Humana Med. Plan, Inc. v. Reale

180 So.3d 195

HUMANA MEDICAL PLAN, INC., Appellant,

v.Mary REALE, et al., Appellees.

No. 3D12–2883.

District Court of Appeal of Florida, Third District.

Dec. 2, 2015.

McDermott Will & Emery and M. Miller Baker, Washington, DC, GrayRobinson and Daniel Alter and Jeffrey T. Kuntz, Fort Lauderdale, Lawrence & Russell and Eileen Kuo, Memphis, TN, for appellant.

Philip D. Parrish, Donna B. Michelson, for appellees.

Before SHEPHERD, ROTHENBERG and SALTER, JJ.

SHEPHERD, J.

Humana Medical Plan, Inc., a Medicare Advantage organization, appeals a final judgment determining its right to reimbursement of conditional Medicare payments under Florida subrogation law, including Florida's collateral sources of indemnity statute, section 768.76, Florida Statutes (2012). Because we find that the court below did not have subject-matter jurisdiction to review this dispute and that Florida's collateral sources of indemnity statute is on its face inapplicable, and Florida subrogation law is expressly preempted by the Medicare Act, we vacate the judgment below and reverse and remand with instructions to dismiss the complaint.

BACKGROUND

Humana, the appellant in this case, administers Medicare benefits to enrollees in its Medicare Advantage plans pursuant to a contract with the Centers for Medicare and Medical Services. At all relevant times, Mary Reale, the appellee, was enrolled in a Humana Medicare Advantage plan (Humana Gold Plus H1036–054C). In January 2009, Mrs. Reale sustained injuries resulting from a fall at Hamptons West Condominiums. Between the date of the fall and April 2009, Humana paid conditional Medicare benefits for Mrs. Reale's medical treatment. The parties have stipulated that Humana expended $19,155.41.

Mrs. Reale and her husband, August Reale, filed a personal injury action against the Hamptons West Condominiums, a home health aide who was accused of causing the fall, and a resident of Hamptons West who employed the home health aide. The parties settled the lawsuit in the amount of $135,000 for Mrs. Reale's economic and non-economic damages and Mr. Reale's loss of consortium claim. The Reales' attorney, Donna Michelson, has set aside, in trust, sufficient funds for the amount of benefits paid by Humana. In a letter dated March 11, 2010, Humana presented Ms. Michelson with a payment report and informed her of its determination that it was entitled to reimbursement of the full amount of conditional Medicare benefits it provided. The Reales, through counsel, declined to reimburse Humana in the amount requested and did not initiate an administrative appeal of Humana's determination. Ms. Michelson and the Reales have agreed that Ms. Michelson may keep as additional attorney's fees any portion of those funds she can avoid having to reimburse to Humana.

In May 2010, Humana brought an action against Mrs. Reale and Ms. Michelson in the United States District Court for the Southern District of Florida seeking reimbursement of the $19,155.41 pursuant to the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b). Mrs. Reale moved to dismiss for lack of subject-matter jurisdiction on the theory that the Medicare Act did not provide Humana with an express or implied right of action for reimbursement. The court granted the motion. Humana Med. Plan, Inc. v. Reale, 2011 WL 335341 (S.D.Fla.2011), vacated (Sept. 26, 2011). Humana then filed a motion to amend or correct the order of dismissal, which was partially granted. The court vacated its order and scheduled a hearing on Humana's motion. Humana subsequently dismissed the action for recovery against Mrs. Reale and her attorney and instead brought a federal action for reimbursement against Western Heritage Insurance Company, Hampton West's liability insurer, which funded the Reales' settlement. On March 16, 2015, the United States District Court entered an order granting Humana's motion for summary judgment, finding that Humana could maintain a private right of action for double damages against Western Heritage pursuant to 42 U.S.C. § 1395y(b)(3)(A).¹ Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 94 F.Supp.3d 1285 (S.D.Fla.2015). Western Heritage has appealed, and Humana's reimbursement claim remains unsatisfied.

During the ongoing initial federal action for reimbursement that Humana brought against Mrs. Reale and Ms. Michelson, Mr. and Mrs. Reale brought this action in the circuit court below for a declaration of Humana's right to reimbursement, asserting that Humana's payments constituted a collateral source of indemnity and that Florida's collateral sources of indemnity statute, section 768.76, Florida Statutes (2012), and not Medicare's Secondary Payer Act, provided Humana's right of recovery. Humana moved to dismiss for lack of subject-matter jurisdiction and failure to state a cause of action based on three separate grounds:

1. Mrs. Reale did not exhaust the mandatory administrative appeal process for disputing Medicare benefits, and even if she had, jurisdiction would lie exclusively in the federal courts.

2. Federal law preempts Florida's collateral sources of indemnity statute.

3. By its terms, the collateral sources statute does not apply to claims for Medicare benefits.

After temporarily staying the lower court proceedings to allow resolution of the initial federal action, the circuit court denied Humana's motion to dismiss. Humana then filed a motion for summary judgment based on the same three grounds, which was also denied. To expedite the process, the parties stipulated to the relevant facts, and the Reales filed a motion for final judgment. On October 30, 2012, the circuit court entered final summary judgment, finding that it had subject-matter jurisdiction pursuant to section 86.011, Florida Statutes, and Care Choices HMO v. Engstrom, 330 F.3d 786 (6th Cir.2003). The court also found that Florida subrogation law, including the collateral sources statute, was applicable in determining Humana's right to reimbursement. Pursuant to the formula in section 768.76(4), Florida Statutes, for calculating the amount of recovery for "[a] provider of collateral sources that has a right of subrogation or reimbursement [,]" the court calculated Humana's total reimbursement to be $3,685.03.² Humana timely appealed.

THE MEDICARE FRAMEWORK

Because of the complex nature of the Medicare Act, we begin by providing a brief overview of the Medicare framework and the provisions at issue in this case. Title 42, chapter 7, Subchapter XVIII of the United States Code (also designated Title XVIII of the Social Security Act) is entitled "Health Insurance for Aged and Disabled." Popularly referred to as "the Medicare Act," it has been described as "one of the most completely impenetrable texts within the human experience." E.g., Parra v. PacifiCare of Arizona, Inc., 715 F.3d 1146, 1149 (9th Cir.2013) (quoting Cooper Univ. Hosp. v. Sebelius, 636 F.3d 44, 45 (3d Cir.2010) ). Medicare benefits are divided into four parts: Part A, "Hospital Insurance Benefits for Aged and Disabled" (42 U.S.C. §§ 1395c to 1395i–5 ); Part B, "Supplementary Medical Insurance Benefits for Aged and Disabled" (42 U.S.C. §§ 1395j to 1395w–5 ); Part C, "[Medicare Advantage]³ Program" (42 U.S.C. §§ 1395w–21 to 1395w–28 ); and Part D, "Voluntary Prescription Drug Benefit Program" (42 U.S.C. §§ 1395w–101 to 1395w–154 ). There is also a Part E for "Miscellaneous Provisions" (42 U.S.C. §§ 1395x to 1395lll ).

PART C: THE MEDICARE ADVANTAGE PROGRAM

This case involves benefits received under Part C. The Medicare Act allows eligible individuals to obtain hospital and medical benefits through one of two programs: "(A) through the original medicare fee-for-service program under parts A and B ... or (B) through enrollment in a [Medicare Advantage] plan under [part C]." 42 U.S.C. § 1395w–21(a) ; see also In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 357 (3d Cir.2012). "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., 685 F.3d at 363 (citing H.R.Rep. No. 105–217, at 585 (1997), 1997 U.S.C.C.A.N. 176, 205–06 (Conf.Rep.)); see also Parra, 715 F.3d at 1152–53 ("Part C is intended to ‘allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service Medicare ... [and] enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options.’ " (quoting H.R.Rep. No. 105–149, at 1251 (1997))).

The Centers for Medicare & Medicaid Services ("CMS") administers the Medicare program on behalf of the Secretary of Health and Human Services.⁴ Part C allows eligible individuals to obtain benefits through Medicare Advantage plans, which are administered by private insurers known as Medicare Advantage organizations ("MAOs") that enter into contracts with CMS.⁵ 42 C.F.R. § 422.503 ("In order to qualify as an MA organization, enroll beneficiaries in any MA plans it offers, and be paid on behalf of Medicare beneficiaries enrolled in those plans, an MA organization must enter into a contract with CMS."). CMS pays MAOs a fixed amount for each enrollee, which is determined pursuant to 42 U.S.C. § 1395w–23. In exchange, the MAOs provide the same (or more) benefits an enrollee would receive under the original Medicare fee-for-service program (Parts A and B). See 42 U.S.C. § 1395w–22(a) ; 42 C.F.R. § 422.100(c) ("An MA plan includes at a minimum basic benefits, and also may include mandatory and optional supplemental benefits.").

THE MEDICARE SECONDARY PAYER ACT

In 1980, Congress enacted the Medicare Secondary Payer ("MSP") Act "in an effort to contain the costs of the Medicare program." Potts v. Rawlings Co., LLC, 897 F.Supp.2d 185, 188 (S.D.N.Y.2012). The MSP Act, 42 U.S.C. § 1395y(b),⁶ makes Medicare a "secondary...