Trouble in Medicare Advantage paradise? Court victories reveal cracks in the foundation.


By Marty Cassavoy, Vice President Medicare Secondary Payer Compliance Services

When it comes to the Medicare Secondary Payer (MSP) statute, Medicare Advantage organizations (MAOs) have had more than their share of litigation success.  It may be of cold comfort, but  some of the recent victories have laid bare the contradictions inherent in the MAOs’ strategy.  The most recent case reveals a split with another federal district court that bears watching.  Let’s catch up on these cases to reset the table on Medicare Advantage.


As we have outlined numerous times over the past few years, Medicare Advantage plans and have incrementally expanded upon the Third Circuit’s decision in In re Avandia.  That ruling gave Medicare Advantage plans the right to sue in federal court for double damages to recover what it argued were “conditional payments” paid by the Advantage Plan.  While Avandia set the rules for Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands, a quick succession of cases in Texas, Louisiana, and Tennessee incorporated the Avandia rationale at lower court levels.  The net result of these cases was that MAOs were free to use the federal courts (with the threat of double damages) as a stick to whack recalcitrant insurers and self-insureds that were reluctant to treat MAOs on the same plane as traditional Medicare.

Two cases even further expanded Avandia and its progeny.  The first, Humana v. Paris Blank, was decided in the U.S. District Court for the Eastern District of Virginia.  The Paris Blank case was an MAO’s first major attempt to sue a plaintiff’s law firm.  The gambit worked.  The court in Paris Blank ultimately ruled that MAOs like Humana were entitled to sue plaintiff attorney firms in federal court under the MSP’s private cause of action provision.  Given that Humana’s strategy had been to utilize the private cause of action provision in the MSP that addressed failures of “primary payers” (as opposed to beneficiaries and their counsel) to reimburse Medicare, many learned observers raised their eyebrows at this decision.  But, since May 2016 (and for now), Paris Blank outlines that Virginia plaintiff attorneys are squarely in the crosshairs of MAOs as well.

The other major case is that of Humana v. Western Heritage, decided out of the Eleventh Circuit in August 2016.  Western Heritage closely follows the rationale of Avandia, with one major exception.  The court in Western Heritage ruled that the MSP’s private cause of action provision mandated the imposition of “double damages” – regardless of the circumstances involved in the case.  The Western Heritage expanded the Avandia rationale both in practice as well as geographically, as it meant that MAOs held a double damages recovery right in Florida, Georgia, and Alabama in addition to the states outlined above.