Medicare Advantage Plans

Question
Are all Medicare replacement plans such as Humana governed by the same Federal rules as Medicare? Humana is claiming to be governed by Medicare rights to subrogation.

Answer
Thank you for the question. My response pertains only to Medicare Advantage plans and not to supplemental plans. Supplemental plans are only intended to cover what Medicare does not, do not contract with Medicare, and should be treated no differently than any other insurance policy under the laws of a particular state.

Below is a quick synopsis on these MA plans.

Medicare Advantage (aka Medicare+ Choice, Medicare HMO, Medicare Part C)

- General Info

A MA plan is established under Part C of Title XVIII of the Social Security Act. The MA program allows eligible individuals to elect to receive Medicare benefits through enrollment in private insurance plans. For individuals enrolled in MA plans, the federal government pays for all or most of the premiums for the insurance in lieu of paying Medicare benefits directly to medical providers as under the ‘regular’ Medicare arrangement. Private insurance carriers, who participate in the MA program, contract with CMS to administer Medicare benefits. The Federal Government pays for MA coverage on a monthly basis (42 USC 1395w-23) and then annually determines the “per capita” rates for these payments (42 USC 1395mm). Here there is a direct affiliation with Medicare in the form of a contract.

- Reimbursement Rights

A MA plan may charge a MA member for services provided if the member has been paid for such services. 42 U.S.C. § 1395mm(e)(4). Furthermore, pursuant to federal regulations, a MA plan exercises the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations. 42 C.F.R. § 422.108(f). The regulations were amended in 2005 to remove any ambiguity which suggested that the States could exercise authority over MA plans in any area other State licensing laws and any laws relating to plan solvency. This position was reinforced in CMS’ Medicare Managed Care Manual, Chapter 4: Benefits and Beneficiary Protections. This chapter of the manual was rewritten and became effective on December 18, 2009, and states at 130.3 that a Medicare Advantage Organization (MAO) is the secondary payer when proceeds from a no-fault or liability settlement are available. At 130.7 the manual states the MAO may exercise the same rights to recover that the Secretary exercises and state law cannot take away this right. Because a MA plan steps into the shoes of Medicare it may have the same rights and limitations of Medicare in terms enforcing reimbursement rights. This includes procurement cost reductions and wrongful death prohibitions.

As a practical matter the rights of MA plans are a hotly contested matter. There has been no definitive case law on the matter although there are several litigations currently underway regarding the reimbursement rights of MA plans, including Parra v. Pacificare of Arizona, No. 410CV00008 in US District Court. I can tell you that Humana is at the forefront of many of these litigations and they will not hesitate to file suit to enforce their rights. As a resolution group we take a conservative approach and based upon the federal regulations it would appear that MA plans have a legitimate argument.

If you have any follow up questions please do not hesitate to contact us. Thank you and I hope you found the response to be helpful.