Can a Medicare Advantage Plan Assert a Greater Right of Recovery for Conditional Payments than Traditional Medicare? Optum Seems to Think So

The Non-Group Health Plan (NGHP) industry is not only experiencing increased recovery demands from Medicare Advantage Plans (MAPs) as of recently, but are also experiencing MAPs attempting to assert a greater right of recovery for conditional payments than traditional Medicare would have available. As a foundational matter, there are certain parameters laid out in the Medicare Secondary Payer Act (MSP) and corresponding regulations which limit Medicare’s recovery, which include but are not limited to: 1) Medicare is capped in its recovery at the total settlement amount minus any procurement costs (See 42 CFR 411.37); 2) Medicare may only take action for conditional payments unless it files a complaint not later than 3 years after the date of the receipt of notice of a settlement, judgment, award or other payment (See 42 USC 1395y(b)(2)(B)(iii)); and 3) Medicare must demonstrate that the primary plan has or had responsibility to make payment with respect to such item or service that Medicare is seeking reimbursement for (See 42 USC 1395y(b)(2)(B)(ii)).

Just recently, our client received a conditional payment demand request from Optum Medicare Advantage on a liability claim. Despite the liability claim settling for only approximately $3,000 dollars, Optum continues to assert to our client that the full amount of the conditional payment demand amount is due, roughly $50,000. Franco Signor on behalf of the client has asserted that Optum is capped in its recovery for conditional payments at the total settlement amount pursuant to 42 CFR 411.37. Additionally, as noted in the December 5, 2011 CMS memorandum, pursuant to 42 CFR 422.108 MAPs will exercise the same rights of recovery under the MSP as the Secretary. Accordingly, MAPs may not recover more than the primary payment/settlement amount. However, Optum concluded otherwise as demonstrated by the following statement:

“I agree that it creates a challenging situation for you, but the law provides both a right and a remedy to Medicare.  The Medicare Secondary Payor Act is clear that the liability is on parties receiving funds as well as those parties who have made payments.  Clearly, payments were made; no dispute there.  My office has a responsibility to recover and while this might have been a small matter for your side, it is clearly not a de minimus matter for my clients/Medicare.”

Congress and CMS never intended for MAPs to have a greater recovery right than traditional Medicare. CMS has made clear that pursuant to 42 CFR 422.108 that MAPs have the same recovery rights as traditional Medicare. Currently, Medicare Advantage Plan conditional payment recoveries are in a state of the “Wild Wild West.” It is important to remember that MAP Conditional Payment Demands are not issued from Traditional Medicare or the BCRC/CRC. MAPs generally pursue their own MSP conditional payment recoveries (or they may use a subrogation company) and as a result, we have widely varied conditional payment recovery practices nationwide from the thousands of MAPs across the country. Some MAPs are more aggressive in their recovery attempts than others and attempt to bully a primary payer into believing that MAPs have a greater right of recovery than traditional Medicare. Other MAPs, such as Humana or MSP Recovery LLC on behalf of various MAPs, have filed numerous lawsuits against primary plans nationwide for an MSP double damages private cause of action for an alleged failure to reimburse the MAP. As a result of this litigation, we now have two Circuits, the 3^rd and 11^th Circuit, which have found in favor of MAPs having the same conditional payment recovery rights as traditional Medicare: the right to pursue double damages for unreimbursed conditional payments. But, the rest of the Circuits have not spoken to this issue, so MAPs’ recovery rights in these other jurisdictions are unclear.

The MAP conditional payment recovery process needs streamlining and consistency. We need a reminder from CMS to MAPs that MAPs cannot exercise a greater right to recover than traditional Medicare. We also need MAPs to allow for primary plans to be afforded a conditional payment appeal process, as primary plans were afforded under the SMART Act with traditional Medicare. Lastly, we need passage of the Provide Accurate Information Directly (PAID) Act, which would allow primary plans to receive enrollment data with respect to Medicare Advantage and Part D plans so that primary plans are not unfairly served with a double damages lawsuit for MAP conditional payments that the primary plan was not aware of.  

We urge our clients to 1) Support the PAID Act. More information on the PAID Act can be found here; and 2) Engage an expert to assist in these MAP conditional payment recoveries where the MAP attempts to step outside its allowable bounds under the MSP. 

About the Author

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP

Heather is Chief Legal Officer for Franco Signor LLC, the nation's compliance authority for Medicare Secondary Payer (MSP) matters. She has lectured on MSP compliance to the workers' compensation and liability insurance communities at conferences, associations, and individual offices nationwide. She is a regularly published author on court decisions and legislative reforms involving Medicare Set-Asides, conditional payments, and Mandatory Insurer Reporting issues. Understanding that compliance with the Medicare Secondary Payer Act can be at times complex and frustrating for those that handle claims with Medicare beneficiaries, Heather's goal is to speak and write with the primary goal being simple and understandable solutions to compliance. 

Heather can be reached at Heather.Sanderson@francosignor.com
Franco Signor's Blog can be found at: http://www.francosignor.com/msp-blog/

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