Q&A: (9th Circuit) Will Medicare Part C Plan Waive Under Made Whole Doctrine?

October 2, 2017

Clients will either be on public Medicare (Parts A & B) or private Medicare (Part C).  Public Medicare requires that your client sign-up/purchase Part D, or prescription coverage, if they expect Medicare to pay for medications.  There is a Part E plan, which is Medicare gap or supplemental insurance.  That is simply a private pay plan which covers the things Parts A & B don’t.

 

Part C, or Medicare Advantage plans get a block of money from Medicare annually for your client, to pay for everything their plan covers. Part C plans cover everything Parts A, B & D cover, plus a little more.  They can do this because they never have to pay back the money they don’t spend on the covered plan member.  If they can keep them healthy, they make a profit.

 

Further you deal directly with the plan to reimburse them when the case is over.  That means you might be dealing with Rawlings or Optum or another TPA to reimburse the plan.  You will not deal with CMS on a Part C plan.  Let me repeat that – you will not deal with CMS/COBC/BCRC or any agency of the government when reimbursing a Part C plan.  I hope that is clear for everyone.  Once those dollars left Medicare and were paid to the Part C plan, they belonged to the Part C plan.

 

Now, here comes the complicated part (😊).  Part C plans are given (for the most part) all of the recovery rights and duties Medicare has – meaning they can use federal pre-emption to overcome any state law limitations on reimbursement.  That means no Made Whole (Thiringer in WA State), because there is no federal equivalent.  But there is a Common Fund (Mahler in WA State) principle in the Medicare Statute, so you do get a pro rata share reduction for fees and costs.

 

The exception exists in the 9th Circuit under a case called Parra v. PacifiCare.  Here the survivors who received settlement proceeds from a wrongful death claim argued the Medicare Advantage plan wasn't entitled to reimbursement because the settlement money did not represent a primary payment.  The plan disagreed, so the funds were deposited into the registry of the court.  The beneficiaries filed an action for declaratory relief and the issue of whether the plan had the right to sue the beneficiaries for recovery of the money it paid for medical treatment was put before the 9th Circuit.  The Court ultimately found that the plan did not have that right in this case because while the statute allowed it to make its payments conditioned on recovery, it did not grant the plan the same remedy given to Medicare.

 

But (and there’s always a big but) every other circuit out there has trended in the other direction, holding Medicare Advantage plans DO get all of the same recovery rights.  Which means no Made Whole.

 

There is a case currently pending in the Western District of Washington which is challenging the 9th circuit’s position on this, and it’s being spearheaded by a Humana Medicare Advantage plan against the Hartford.  I have no love for the Hartford, but I am rooting for them.  The holdings in the cases from the other federal circuits lack a clear understanding of what the statute actually gives Part C plans, and losing the small defense Parra maintains will make turning it all around that much harder.

 

 

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