
as herein provided. No action against the United States,
the [Secretary], or any officer or employee thereof shall
be brought under section 1331 or 1346 of Title 28 to
recover on any claim arising under this subchapter.9
(emphasis added). In Heckler v. Ringer, 466 U.S. 602, 614 (1984), the Supreme
Court of the United States explained that 42 U.S.C. § 405(h) makes 42 U.S.C. §
405(g), the Social Security program’s judicial review provision, “the sole avenue
for judicial review of all claims arising under the Medicare Act.” (internal
quotation marks omitted). See also, e.g., Potts, 897 F. Supp. 2d at 191 (“Under 42
U.S.C. § 405(h), which is made applicable to the Medicare Act by 42 U.S.C. §
1395ii, ‘[n]o findings of fact or decision of the [Secretary] shall be reviewed by
any person, tribunal, or governmental agency except as herein provided [in §
405(g).] . . . .’” (alterations in original)). In addition, Part C includes a provision
note 6.
8 In applying provisions of the Social Security Act to the Medicare Act, “any
reference . . . to the Commissioner of Social Security or the Social Security
Administration shall be considered a reference to the Secretary or the Department
of Health and Human Services, respectively.” 42 U.S.C. § 1395ii.
9 Revoking federal jurisdiction under 28 U.S.C. §§ 1331 (federal-question
jurisdiction) and 1346 (federal tort claims) “is intended to prevent circumvention
of the administrative process provided for the adjudication of disputes between
Medicare beneficiaries and the government (or agents of the government . . .).”
United States v. Blue Cross & Blue Shield of Alabama, Inc., 156 F.3d 1098, 1103
(11th Cir. 1998).
12
that expressly incorporates § 405(g) into the Medicare Advantage context. See 42
U.S.C. § 1395w-22(g)(5).
Section 405(g), in turn, limits jurisdiction of claims arising under the
Medicare Act to the federal courts but only after exhaustion of administrative
remedies:
Any individual, after any final decision of the
[Secretary of Health and Human Services] made after
a hearing to which he was a party . . . may obtain a
review of such decision by a civil action . . . . Such
action shall be brought in the district court of the
United States for the judicial district in which the
plaintiff resides, or has his principal place of business, or,
if he does not reside or have his principal place of
business within any such judicial district, in the United
States District Court for the District of Columbia.
(emphasis added). Therefore, 42 U.S.C. §§ 405(h) and 405(g), when read together,
create an exclusive review process for all claims arising under the Medicare Act,
including claims brought in the context of the Medicare Advantage program.
In Potts, a Medicare Advantage case similar to the one before us, the United
States District Court for the Southern District of New York explained that “[t]he
Supreme Court has interpreted the ‘claim arising under’ language in § 405(h)
‘quite broadly.’” 897 F. Supp. 2d at 192 (quoting Heckler, 466 U.S. at 615). The
Potts court further explained that “[a] claim ‘arises under’ the Medicare Act (1) if
‘both the standing and substantive basis’ for the claim is the Medicare Act, or (2) if
13
the claim is ‘inextricably intertwined’ with a claim for benefits under the Medicare
Act.” Id.
CMS requires MAOs to provide “[a] general description of procedural rights
(including grievance and appeals procedures)” to Medicare Advantage plan
enrollees. 42 C.F.R. § 422.111(f)(3). As required, Humana mailed Mrs. Reale an
Evidence of Coverage (EOC) every year outlining her rights and responsibilities.
Humana’s 2009 and 2010 EOCs both describe, in detail, the plan’s appeals
process, including an enrollee’s right to appeal to a federal district court after
completing the administrative review process. The EOCs also outline the
coordination of benefits under Medicare’s Secondary Payer rules. Both EOCs
clearly state that if Humana makes a payment to an enrollee for covered services,
Humana is “entitled to be fully subrogated to any and all rights you have against
any person, entity, or insurer that may be responsible for payment of medical
expenses and/or benefits related to your injury, illness, or condition.”
The Reales do not dispute that this mandatory review process applies to all
claims arising under the Medicare Act,10 nor do the Reales claim that they
10 The dissent, however, suggests 42 U.S.C. § 405(g) does not apply to MAOs
because Heckler “antedated the establishment of MAOs by many years.” Dissent
at 11. We do not rely on Heckler for the proposition that the process set forth in §
405(g) is applicable to MAOs. As we, and many courts before us, have explained,
§ 405(g) is made applicable to the Medicare Advantage program by the Medicare
Act itself (through 42 U.S.C. § 1395ii and 42 U.S.C. § 1395w-22(g)(5)). See also
42 C.F.R. § 422.562(b)(4) (MA enrollee appeal rights).
14
exhausted their reimbursement dispute. Instead, they put forth several arguments
why, in spite of these clear statutory jurisdictional requirements, this Court has
subject-matter jurisdiction:
1. Humana does not have a federal cause of action against the Reales;
therefore, this dispute does not arise under the Medicare Act.
2. Exhaustion is not required because this dispute over Humana’s
reimbursement rights is at most a grievance.
3. Humana waived the exhaustion requirement when it brought an action for
recovery in federal court.
We find these arguments, which we treat in turn, unavailing.
a. Arising under the Medicare Act
The Reales’ principal argument is difficult to parse but appears to be that the
court below properly exercised jurisdiction because MAOs, such as Humana, are
not provided with a federal cause of action under 42 U.S.C. § 1395w-22(a)(4), and
therefore, the Reales’ action arises under state law rather than under the Medicare
Act. The Reales contend that because the language found in § 1395w-22(a)(4) is
permissive,11 the provision authorizes, but does not compel, an MAO to charge an
11“Notwithstanding any other provision of law, [an MAO] may . . . charge . . . (A)
the insurance carrier, employer, or other entity which under such law, plan, or
policy is to pay for the provision of such services, or (B) such individual to the
extent that the individual has been paid under such law, plan, or policy for such
services.” 42 U.S.C. § 1395w-22(a)(4) (emphasis added).
15
entity or individual for payments when the MAO is a secondary payer. The circuit
court’s finding of subject-matter jurisdiction seems to be partially premised on this
argument as well.12
The Reales cite a handful of cases to support this assertion. See Parra v.
PacifiCare of Arizona, Inc., 715 F.3d 1146, 1146 (9th Cir. 2013) (finding that an
MAO did not have a federal private cause of action for reimbursement under §
1395mm(e)(4);13 therefore, the MAO’s reimbursement claim arose by virtue of its
contract with plan participants); Engstrom, 330 F.3d 786 (6th Cir. 2003) (finding
that a Medicare HMO, a precursor to Part C, did not have a federal right of action
under 42 U.S.C. § 1395mm(e)(4)); Konig v. Yeshiva Imrei Chaim Viznitz of Boro
Park Inc., 12-CV-467, 2012 WL 1078633 (E.D.N.Y. 2012) (remanding an MAO’s
federal action for reimbursement to state court because the MAO did not have a
federal cause of action under the Medicare Act); Ferlazzo v. 18th Ave. Hardware,
Inc., 929 N.Y.S.2d 690 (Sup. Ct. 2011) (finding that an MAO did not have a
federal right of action under 42 U.S.C. §§ 1395mm(e)(4) and 1395w-22(a)(4));
Nott v. Aetna U.S. Healthcare, Inc., 303 F. Supp. 2d 565 (E.D. Pa. 2004) (finding
12 The circuit court’s finding of jurisdiction was based on section 86.011, Florida
Statutes, and Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir. 2003).
13 See D. Gary Reed, Esq., Medicare Advantage Misconceptions Abound, Health
Law., October 2014, at 1, 3 (“42 U.S.C. § 1395mm governed the Medicare HMO
option that was the precursor to Medicare Part C. Not understanding this, several
decisions cite that provision when discussing the Medicare Part C option, instead
of or along with the correct Part C provision.”).
16
that a Medicare+Choice organization did not have a federal right of action under
42 U.S.C. §§ 1395mm(e)(4) and 1395w-22(a)(4)).
Conspicuously absent from these cases, however, is any analysis whatsoever
of the review process set forth in 42 U.S.C. § 405(g). Indeed, none of these cases
even so much as mentions § 405(g)’s mandatory exhaustion and exclusive federal
jurisdiction requirements, and the Reales are unable to point us to a single case in
which these requirements were actually considered and found to be inapplicable in
a dispute—such as the one before us now—involving an MAO’s right to
reimbursement.
Contrary to what the Reales would have us believe, courts have consistently
and overwhelmingly held that disputes concerning reimbursement of conditional
payments are claims for benefits that “arise under the Medicare Act” and must be
exhausted through the administrative appeals process before an enrollee invokes
judicial review in a federal court. See, e.g., Collins v. Wellcare Healthcare Plans,
Inc., 2014 WL 7239426 (E.D. La. 2014) (holding that a Medicare Advantage
enrollee’s state court action seeking a declaration that an MAO was not entitled to
reimbursement was a claim arising under the Medicare Act that must be exhausted
before any judicial review); Einhorn v. CarePlus Health Plans, Inc., 43 F. Supp. 3d
1329 (S.D. Fla. 2014) (holding that a Medicare Advantage enrollee’s Florida
Consumer Practices Act claim against an MAO for demanding reimbursement
17
greater than what was due was a claim arising under the Medicare Act that must be
brought through the administrative appeals process before it could be taken to
federal court); Cupp v. Johns, 2:14-CV-02016, 2014 WL 916489 (W.D. Ark. 2014)
(holding that a Medicare Advantage enrollee’s Arkansas subrogation law action
seeking a declaration that an MAO did not have a right to reimbursement arose
under the Medicare Act, and the appropriate remedy was to go through the
administrative review and appeals process required by the Medicare Act); Potts,
897 F. Supp. 2d 185 (holding that Medicare Advantage enrollees’ action seeking
declaratory judgment regarding MAO reimbursement rights pursuant to a New
York anti-subrogation statute arose under the Medicare Act and was subject to the
requirements of § 405(g)); Phillips, 953 F. Supp. 2d at 1081 (holding that a
Medicare Advantage enrollee’s California consumer protection claim against an
MAO seeking reimbursement was a disguised claim for benefits and arose under
the Medicare Act).
Given the extensive case law, we have no difficulty concluding that the
Reales’ declaratory action to determine Humana’s right to reimbursement is a
claim that must proceed exclusively pursuant to § 405(g). The law in both the
traditional Medicare14 and Medicare Advantage context is settled: “[c]laims
14An even larger body of case law in the traditional Medicare context holds that §
405(g) is the sole avenue for judicial review of Medicare reimbursement disputes.
See, e.g., Wilson ex rel. Estate of Wilson v. United States, 405 F.3d 1002 (Fed.
Cir. 2005); Maresh v. Thompson, 114 Fed. App’x. 152 (5th Cir. 2004) (per
18
concerning reimbursement of secondary payments are ‘inextricably intertwined’
with claims for benefits” and therefore such reimbursement claims arise under the
Medicare Act. See, e.g., Einhorn, 43 F. Supp. 3d at 1332 (quoting Potts, 897 F.
Supp. 2d at 192). Because the Reales did not obtain a final decision from the
Secretary, as required by § 405(g), their dispute is not subject to judicial review.
Further, if their dispute were subject to judicial review, jurisdiction would lie
exclusively in the federal courts.
b. Organization Determinations and Grievances
The Reales next argue, based upon Giesse v. Secretary of the Department of
Health & Human Services, 522 F.3d 697 (6th Cir. 2008), that what they
denominate as the “binary nature of the administrative review process which
distinguishes between ‘[organization determinations]15’ and ‘grievances’” operates
to exempt them from the strictures of the § 405(g) review process. According to
the Reales, this dispute over Humana’s reimbursement rights does not fit anywhere
within the definition of an organization determination contained in 42 C.F.R. §
422.566(b), so the dispute must instead be a grievance.16 Since the review process
curiam); Fanning v. United States, 346 F.3d 386 (3d Cir. 2003); Buckner v.
Heckler, 804 F.2d 258 (4th Cir. 1986).
15 The Reales—apparently adverting to Giesse—incorrectly use the outdated term
“agency determinations,” which appears in an older version of 42 C.F.R. §
422.566(b), in the place of “organization determinations.”
16 Relatedly, the Reales and the dissent both argue that Humana never actually
issued an organization determination because the letter Humana sent to the Reales
19
for a grievance is more limited than that of an organization determination, the
Reales claim this somehow exempts their dispute from the administrative review
process completely and allows them to adjudicate their “grievance” in state court
under state law. The Reales cite no authorities to support this proposition.
The Reales misapprehend the “organization determination” and “grievance”
distinction explained in Giesse and the relevant regulations. Humana’s
reimbursement determination is an organization determination under 42 C.F.R §
422.566(b)(3) because it is a “refusal to . . . pay for services” where there is a
primary payer. Cf. 42 C.F.R. § 422.564 (grievance procedures). However, even
assuming for the sake of argument that this dispute is a grievance, this Court would
not have subject-matter jurisdiction because, as explained above, this claim
unequivocally arises under the Medicare Act and must proceed through the review
process outlined in 42 U.S.C. §§ 405(g) and 405(h). As Giesse itself explains,
“[s]ection 405(h) ‘channels most, if not all, Medicare claims through this special
review system.’” 522 F.3d at 702 (quoting Shalala v. Illinois Council on Long
did not meet the requirements set forth in the regulations. While there may be
some merit to this argument, it does not convert the Reales’ action to determine
Humana’s reimbursement rights into a state court claim. The Reales’
reimbursement dispute remains a claim arising under the Medicare Act. Moreover,
if an MAO fails to provide an enrollee with a timely organization determination in
compliance with the relevant regulations, “this failure itself constitutes an adverse
organization determination and may be appealed.” 42 C.F.R. § 422.568(f). The
EOCs also explain that if an organization determination is not timely received, the
enrollee has the right to appeal.
20
Term Care, 529 U.S. 1 (2000)). This is true of both organization determinations
and grievances.
The difference explained by the court in Giesse between an organization
determination and a grievance is the extent of the appeals process. An
organization determination is subject to judicial review once an enrollee receives a
final decision from the Secretary after exhausting all administrative appeals. Id. at
704. “Grievances, unlike organization determinations, do not have additional
levels of review beyond the [MAO]. As there are no additional levels of review
beyond the [MAO], there is no ‘final decision’ by the secretary that allows for
judicial review” Id. (citations omitted). In other words, there is no judicial review
of an MAO’s grievance determination. This in no way suggests that judicial
review of a grievance is available in state court under state law for a claim arising
under the Medicare Act.
c. Waiver
In a final effort to invoke the subject-matter jurisdiction of this Court over
the claim made by them in this case, the Reales argue that Humana waived “its
right” to require the claim to proceed through the Medicare appeals process by
bringing an action for recovery against Mrs. Reale in federal court.17 This
17 The dissent similarly argues that Humana engaged in conduct that cleared the
way for the court below to determine its reimbursement rights. Dissent at 13-14.
This argument seems to be premised on a law review article’s claim that MAOs are
responsible for their own debt collections. Id. at 11-13 (quoting Jennifer Jordan, Is
21
argument is also unavailing. As we have already explained, “[j]udicial review of
claims arising under the Medicare Act is available only after the Secretary renders
a ‘final decision’ on the claim, in the same manner as provided in 42 U.S.C. §
405(g)” Potts, 897 F. Supp. 2d at 191 (quoting Heckler, 466 U.S. at 605). The
Reales, relying on the United States Supreme Court case Heckler, correctly state
the two elements required for a final decision: “(1) a non-waivable requirement of
presentation of any claim to the Secretary and (2) a requirement of exhaustion of
administrative review, which the Secretary may waive.” See also Potts, 897 F.
Supp. at 192. The Reales then incorrectly assert, without citation to authority, that
Humana is placed in the position of the Secretary and therefore (1) the Reales
satisfied the non-waivable presentation requirement by presenting their claim to
Humana and (2) Humana waived the exhaustion requirement by filing an action in
federal court.
The Reales’ assumption that Humana replaces the Secretary in the appeals
process finds no support in any of the Medicare Part C statutes or regulations, nor
is it supported by the detailed explanation of the process set forth in Humana’s
Medicare Advantage Entitled to Bring a Private Cause of Action Under the
Medicare Secondary Payer Act?, 41 Wm. Mitchell L. Rev. 1408, 1414-16, 1439-40
(2015)). How this premise leads to the conclusion that a state court has jurisdiction
over a Medicare reimbursement dispute is unclear, especially in light of the law
review article’s explanation that under both Medicare and Medicare Advantage
“[s]hould any beneficiary disagree with a benefit determination, he must exhaust
the administrative remedies provided.” Jordan, supra, at 1413.
22
EOC. It defies logic to substitute Humana in the place of the Secretary as the
arbiter of a dispute between Humana and its enrollee. To obtain federal judicial
review, the Reales must present their claim to the Secretary, not to Humana, to
render a final decision. See 42 U.S.C. § 1395w-22(g)(5).18
II. THE STATE LAW SUBROGATION CLAIM
The Reales argue that their action for a declaration of Humana’s
reimbursement rights is governed by Florida subrogation law, including Florida’s
collateral sources of indemnity statute, section 768.76, Florida Statutes (2012).
The circuit court agreed. Because the clear language of the statute excludes
benefits received under the Medicare Act, we find that the statute is inapplicable
on its face. In addition, Florida subrogation law is expressly preempted by Part
C’s broad and unambiguous preemption provision, 42 U.S.C. § 1395w-26(b)(3).
As the Reales’ action cannot be brought under state law, “[t]his reinforces the
Court’s conclusion that [the Reales’] claims concerning [Humana’s]
reimbursement rights necessarily arise under the Medicare Act.” See Potts, 897 F.
Supp. 2d at 195.
a. The Plain Language of Section 768.76
18Although Humana does not take the place of the Secretary and may not waive
the exhaustion requirement, its conduct has not necessarily been aboveboard. See
supra note 16. At oral argument, counsel for Humana stated that if this Court finds
there is a lack of subject-matter jurisdiction, Humana will reissue another
determination letter, which will restart the time period for pursuing the
administrative appeals process.
23
The court below found section 768.76, Florida Statutes (2012), applicable in
determining Humana’s right to reimbursement. Section 768.76(4) provides a
formula for calculating the amount to be reimbursed when a collateral source
payment is made under a right of subrogation or reimbursement:
(4) A provider of collateral sources that has a right of
subrogation or reimbursement that has complied with this
section shall have a right of reimbursement from a
claimant to whom it has provided collateral sources if
such claimant has recovered all or part of such collateral
sources from a tortfeasor. Such provider's right of
reimbursement shall be limited to the actual amount
of collateral sources recovered by the claimant from a
tortfeasor, minus its pro rata share of costs and
attorney's fees incurred by the claimant in recovering
such collateral sources from the tortfeasor. In
determining the provider's pro rata share of those costs
and attorney's fees, the provider shall have deducted from
its recovery a percentage amount equal to the percentage
of the judgment or settlement which is for costs and
attorney's fees.
(emphasis added). Relying on this formula, the court calculated Humana’s
reimbursement amount to be $3,685.0319 instead of the full $19,155.41 Humana
requested in its written letter to the Reales’ counsel.
The lower court’s finding flies in the face of the plain language of the
statute, which expressly excludes consideration of Medicare benefits as a collateral
source in two separate provisions:
19 See supra note 2.
24
(a) “Collateral sources” means any payments made to the
claimant, or made on the claimant's behalf, by or
pursuant to:
1. The United States Social Security Act, except Title
XVIII and Title XIX; any federal, state, or local income
disability act; or any other public programs providing
medical expenses, disability payments, or other similar
benefits, except those prohibited by federal law and those
expressly excluded by law as collateral sources.
§ 768.76(2)(a)(1), Fla. Stat., (emphasis added).
(b) Notwithstanding any other provision of this section,
benefits received under Medicare, or any other federal
program providing for a Federal Government lien on or
right of reimbursement from the plaintiff's recovery, the
Workers' Compensation Law, the Medicaid program of
Title XIX of the Social Security Act or from any medical
services program administered by the Department of
Health shall not be considered a collateral source.
§ 768.76(2)(b), Fla. Stat., (emphasis added).
The Reales completely ignore section 768.76(2)(a)(1) and argue that section
768.76(2)(b) does not apply because Humana did not provide “Medicare
conditional benefits,” and “Humana is not Medicare.” These arguments cannot be
harmonized with the plain language of the statute. As explained above, Humana is
a Medicare Advantage organization that provides Medicare benefits to enrollees
in its Medicare Advantage plans. See 42 U.S.C. § 1395w-21(a). The benefits paid
on behalf of the Reales are indisputably “benefits received under Medicare[.]” The
plain language of § 768.76(2)(b) makes clear that such benefits “shall not be
25
considered a collateral source.” Further, Humana’s payments are expressly
excluded under section 768.76(2)(a)(1) because they are payments made pursuant
to Part C of Title XVIII of the Social Security Act. The circuit court erred in
finding section 768.76 applicable to determine the extent of Humana’s
reimbursement rights.
b. Express Preemption
The court below found that “Florida Subrogation Law, including the
provisions of Florida Statute § 768.76, is applicable to determine the extent of
Defendant Humana’s right to reimbursement from the Reale settlement proceeds.”
To the extent that “Florida Subrogation Law” apart from section 768.76 may be
applicable to determine Humana’s right to reimbursement, it is preempted by the
broad, express preemption clause in Part C of the Medicare Act:
(3) Relation to State laws
The standards established under this part shall supersede
any State law or regulation (other than State licensing
laws or State laws relating to plan solvency) with respect
to MA plans which are offered by MA organizations
under this part.
42 U.S.C. § 1395w-26(b)(3); see also 42 C.F.R. § 422.402; Potts, 897 F. Supp. 2d
at 195 (finding New York anti-subrogation law preempted by 42 U.S.C. § 1395w-
26(b)(3)); cf. Smith v. Travelers Indem. Co., 763 F. Supp. 554 (M.D. Fla. 1989)
(finding that an older version of Florida’s collateral source statute, section
26
627.7372, Florida Statutes (1987), was preempted by section 1395y(b)(1) of the
Medicare Act).
When federal law contains an express preemption clause, our task is to
“focus on the plain wording of the clause, which necessarily contains the best
evidence of Congress’ preemptive intent.” Chamber of Commerce of U.S. v.
Whiting, 131 S. Ct. 1968, 1977 (2011) (quoting CSX Transp., Inc. v. Easterwood,
507 U.S. 658 (1993)). “[W]hen Congress has made its intent known through
explicit statutory language, the courts’ task is an easy one.” English v. Gen. Elec.
Co., 496 U.S. 72 (U.S. 1990). This is the case here. Part C’s preemption provision
is clear and unambiguous: the standards established under Part C supersede any
state law or regulation, with very few exceptions, none of which apply here.
In Potts, the court explained that “[f]or the purposes of the preemption
provision, a standard is a statutory provision or a regulation promulgated under the
[Medicare Act] and published in the Code of Federal Regulations.” 897 F. Supp.
2d at 195 (quoting New York City Health & Hosps. Corp. v. WellCare of New
York, Inc., 801 F. Supp. 2d 126, 140 (S.D.N.Y. 2011)). “Here, the federal statute
contains extensive provisions with respect to reimbursement rights of MA
organizations in the secondary payer context.” Id. at 196. In addition, the Part C
regulations eliminate all doubt that the standards in Part C govern MAO
reimbursement rights, preempting any state law affecting such rights:
27
(f) MSP rules and State laws. Consistent with § 422.402
concerning the Federal preemption of State law, the rules
established under this section supersede any State laws,
regulations, contract requirements, or other standards that
would otherwise apply to MA plans. A State cannot take
away an MA organization's right under Federal law and
the MSP regulations to bill, or to authorize providers and
suppliers to bill, for services for which Medicare is not
the primary payer. The MA organization will exercise the
same rights to recover from a primary plan, entity, or
individual that the Secretary exercises under the MSP
regulations in subparts B through D of part 411 of this
chapter.
42 C.F.R. § 422.108(f); see also Potts, 897 F. Supp. 2d at 195. Therefore, because
the explicit statutory language of Part C’s preemption provision preempts any state
law with respect to an MAO’s reimbursement rights, the circuit court erred in
determining the extent of Humana’s reimbursement pursuant to Florida
subrogation law.
CONCLUSION
For the foregoing reasons, we hold that the circuit court erred in its finding
of subject-matter jurisdiction and its determination of Humana’s reimbursement
rights pursuant to Florida subrogation law, including Florida’s collateral sources of
indemnity statute. We vacate the judgment below and reverse and remand with
instructions to dismiss the complaint for lack of jurisdiction.
ROTHENBERG, J., concurs.
28
Humana Medical Plan, Inc. v. Reale
Case No. 3D12-2883
29
SALTER, J. (concurring in part, dissenting in part).
I. Concurrence Regarding the Collateral Source Statute
I concur with that portion of the majority’s opinion holding that the Florida
collateral source statute, section 768.76, Florida Statutes (2012), expressly
excludes the claim raised by Mr. and Mrs. Reale. Section 768.76(2)(b) defines
“collateral sources,” those subject to the provisions of the statute, as excluding
“benefits received under Medicare, or any other federal program providing for a
Federal Government lien on or right of reimbursement from the plaintiff’s
recovery . . . .” Although there are important differences between the federal
Department of Health and Human Services’ administration of Parts A and B
Medicare, and the manner in which Humana Medical Plan, Inc. (“Humana”), and
other private, for-profit Medicare Advantage Organizations (“MAOs”) operate
under Part C of Medicare, “Medicare Advantage is merely an alternative to
traditional Medicare Parts A and B. It is still Medicare, governed by the Medicare
Act and funded through the Medicare Trust Fund.” Jennifer Jordan, Is Medicare
Advantage Entitled to Bring a Private Cause of Action Under the Medicare
Secondary Payer Act?, 41 Wm. Mitchell L. Rev. 1408, 1409 (2015) (footnotes
omitted).
30
The exclusion in section 768.76(2) applies to the MAO-paid benefits at issue
in the present case, and that conclusion requires a reversal of the final judgment
and remand to the trial court.
However, Humana’s status as a non-governmental, for-profit entity permits
it to make private business choices regarding its remedies (unlike the federal
agencies administering Parts A and B of Medicare). In the present case, I conclude
that the financial and business decisions concededly made by Humana regarding
the Reales’ case should control the further proceedings on remand following our
reversal of the judgment below.
II. Dissent Regarding Circuit Court Jurisdiction
Given the unusual record before us and the additional authority provided by
Humana itself, I respectfully dissent from the majority’s conclusion that reversal
and remand must be accompanied by a directive from this Court to dismiss the
Reales’ complaint for lack of jurisdiction. It may now be appropriate for the trial
court to dismiss Humana as a party on remand, but the Reales also sought
declaratory relief regarding, and recovery of, the funds in their attorney’s trust
account.
The Reales are in their sixth year of attempting to resolve a common legal
problem that should have a “just, speedy, and inexpensive”20 resolution. Their
20 Fla. R. Civ. P. 1.010(a).
31
common legal problem became, inadvertently, a case study in the relationships
between federal and state courts in a subcategory of Medicare “Secondary Payer”
disputes. The question before the trial court, and now us, is how a for-profit,
Florida-licensed MAO—the appellant, Humana—and its enrolled member (Mrs.
Reale) may proceed when they disagree regarding Humana’s rights of
reimbursement from the enrolled member’s personal injury settlement proceeds.
If Humana had issued an “organization determination”21 as provided by
federal regulation, if Humana had timely advised the Reales of their remedies to
dispute such a determination, if Humana had not filed a federal lawsuit against the
Reales before the state court lawsuit (and then dismissed that federal lawsuit), and
if Humana had not obtained a federal judgment for twice the amount of its claimed
reimbursement from the insurer which paid the settlement, I would have a different
view of the case. As the record discloses, however, Humana proceeded in a
different direction.
A. Facts and Procedural History
1. The Parties and the State Tort Suit
As an MAO, Humana administers a “Medicare Advantage health plan.” It is
a for-profit entity and a wholly-owned subsidiary of one of the nation’s largest
health insurers, Humana, Inc. MAOs are governed by federal statutes within Part
21 See 42 C.F.R. §§ 422.566 - .626 (2009).
32
C of Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395w-21 – 1395w-28
(2009).
Mary Reale sustained injuries from a fall at Hamptons West Condominium
in January 2009. At the time, she was 86 years old and enrolled in Humana’s
“Gold Plus HMO H1036-054C” Medicare Advantage plan. Between January and
April 2009, she obtained treatment for her injuries, including total hip replacement
surgery and extensive rehabilitative therapy. Humana paid $19,155.41 for those
and other medical charges arising from her injury. Later in 2009, Mrs. Reale and
her husband (a co-appellee here), August Reale, filed a circuit court personal injury
suit against the condominium association and two individuals alleged to have been
responsible for her injury. The condominium association put its liability insurance
carrier, Western Heritage Insurance Company (“Western Heritage”), on notice of
the claim.
Western Heritage ultimately agreed to settle the Reales’ claim against the
condominium association for $115,000.00, with the two other defendants or their
insurers contributing an additional $20,000.00. Counsel for the Reales in the
personal injury lawsuit disclosed to Humana the prospects for settlement and
requested information on the amounts paid by Humana for Mrs. Reale’s medical
treatment. There followed a series of letters between Humana “cost management”
personnel (and, thereafter, Humana’s attorneys) regarding the appropriate amount
33
necessary to settle Humana’s reimbursement claim. At no point did Humana issue
any document identified as an “organization determination”22 or advise the Reales
and their counsel that the disagreement regarding the amount to be reimbursed was
(a) final or (b) subject to an exclusive federal administrative process and specific
appellate remedies.23
To the contrary, Humana’s attorney’s letter of April 26, 2010, asserted that
Humana would “engage in an interactive process of negotiating resolution of this
lien to avoid costly litigation.” (Emphasis provided). Three days later, Humana’s
attorney advised that:
Also, based on our conversation, it seems that a dispute is going
to exist with respect to any recovered funds to the extent of the Plan’s
lien. As such, you have an obligation under the Florida Rules of
Professional Conduct to hold the funds to which the Plan asserts an
interest until we have resolved our dispute.
After reviewing the law and consulting with your client, please
advise of your client’s position. While my client is willing to litigate
this matter, it stands ready to discuss a resolution to the case.
(Emphasis provided).
2. The First Humana Federal Suit
After a brief further exchange of emails, Humana filed a federal lawsuit
against the Reales and their attorney on May 7, 2010, seeking declaratory relief,
recovery of the reimbursement amount under the Medicare Secondary Payer Act
22 42 C.F.R. § 422.566.
23 42 C.F.R. § 422.576 (2009).
34
(the “MSP Act”),24 and reimbursement under Mrs. Reale’s Gold Plus HMO plan as
a matter of “express contract, a contract implied in law or a contract implied in
fact.”25 The lawsuit named Mrs. Reale and her attorney (“as a stakeholder”) as
defendants. To keep the four lawsuits relating to this dispute separate, I will
identify the Reales’ 2009 state court personal injury lawsuit as the “State Tort
Suit,” and Humana’s 2010 federal lawsuit against Mrs. Reale and her attorney as
the “First Humana Federal Suit.”
3. The State Settlement Proceeds Suit
Only four weeks after Humana filed the First Humana Federal Suit, the
Reales filed the state court lawsuit that gave rise to the final judgment under
review here: Reale v. Humana Med. Plan, Inc., No. 10-31906-CA-30 (Fla. 11th
Cir. Ct. filed June 4, 2010). I will refer to this third lawsuit in the series as the
“State Settlement Proceeds Suit.” By this time, the Reales and their attorney had
obtained an order in the State Tort Suit whereby the full amount claimed by
Humana, $19,155.41, had been placed in the attorney’s trust account pending
resolution of the dispute, and the remaining settlement proceeds were disbursed to
the Reales and their attorney.
24 42 U.S.C. § 1395y(b) (2009), discussed in detail below.
25 Complaint at 6, Humana Med. Plan, Inc. v. Reale, No. 10-21493-Civ-MGC
(S.D. Fla. filed May 7, 2010), ECF No. 1.
35
In the State Settlement Proceeds Suit, the Reales sought a declaratory
judgment regarding the respective interests of Mrs. Reale, her husband, her
attorney, and Humana in the escrowed settlement funds. The Reales asserted that
Florida’s collateral sources statute, section 768.76, Florida Statutes (2012),
applied, providing apportionment of the settlement proceeds based on pro rata
reductions for the legal fees incurred in obtaining those proceeds and for the ratio
of the actual recovery to the total value of the case had it gone to trial.
In response to the State Settlement Proceeds Suit, Humana filed a motion to
dismiss for lack of subject matter jurisdiction and under the “first to file” rule
(based on the fact that the First Humana Federal Suit was filed a month before the
State Settlement Proceeds Suit). The circuit court below then stayed the State
Settlement Proceeds Suit in deference to the First Humana Federal Suit.
Subsequently, Humana’s motion to dismiss was denied. At the circuit court
hearing on Humana’s motion to dismiss, however, Humana’s counsel told the
court that the State Settlement Proceeds Suit “is now moot due to the fact that
Humana is no longer pursuing reimbursement from Mr. and Mrs. Reale
personally.”
Consistent with that representation, Humana voluntarily dismissed the First
Humana Federal Suit against Mrs. Reale and her attorney in November 2011.26
26 Notice of Voluntary Dismissal by Human Medical Plan, Inc., Humana Med.
Plan, Inc. v. Reale, No. 10-21493-Civ-MGC (S.D. Fla. filed Nov. 9, 2011), ECF
36
The filing and prosecution of that lawsuit by Humana against Mrs. Reale for over
18 months bears significance in the analysis, however, because it demonstrates that
Humana never required or pursued any preliminary administrative remedies
relating to its reimbursement dispute with Mrs. Reale. Instead, Humana pursued
immediate recourse to litigation. After Humana voluntarily dismissed the First
Humana Federal Suit, the circuit court lifted its stay of the State Settlement
Proceeds Suit.
4. The Second Humana Federal Suit and the
Western Heritage Appeal
Humana’s change in strategy became clear when, in January 2012, Humana
sued Western Heritage in federal court for failing and refusing to pay Humana’s
claimed reimbursement amount as “primary payer” of the settlement proceeds
under 42 U.S.C. § 1395y(b)(2), the Medicare Secondary Payer (“MSP”) Act.
Humana also sought to recover double its reimbursement claim, i.e., $38,310.82,
from Western Heritage as a remedy for non-payment by Western Heritage under
section 1395y(b)(3).
Consistent with its change in strategy, Humana did not join the Reales or
their attorney in this lawsuit (the “Second Humana Federal Suit”). Humana
prevailed against Western Heritage on both of these claims. Humana Med. Plan,
Inc. v. W. Heritage Ins. Co., 94 F. Supp. 3d 1285 (S.D. Fla. 2015). Humana filed
No. 59.
37
that opinion in this Court as additional authority promptly after it was issued.
Western Heritage has appealed the final judgment against it,27 but no stay has been
entered in the federal appeal.
5. Final Judgment and Appeal in the State Settlement
Proceeds Suit
In the meantime, and notwithstanding Humana’s decision to pursue
Western Heritage instead of the Reales, Humana’s answer and affirmative defenses
filed in the State Settlement Proceeds Suit (after Humana had dismissed the First
Humana Federal Suit) maintained that, among other matters, the Florida collateral
sources statute was preempted by federal law; that the Reales were not entitled to
relief because they had not exhausted their federal administrative remedies; that
their claims had to be brought in federal court; and that Humana was entitled to the
entire amount of its reimbursement claim, with no allowance for attorney’s fees or
costs, because Humana had engaged in a lawsuit to compel reimbursement.
The state trial court granted the Reales’ motion for a final declaratory
judgment, concluding that it had subject matter jurisdiction and that “Florida
Subrogation Law, including the provisions of Florida Statute § 768.76, is
applicable to determine the extent of Defendant Humana’s right to reimbursement
from the Reale settlement proceeds.” The final declaratory judgment determined
27W. Heritage Ins. Co. v. Humana Med. Plan, Inc., No. 15-11436 (11th Cir. filed
Apr. 2, 2015).
38
that (1) Mrs. Reale had recovered 33.75% of the full value of her claims, (2)
Humana’s claim for reimbursement should be reduced by applying the same ratio,
(3) Mrs. Reale’s recovery had been further reduced by the attorney’s fees and costs
incurred in obtaining the settlement, and paid by her from the proceeds, (4)
Humana’s claim for reimbursement should also bear a pro rata percentage of such
attorney’s fees and costs, and (5) Humana’s reimbursement after such adjustments
would be $3,685.03 of the $19,155.41 advanced. This appeal followed.
To recap, Humana’s otherwise straightforward reimbursement claim has
included two federal lawsuits brought by Humana, and a resulting federal appeal,
as well as proceedings in the two state court lawsuits and this appeal. The
aggregate legal bills are obviously many multiples of the original reimbursement
claim. The judicial system’s objective of a “just, speedy, and inexpensive”
determination of the dispute has not been achieved.
B. Analysis
1. Mootness
Though agreeing that the judgment below must be reversed because of the
inapplicability of the Florida collateral sources statute, on remand I would direct
the trial court to consider whether the State Settlement Proceeds Suit is moot as to
Humana, based on Humana’s counsel’s declaration in open court that it would not
pursue recovery against the Reales further and on Humana’s complete recovery
39
(and more) against Western Heritage on Humana’s underlying reimbursement
claim. The disposition of the $19,155.41 in the Reales’ attorney’s trust account
deposited over five years ago would then be ripe for determination. That part of
the controversy has not been concluded to the point that “a judicial determination
can have no actual effect.” Philip J. Padovano, Florida Appellate Practice § 1.4
(2007 ed.) (citing Godwin v. State, 593 So. 2d 211 (Fla. 1992)).
2. The MSP Provisions as Applied to an MAO
Humana argues that it is entitled to enforce the exclusive federal jurisdiction
provision applicable to the review of governmental decisions under 42 U.S.C. §
405(g). But the decision initially cited for that proposition, Heckler v. Ringer, 466
U.S. 602 (1984), antedated the establishment of MAOs by many years. Humana
has not addressed its special status as an MAO and its unusual actions in this case.
Unlike the Centers for Medicare & Medicaid Services (“CMS”), the
governmental administrator of traditional Medicare on behalf of the Secretary of
Health and Human Services, Humana is a for-profit, risk-taking entity that can
(and does) pursue MSP Act reimbursement claims on its own. Humana and other
MAOs retain the proceeds of those recoveries for their own account, as opposed to
CMS (which obtains such reimbursements for return to the Medicare Trust Fund).
A 2015 law review article explains this difference:
Medicare is statutorily prohibited from making payments when
there is a primary payer, with the exception of payments made when
40
primary payment is not timely made, conditioned upon reimbursement
should primary payment responsibility be determined. 42 U.S.C. §
1395w-22(a)(4) extends secondary payer status to Medicare
Advantage by virtue of reference to payments made pursuant to 42
U.S.C. § 1395y(b)(2). But the statute does not incorporate any of the
recovery provisions available at 42 U.S.C. § 1395y(b)(2)(B)(iii) or
(iv) expressly granted to the United States. Instead, the statute
provides that an MAO “may” charge the responsible party or a
beneficiary who has received payment for reimbursement of payments
for which Medicare is prohibited from making or had made
conditionally. It is interesting to note that this permission given to
MAOs to bill for reimbursement appears discretionary, whereas
traditional Medicare conditional payments made by the Secretary
“shall be” conditioned on reimbursement. If Congress were truly
concerned about the recovery of payments made from the capitated
payments to MAOs, it could have easily required that an MAO bill the
responsible party, but instead, it merely granted MAOs permission to
do so.
42 C.F.R. § 422.108 specifically covers MSP procedures for
MAOs. It states that CMS does not pay for services when Medicare is
not primary and lays out responsibilities of MAOs to identify and
coordinate benefits with primary payers, reemphasizing the idea that
MAOs are making payments on behalf of CMS. Interestingly,
subsection (b) states that the “MA organization must” identify primary
payers and amounts owed, thereby demonstrating that Congress is
capable of using mandatory language. Yet subsections (c), (d), and
(e) employ discretionary language: “[an] MA organization may bill”
for covered Medicare services. When used in such close proximity,
one cannot help but infer that the word selection was intentional.
It stands to reason that the government can require its
contractors to consistently coordinate benefits in the same manner as
the traditional program so that all beneficiaries receive the same base-
level benefits and exclusions. But federal funds are not in play with
regard to the MAO recovery itself since such reimbursements are not
returned to the Medicare Trust Fund. Part of the risk sharing is that
MAOs are paid a fixed capitation rate, whether beneficiaries seek
medical treatment or not, and whether MAOs collect from third
parties or not. The manner and extent to which an MAO elects to
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pursue its third-party recoveries are business expenses that should
have factored into its benchmarks when bidding to be an MAO. How
MAOs conduct their ordinary course of business determines how
much profit they can make contracting as an MAO and is not
Congress’s concern, so long as Medicare beneficiaries receive the
guaranteed benefits provided by law. If the principles of Medicare
Advantage were founded on the idea that private sector insurance
companies can deliver health care benefits more efficiently than the
federal government, one has to assume that they are just as efficient
and knowledgeable about recovering liens from responsible third
parties.
...
Any payment made by Medicare in contravention to the MSP [Act] is
by definition an overpayment, and no different from any other
payment made by the U.S. government that should not have been
made. While the MSP [Act] contains some very specific recovery
rights, at all times they are overpayments subject to standard federal
debt recovery laws. If a conditional payment reimbursement demand
by CMS goes unanswered for 180 days, it must be referred to the
Department of Treasury pursuant to the Debt Collection Improvement
Act of 1996. If Treasury is unsuccessful in obtaining reimbursement,
the claim is referred back to CMS or to the Department of Justice if it
believes that litigation under the MSP [Act] would be successful in
recovering the debt.
In contrast, MAOs are responsible for their own debt
collections, as they do not have access to the Departments of Treasury
or Justice. In practice, most MAOs utilize ordinary collection
agencies allegedly specializing in health care recoveries. And like
most collection agencies, they are unrelenting in their demands for
payment with little regard to the legalities that give rise to the claim.
Jordan, supra at 1, 1414-16, 1439-40 (emphasis provided; footnotes
omitted).
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As an entity responsible for its own debt collection, Humana may
have been free to file its own action against Mrs. Reale and her attorney
without issuing an organization determination, notifying Mrs. Reale of her
appellate remedies, or invoking federal administrative remedies. However,
Humana’s election of a different remedy against a different party (Western
Heritage), and its announcement to the trial court below that Humana would
not pursue recovery against the Reales, cleared the way for the trial court to
determine what part, if any, of the escrowed settlement funds should be
released to the Reales.
3. Other MAO-Enrollee Reimbursement Cases
But for the extraordinary actions taken by Humana in the present case28
I might reach a different result.29 I reiterate that my analysis regarding the
28 Humana’s strategy in taking those actions, as a private entity entitled to pursue
its own collection strategy, makes obvious business sense. Humana has chosen not
to pursue its own enrollee member (now over 90 years old) for reimbursement,
electing instead to pursue a double-the-claim recovery against an insurer as
primary payer. Humana also established its right to a private right of action and
double recovery against primary payers (rather than its enrollees) under the MSP
Act in In re Avandia Mktg., Sales Practices & Prod. Liab. Litig., 685 F.3d 353 (3d
Cir. 2012).
29 The jurisdictional analysis in a more typical MAO reimbursement dispute is
detailed in Einhorn v. CarePlus Health Plans, Inc., 43 F. Supp. 3d 1329 (S.D. Fla.
2014). In that case, however, the MAO did not start a federal lawsuit to collect
reimbursement from its enrollee, voluntarily dismiss that lawsuit, and abandon the
claim against the enrollee in favor of a double recovery in a separate MSP Act
lawsuit against a primary payer, leaving escrowed funds in a resulting limbo.
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present case is based on the private, non-governmental business decisions
permitted for MAOs in seeking reimbursement for their own account rather
than for reimbursement to the Medicare Trust Account, and on the unusual
record presented to us.
III. Conclusion
I concur with the majority’s determination that section 768.76, Florida
Statutes (2012), is inapplicable to Humana’s claim for reimbursement
against the Reales, and that the final judgment must be reversed and
remanded.30 I respectfully dissent, however, with regard to the actions to be
taken on remand. The trial court should be permitted to consider and
determine whether Humana’s dismissal of its first federal lawsuit, its
representations to the trial court and the Reales, and its judgment against
Western Heritage, warrant the dismissal of Humana as a party in the state
action for declaratory relief, and the trial court should adjudicate the rights
of the Reales, if any, to the settlement funds held these many years in their
attorney’s trust account.
30 I also concur with my colleagues’ reference, authored originally by a number of
federal appellate judges, to the Medicare Act as “one of the most completely
impenetrable texts within the human experience.” (Majority op. at 6, citing Parra v.
PacifiCare of Arizona, Inc., 715 F.3d 1146, 1149 (9th Cir. 2013) (quoting Cooper
Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3d Cir. 2010)).
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