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MSP Recovery Claims, Series LLC v. Plymouth Rock Assurance Corporation, Inc.

United States District Court, D. Massachusetts

July 18, 2019

MSP RECOVERY CLAIMS, SERIES LLC and SERIES 17-04-631, a series of MSP Recovery Claims, Series LLC, Plaintiffs,
v.
PLYMOUTH ROCK ASSURANCE CORPORATION, INC. and THE PLYMOUTH ROCK COMPANY, INC., Defendants.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS AND MOTION TO STRIKE CLASS ALLEGATIONS

          ALLISON D. BURROUGHS, U.S. DISTRICT JUDGE

         MSP Recovery Claims, Series LLC and Series 17-04-631 (together “MSPRC”) bring this putative class action under the Medicare Secondary Payer Act (“MSPA”) as the assignee of a Medicare Advantage Organization (“MAO”). Defendants Plymouth Rock Assurance Corporation, Inc. and The Plymouth Rock Company, Inc. (together “Plymouth”) offer automobile insurance and frequently settle claims for injuries that result from accidents involving the individuals they insure. MSPRC argues that at least one of those settlements rendered Plymouth liable for medical expenses that had been paid by its assignor MAO and claims that Plymouth failed to reimburse that MAO. MSPRC brings a single claim against Plymouth pursuant to the MSPA's private cause of action, 42 U.S.C. § 1395y(b)(3)(A), for those medical expenses and for similar expenses incurred by other MAOs who Plymouth has not reimbursed. [ECF No. 1 (“Complaint” or “Compl.”) ¶¶ 55-65]. Now pending before the Court are Plymouth's motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), [ECF No. 8], and its motion to strike the class allegations, [ECF No. 11]. For the reasons discussed herein, the motion to dismiss [ECF No. 8] is DENIED, and the motion to strike [ECF No. 11] is GRANTED.

         I. FACTUAL BACKGROUND

         The following facts are drawn from the Complaint, the well-pleaded allegations of which are taken as true for the purposes of evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014) (citing A.G. ex rel. Maddox v. Elsevir, Inc., 732 F.3d 77, 80 (1st Cir. 2013). Certain details are also culled from documents attached to the Complaint and from documents whose authenticity is not disputed by the parties. See Alvarez-Mauras v. Banco Popular of P.R., 919 F.3d 617, 622 (1st Cir. 2019) (citing Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)).

         MSPRC brings this action as the assignee of MAO Fallon Community Health Plan (“Fallon”). [ECF No. 1 (“Compl.”) ¶¶ 7, 14].[1] On April 12, 2012, an individual named A.C., who later enrolled in a Medicare Advantage plan administered by Fallon, was injured in an accident. Id. ¶ 8. Between April 16, 2012 and August 30, 2013, A.C. received numerous medical services for accident-related injuries. Id. ¶ 9. One of A.C.'s medical providers billed Fallon $8, 106.30 for accident-related services, and Fallon paid $1, 782.02 to settle that charge. Id. ¶ 10.

         Following the accident, A.C. asserted a claim against the tortfeasor involved in the accident, who was insured by Plymouth. Id. ¶¶ 8, 11. Plymouth settled A.C.'s claim against its insured, reported the settlement to the Centers for Medicare & Medicaid Services (“CMS”), and thereby became the primary payer for A.C.'s accident-related medical expenses. Id. ¶ 11. MSPRC alleges that, as of the date Plymouth notified CMS of the settlement, Plymouth knew it was obligated to reimburse Fallon for the $1, 782.02 of accident-related medical expenses that Fallon had paid the medical provider for A.C. and yet nonetheless failed to reimburse Fallon. Id.

         On June 19, 2017, Fallon assigned all rights to recover conditional payments made for its enrollees' healthcare services to MSP Recovery, LLC. Id. at 45. MSP Recovery, LLC then assigned all of the rights acquired from Fallon to Series 17-04-631, a designated series of MSP Recovery Claims, Series LLC. Id. at 53.

         In addition to A.C.'s accident-related medical expenses, MSPRC asserts that Plymouth is the primary payer for numerous other medical expenses that it will be able to identify once it obtains and organizes data from Plymouth. See id. ¶ 51. MSPRC brings a single count to recover those expenses from Plymouth under the MSPA's private cause of action. Id. ¶¶ 55-65.

         The claim is brought on behalf of the following putative class:

All Medicare Advantage Organizations, or their assignees, that provide benefits under Medicare Part C, in the United States of America and its territories, which made payments for a Medicare beneficiary's medical expenses where Defendant:
(1) is the primary payer by virtue of having settled a claim with Medicare beneficiary enrolled in a Medicare Advantage plan;
(2) settled a dispute to pay for personal injuries with a Medicare beneficiary enrolled in a Medicare Advantage plan; and
(3) failed to reimburse Medicare Advantage Organizations, or their assignees, the payments provided for medical items and services related to the claims settled by Defendant.
This class definition excludes (a) Defendant, its officers, directors, management, employees, subsidiaries, and affiliates; and (b) any judges or justices involved in this action and any members of their immediate families.

Id. ¶ 45.

         II. LEGAL FRAMEWORK FOR CLAIM

         Traditional Medicare consists of Parts A and B of the Medicare Act. See 42 U.S.C. §§ 1395c - 1395w-6. These fee-for-service provisions entitle eligible persons to have CMS pay medical providers directly for hospital and outpatient care. See id. Medicare Part C is the Medicare Advantage program under which Medicare-eligible persons may elect to have an MAO such as Fallon, rather than CMS, provide Medicare benefits. See 42 U.S.C. §§ 1295w-21 - 1395w-29. Medicare Part D provides for prescription drug coverage, see 42 U.S.C. §§ 1395w-101 - 1395w-154, and Part E contains generally applicable definitions and exclusions, see 42 U.S.C. §§ 1395x - 1395lll.

         “Before 1980, ‘Medicare paid for all medical treatment within its scope and left private insurers merely to pick up whatever expenses remained.'” Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229, 1234 (11th Cir. 2016) (quoting Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277, 278 (6th Cir. 2011)). “In 1980, in an effort to curb the rising costs of Medicare, Congress enacted the MSPA, which ‘inverted that system; it made private insurers covering the same treatment the “primary” payers and Medicare the “secondary” payer.' Medicare benefits became an entitlement of last resort, available only if no private insurer was liable.” Id. (citation omitted). Under the current Medicare system, an automobile insurance provider or a similarly situated entity is the primary payer relative to Medicare or an MAO whenever its policy holders cause Medicare eligible expenses that are within its policy limits. See 42 U.S.C. § 1395y(b)(2)(A).

         In 1986, in an effort to “encourage private parties to bring actions to enforce Medicare's rights” under the MSPA and thereby reduce instances of primary payers failing to cover costs or to reimburse CMS, Congress created the MSPA's private cause of action. See United Seniors Ass'n v. Philip Morris USA, 500 F.3d 19, 22 (1st Cir. 2007). The private cause of action provides:

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A) [of 42 U.S.C. § 1395y(b)].

42 U.S.C. § 1395y(b)(3)(A). Paragraph (1) contains rules concerning group health care plans and paragraph (2)(A) is a general prohibition on Medicare making payments for costs that a primary payer, such as Plymouth or a similarly situated auto insurance provider, has paid or is expected to pay. See Humana Med. Plan, 832 F.3d at 1234 (discussing MSPA's statutory structure). MAOs such as Fallon did not exist when the MSPA's private cause of action was enacted, and Congress likely therefore did not anticipate such plans bringing actions like that brought here. The more probable scenario then was Medicare beneficiaries or their healthcare providers suing to recover the costs of services that primary payers declined to cover. See id.[2]

         In 1997, Congress enacted Part C of Medicare, the Medicare Advantage program, including the provisions that allowed for the creation of MAOs. See id. at 1235 & n.3 (citing Pub. L. No. 105-33, § 4001, 111 Stat. 251 (codified as amended at 42 U.S.C. §§ 1395w-21 - 1395ww-28)). “Congress's goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system.” In re Avandia Mktg., Sales Pracs. & Prods. Liab. Litig., 685 F.3d 353, 363 (3d Cir. 2012) (citing H.R. Rep. No. 105-217, at 585 (1997), 1997 U.S.C.C.A.N. 176, 205-06 (Conf. Rep.)). Under the Medicare Advantage program, MAOs administer Medicare benefits pursuant to a contract with CMS, and CMS pays the MAOs a fixed fee per enrollee. An MAO must provide its enrollees at least the same benefits as they would receive under traditional Medicare. See 42 U.S.C. §§ 1395w-22(a), 1395w-23. As of 2018, more than 20 million Americans, comprising 34 percent of Medicare beneficiaries, were enrolled in a Medicare Advantage plan. See Gretchen Jacobson et al., A Dozen Facts About Medicare Advantage, Kaiser Family Foundation (Nov. 13, 2018), https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/.

         Medicare Part C includes a provision that allows MAOs to charge a primary payer, such as an auto insurance provider that insures a tortfeasor and thereby becomes a primary payer pursuant to the MSPA, or an individual who has received payments from such a primary payer.

         Specifically, “[o]rganization as secondary payer, ” provides:

Notwithstanding any other provision of law, a [Medicare Advantage] organization may (in the case of the provision of items and services to an individual under a [Medicare Advantage] plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section--
(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such individual to the extent that the individual has been paid under such law, plan, or ...

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