§ 5.10 Medicare Advantage Plan (“MA Plan”) and Prescription Drug Plan Recovery Rights (Medicare Parts C and D)
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§ 5.10 – Medicare Advantage Plan (“MA Plan”) and Prescription Drug Plan Recovery Rights (Medicare Parts C and D)
Medicare Part C, known as Medicare Advantage, is essentially “privatized Medicare” where eligible consumers can select health insurance plans from private health insurance companies rather than opting for “original Medicare” coverage through the federal government. 42 U.S.C. §§ 1395w-21 to 1395w-28 (“Medicare Part C”); see generally 42 C.F.R. § 422. While original Medicare is still the most common form of Medicare, Congress provided an additional option for eligible Medicare beneficiaries when it enacted Medicare Part C in 1997.25 E.g., Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4001, 111 Stat. 251; Medicare Managed Care Manual, Ch. 1 § 10 (Rev. 125, 02-10-17) (CMS Pub. 100-16) (“Managed Care Manual”).
Medicare Advantage currently insures approximately one-third of eligible Medicare beneficiaries. Medicare Advantage allows eligible individuals to opt-out of original Medicare and obtain Parts A and B coverage, as well as additional services not included in original Medicare, through private health insurance companies approved by CMS. 42 U.S.C. § 1395w-22(a); 42 C.F.R. § 422.100.
Medicare Advantage was intended to reduce the costs of Medicare to the federal government by “enabl[ing] the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options.” H.R. Rep. No. 105-149, at 1251 (1997). Private health insurance companies, after being approved by CMS to serve as a Medicare Advantage Organizations (“MAOs”), create MA Plans to provide Medicare-related services to plan participants. See 42 U.S.C. §§ 1395w-21 to 1395w-23(a), 1395w-27 and 1395w-28; 42 C.F.R. §§ 422.2260 to 422.2262. These MA Plans are reviewed and approved by CMS. See Managed Care Manual, Ch. 1
§ 20.2 (Rev. 125, 02-10-17).
These private health insurers, however, are not free agents. “Among other things, [MAOs] agree to comply with all Medicare laws, CMS rules, and federal coverage guidelines.” United Behavioral Health v. Maricopa Integ. Health Sys., 240 Ariz. 118 ¶ 3, 377 P.3d 315 (2016). In fact, our supreme court observed the relationship between MAOs and enrollees is “not between an insurer and its policyholder, but rather, between Medicare . . . and Medicare beneficiaries.” Id. (quoting Pagarigan v. Superior Court, 126 Cal. Rptr. 2d 124, 134 (Ct. App. 2002)).
Medicare, in turn, pays a fixed amount each month to MAOs offering MA Plans. 42 U.S.C. § 1395w-23(a)(1)(A). This fee is paid regardless of the value of services provided, but MAOs must assume full financial risk for providing Medicare benefits to plan participants. 42 U.S.C. § 1395w-25(b).
Upon forming a MA Plan, MAOs may then contract with various healthcare providers to furnish medical services covered by MA Plans. See 42 C.F.R. § 422.2 (defining “arrangements” as written agreements between MAOs and providers or provider networks); see also Managed Care Manual, Ch. 1 § 20.2 (Rev. 125, 02-10-17). These “arrangements” must be “satisfactory to CMS to protect its enrollees from incurring liability . . . for payment of any fees that are the legal obligation of the [MAOs].” 42 C.F.R. § 422.504(g)(1). This means, in the Medicare Advantage context, aside from considering the federal overlay, a thorough legal analysis may require reviewing the terms of: (1) the MAO’s agreement with Medicare, (2) the MA Plan, and (3) the MAO’s “arrangements” with particular healthcare providers.
Medicare Part D, 42 U.S.C. §§ 1395w-101 to 1395w-154, is a separate program for obtaining prescription drug coverage. Like Medicare Advantage, Part D benefits are provided by private insurers who form Prescription Drugs Plans (“PDPs”), just as MAOs form MA Plans. In most circumstances, however, participants in Medicare Part D add this coverage to original Medicare since prescription drug coverage is already part of the coverage offered by MA Plans. See 42 U.S.C. § 1395w-131 (requiring MA plans to offer prescription drug coverage). Thus, one should not expect to see a MA Plan coupled with a Part D prescription drug plan; a Part D plan is typically an option added by participants in the original Medicare program. See supra § 5.9.
Notwithstanding this, PDP rights of recovery under Medicare Part D purport to incorporate the rights of MAOs under Medicare Part C. See 42 C.F.R. § 423.462(a). While enabling authority for 42 C.F.R. § 423.462(a) is elusive, CMS contends “PDP sponsors have the same MSP [Act] rights and responsibilities as MAOs.” See Memo. from Moon & Tudor, CMS to MAOs and PSP Sponsors, Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011), www.cms.gov/Medicare/Health-Plans/HealthPlansGenInfo/Downloads/21_MedicareSecondaryPayment.pdf (last visited May 19, 2019). In light of this and because there are no cases addressing 42 C.F.R. § 423.462(a), we will not draw any further distinction between MAO and PDP sponsor recovery rights, and conclude the same authority and analysis applicable to MAOs is applicable to PDP sponsors.
a. The Scope of MA Plan Recovery Rights
The scope of MA Plan recovery rights is a matter of considerable dispute.
MAOs typically claim they are entitled to assert reimbursement claims under the Medicare Part C authorization provision, 42 U.S.C. § 1395w-22(a)(4), or under the MSP Act’s private right of action provision, 42 U.S.C. § 1395y(b)(3)(A); see also 42 C.F.R. § 422.108(f) (purporting to give MAOs “the same rights” to recover from a “plan, entity, or individual” that federal law grants the United States in original Medicare). To a large extent, these arguments failed to persuade the Ninth Circuit in Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146 (9th Cir. 2013), but MAOs continue to make these claims in Arizona courts and other jurisdictions.26 E.g., Estate of Ethridge v. Recovery Mgmt. Sys., Inc., 235 Ariz. 30, 34 ¶¶ 12-13, 326 P.3d 297, 301 (App. 2014), review denied (Nov. 6, 2014), cert. denied 135 S. Ct. 1517 (2015).
The court in Parra held the Medicare Part C authorization provision does not by itself require reimbursement. Parra, 715 F.3d at 1153. The court concluded § 1395w–22(a)(4) authorizes, but does not compel, MAOs to include in MA Plans contractual provisions regarding the MAO’s right to seek reimbursement from a “primary” payer. Id. In other words, enforceable terms of a MA Plan, if any, should govern reimbursement rights in the Ninth Circuit.
The Ninth Circuit also rejected, at least to a certain extent, the idea that MAOs enjoy the same right to reimbursement as the federal government under the MSP Act (a part of which is cross-referenced in the Medicare Part C authorization provision). Parra concluded that the cross-reference “simply defines when MAO coverage is secondary, and does not create a federal cause of action in favor of a MAO.” Parra, 715 F.3d at 1154 (emphasis added); Estate of Ethridge, 235 Ariz. at 34 ¶ 13, 326 P.3d at 301 (“The reference to § 1395y(b)(2) contained in the Part C authorization provision does not . . . grant Medicare Advantage plans the same right to reimbursement enjoyed under traditional Medicare.”).
But other jurisdictions have reached different conclusions, most notably the Third Circuit in In re Avandia Mktg., Sales Practices & Products Liab. Litig., 685 F.3d 353 (3d Cir. 2012). In re Avandia held that § 1395y(b)(3)(A) provides a private right of action to a MAO against a...
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