Eleventh Circuit Holds Section 111 Reporting Can Establish Elements of Private Cause of Action Under MSP Act

Gavel on a desk in the forefront with a person holding a law book and legal scales in the background

by B. Smith

The Eleventh Circuit Court of Appeals in MSP Recovery Claims, Series LLC v. Metropolitan General Insurance Company, et. al., Case No. 21-11547 (11th Cir. July 18, 2022), issued a significant new decision finding that primary payers’ reporting a settlement through Section 111 constitutes the “constructive notice” requirement needed to move forward with a private cause of action.

MSP Recovery Claims, Series LLC (MSP Recovery) filed a class action complaint, on behalf of themselves and other Medicare Advantage Plans (MAPs) against liability insurers under the Medicare Secondary Payer (MSP) Act’s private cause of action provision, 42 U.S.C. § 1395y(b)(3)(A). The complaint alleged that Defendants had a “demonstrated responsibility” to reimburse conditional payments made by MAPs for injury-related medical expenses.

The complaint identified numerous instances where Defendants admitted, through settlement, contractual obligations, and  reporting to the Centers for Medicare and Medicaid Services (CMS) via Section 111, that they were the primary payers responsible for conditional payment reimbursement.  The complaint did not specify these instances and, instead, MSP Recovery attached Exhibit A to the complaint in support of the same. Exhibit A included primary payer information, beneficiary IDs, policy numbers, and whether the primary payment was a result of settlement or a contractual obligation. The complaint further alleged that MSP identified the claims in Exhibit A by comparing this data with Section 111 Reporting data and with reported settlements to which MSP Recovery had access.

Defendants moved to dismiss the complaint alleging, among other things, that MSP Recovery failed to identify how  Defendants had a “demonstrated responsibility” to pay the claims which is a prerequisite for bringing a private cause of action under the MSP Act. The district court agreed and granted the motion to dismiss.

On appeal, the Eleventh Circuit noted that to survive a motion to dismiss, MSP Recovery would need to plausibly allege that Defendants’ responsibility to pay had been demonstrated prior to filing suit and Defendants must have at least constructively known of this obligation. The Court noted that Defendants’ responsibility to pay can be shown in many ways including through contractual obligations and by entering into a settlement. As to the knowledge requirement, the Court held that Defendants’ Section 111 Reporting evidenced constructive knowledge they owed primary payments. Based upon the foregoing, the Court found that MSP Recovery’s allegations in the complaint satisfied the “demonstrated responsibility” requirement and reversed and remanded the case to the district court for further proceedings.

Conditional payment recovery efforts by MAPs have become more and more aggressive and Section 111 Reporting data is playing a significant role in supporting these private cause of action claims. Diagnosis codes reported, Ongoing Responsibility for Medical (ORM) Termination dates, and Total Payment Obligation (TPOC) settlements all play a role in the amount of the conditional payment, the timing for MAPs seeking recovery, and potentially Civil Monetary Penalties.

The need to identify MAP lienholders prior to settlement and negotiate lien amounts is imperative to avoid excessive lien recoveries and double damages or other causes of action asserted by MAPs after settlement.  Prior to the implementation of the Provide Accurate Information Directly (PAID) Act, it was difficult for liability insurers, self-insured employers, and workers’ compensation insurers to identify potential MAPs.  As a result of the PAID Act, CMS expanded the query process in December 2021 to include information on a beneficiaries’ Medicare part A, B, C (MAP) and D (prescription drug) plan enrollment for the preceding three-year period.  The query update is not automatic and requires primary payers or their agents to update their Section 111 Reporting systems to meet the technical requirements issued by CMS.

However, having the additional PAID Act information alone is not enough. Primary payers must also reach out to the part C and D lienholders prior to settlement to provide notice and negotiate potential liens. Having process and procedures in place to determine how liens will be resolved is necessary to avoid surprises after settlement takes place.

IMPAXX developed our QueryGuard program to help primary payers stay ahead of part C and D conditional payment obligations. By utilizing query data, we provide the necessary notice to lienholders to help avoid potential double damages or other claims. For more information regarding QueryGuard, Section 111 Reviews, and conditional payment resolution, please contact the IMPAXX Settlement Consulting Team at [email protected].