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Humana seeks reimbursement from Farmers under Medicare Secondary Payer rules

Insurers legal clash tied to rules for Medicare reimbursement


A series of federal lawsuits filed by Humana Inc. against Farmers Insurance Group of Cos. seeking reimbursement under Medicare Secondary Payer rules is being watched closely by Medicare experts, who say the litigation is an example of hurdles they face in reaching workers compensation and liability settlements.

Humana argues in the suits that the Medicare Secondary Payer Act entitles it to reimbursement from Farmers for benefits that Humana paid for Medicare Advantage and Medicare Part D plan beneficiaries.

In its suits, Humana is seeking nearly $80,000 from Farmers and related entities for claims that Humana paid in Kansas, Missouri, Tennessee and Texas. The company also is seeking unspecified “restitution for all claims under no-fault, medical payments or other” cases in which Humana paid a claim when Farmers was the primary payer.

A Farmers spokesman said the company does not agree with the premise of the lawsuits, but did not provide additional comment.

While Medicare compliance experts agree that Medicare Advantage plans have some right to reimbursement from workers comp and liability settlements, they say it can be tricky to determine whether a claimant owes money to a private provider, rather than the Centers for Medicare and Medicaid Services.

Cases such as Humana's could open the door for Medicare Advantage plans to seek reimbursement long after a claim has closed — and possibly seek double damages in court for delayed repayment — even if settlement parties didn't know money was owed to a Medicare Advantage plan that paid for the care, said Michele Adams, chairwoman of the Medicare Advocacy Recovery Coalition in Washington.

“It's going to slow down recovery to (CMS), as well as to the Medicare Advantage plan and ultimately to the beneficiary in the final resolution of their case,” said Ms. Adams, who also is director of claims management and business strategies for risk management services for Walt Disney World Resort in Orlando, Fla.


Humana filed suit last month in federal courts in Kansas, Missouri, Tennessee and Texas, court records show. Each complaint argues that Farmers entities used “deceptive practices” to “shift their financial obligations under the Medicare Secondary Payer Act to Medicare Advantage organizations and ultimately to the Medicare Trust Funds.”

The Medicare Secondary Payer Act requires self-insured employers, insurers and others to notify CMS of workers comp and liability settlements or payments that involve Medicare recipients. CMS can use settlement funds to recoup “conditional payments” that it has made on behalf of beneficiaries to medical programs. It also can require insurers, employers and other “primary payers” to set aside funds to pay for future medical costs related to a beneficiary's injury.

Humana argues in the court filings that Farmers entities served as primary payers, and that Humana and its entities are secondary payers because they acted on behalf of CMS as a Medicare Advantage plan. Therefore, Humana contends, Farmers companies are required to reimburse Humana under the federal law.

As to whether additional lawsuits may be filed, Humana said in an emailed statement that it “will do what is necessary to protect its members and the Medicare Advantage program, a program that has helped seniors across the country improve their health.”

In earlier litigation, Humana sued pharmaceutical firm GlaxoSmithKline P.L.C. in federal court for reimbursement under Medicare Secondary Payer rules. That suit was based on at least $460 million in settlements that Glaxo paid for patients who suffered complications from using diabetes drug Avandia.

The 3rd U.S. Circuit Court of Appeals ruled in June 2012 that Humana had a right to pursue its claim against Glaxo. The U.S. Supreme Court declined in April to hear Glaxo's appeal of that case, which was remanded to the Philadelphia County Court of Common Pleas.

Attorney David Farber, counsel for the Medicare recovery coalition, said most court decisions prior to the Glaxo case found that Medicare Advantage plans do not have the same recovery rights as CMS. He sees Humana's lawsuits against Farmers as a continuation of arguments in the Glaxo case.

“I presume that they're trying to build on that one decision,” Mr. Farber said.


The difficulty in reimbursing Medicare Advantage plans stems from several points.

First, experts say there are numerous Medicare Advantage programs and no centralized way to determine whether money is owed to a particular Advantage plan.

Settlement parties can request reimbursement information from CMS if a claimant's health care has been paid by traditional Medicare. However, CMS does not provide reimbursement information for private Medicare Advantage programs.

“We just don't have access to the information that these Medicare Advantage plans are expecting,” Ms. Adams said. “If we don't know that a beneficiary is a member in a Medicare Advantage plan until well after we've resolved the case, we don't know that there's an obligation out there that we have to pay back the plan.”

Secondly, many claimants are unaware of whether their coverage is provided by traditional Medicare or a Medicare Advantage plan. Without that information, experts say settlement parties often seek reimbursement data from CMS rather than the proper Medicare Advantage provider, leaving them unaware that money is due to a private plan.

“You really need the cooperation of the claimant,” Ms. Jordan said. “You need them to show you their (Medicare) card because sometimes they really don't understand that there's a difference” between Medicare Advantage and traditional Medicare.

Also complicating matters is that Medicare Advantage enrollees often receive coverage from various programs in their lifetime, making it difficult to determine how much should be repaid to various Medicare Advantage plans, said Aaron Frederickson, director of Medicare Secondary Payer compliance for Medicare and Social Security compliance firm Allsup Inc. in Belleville, Ill.

“A plan might start making payments, but 18 months later that plan could conceivably change two or three times,” Mr. Frederickson said.


Though experts say Medicare Advantage plans should be repaid for workers comp- or liability-related medical care, they say it's unclear whether Advantage programs should have the same recovery authority as CMS and the federal government.

If so, Ms. Adams said Medicare Advantage programs should be held to the same requirements as CMS under the Medicare Secondary Payer Act and the recently enacted Strengthening Medicare and Repaying Taxpayers Act, known as the SMART Act.

Those provisions include a three-year statute of limitations for reimbursement claims, the ability to request precise reimbursement amounts prior to a claim settlement and safe harbor provisions that protect settlement parties from litigation if they acted in “good faith” to follow Medicare Secondary Payer procedures.

“Certainly, if they have a right of recovery, we have an equal right to the information upfront so that we can attempt to resolve the claim,” Ms. Adams said.