Potts v. Rawlings Co.

• Decision Date: 25 September 2012
• Docket Number: No. 11 Civ. 9071(JPO).,11 Civ. 9071(JPO).
• Citation: 897 F.Supp.2d 185
• Parties: Sylvia POTTS, Roland Lyons, and Loretha Smith, individually and on behalf of all others similarly situated, Plaintiffs, v. The RAWLINGS COMPANY, LLC, Ingenix Inc., Emblem Health Company LLC, HIP of New York, Inc., Ovations Inc., Oxford Health Plans (N.Y.), Inc., and UnitedHealth Group, Incorporated, Defendants.
• Court: U.S. District Court — Southern District of New York

897 F.Supp.2d 185

Sylvia POTTS, Roland Lyons, and Loretha Smith, individually and on behalf of all others similarly situated, Plaintiffs,

v.The RAWLINGS COMPANY, LLC, Ingenix Inc., Emblem Health Company LLC, HIP of New York, Inc., Ovations Inc., Oxford Health Plans (N.Y.), Inc., and UnitedHealth Group, Incorporated, Defendants.

No. 11 Civ. 9071(JPO).

United States District Court,

S.D. New York.

Sept. 25, 2012.

Frank Rocco Schirripa, Michael A. Rose, Hach Rose Schumacher Schirripa & Cheverie LLP, New York, NY, Neil Stuart Torczyner, Steven Jay Harfenist, Freidman, Harfenist, Kraut & Perlstein, Lake Success, NY, for Plaintiffs.

Richard W. Cohen, Gerald Lawrence, Uriel Rabinovitz, Lowey Dannenberg Cohen & Hart, P.C., White Plains, NY, for Defendants The Rawlings Company LLC, Emblem Health Company LLC, and HIP of New York, Inc.

Charles E. Bachman, O'Melveny & Myers LLP, New York, NY, Bryan D. Boyle, Theresa S. Gee, Washington, DC, for Defendants UnitedHealth Group Incorporated, Ingenix, Inc., Ovations Inc., and Oxford Health Plans (NY), Inc.

MEMORANDUM OPINION AND ORDER

J. PAUL OETKEN, District Judge:

This case is a putative class action by enrollees in Medicare Advantage plans seeking a declaratory judgment that, pursuant to New York State General Obligation Law § 5–335 (“GOL § 5–335”), the Defendant Medicare Advantage organizations and their agents do not have a right to seek reimbursement of monies that Plaintiffs received in settlements of lawsuits. Plaintiffs also assert a claim for violation of the New York deceptive business practices statute, N.Y. Gen. Bus. L. § 349 (“GBL § 349”).

Plaintiffs originally filed this action in New York State Supreme Court for New York County. Defendants removed the case to this Court pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), as well as on the grounds that the claims arise under certain provisions of the Medicare Act and implicate the Federal Officer removal statute, 28 U.S.C. § 1442(a)(1). Defendants now move to dismiss the case for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted, pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure.

For the reasons that follow, Defendants' motion to dismiss the case is granted.

I. BackgroundA. Medicare Provisions at Issue

This case concerns Medicare Advantage organizations acting as “secondary payers” under the Medicare Act.

1. Medicare Secondary Payer Act

The Medicare Secondary Payer (“MSP”) Act was enacted in 1980 in an effort to contain the costs of the Medicare program. See Bird v. Thompson, 315 F.Supp.2d 369, 371 (S.D.N.Y.2003). Under these provisions, Medicare is, in certain circumstances, considered a “secondary payer” in relation to other sources, which are considered “primary payers.” Specifically, under 42 U.S.C. § 1395y(b)(2)(A), payment by Medicare “may not be made” to the extent that “payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” However, when these primary payers cannot pay for particular services “promptly,” Medicare may make payment, conditioned upon reimbursement by the primary payer. 42 U.S.C. § 1395y(b)(2)(B)(i). The statute provides that “[a] primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate [Medicare] Trust Fund for any payment made by the Secretary [of the Department of Health and Human Services (“HHS”) (the “Secretary”) ] under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” 42 U.S.C. § 1395y(b)(2)(B)(ii).

In practice, this system works as follows: In a situation where another party is ultimately responsible for paying the healthcare costs of a Medicare enrollee, the money may not be available at the time the services are provided. For example, if an enrollee is injured in an accident caused by a third party tortfeasor, that tortfeasor (or its insurer) is ultimately responsible for the payment of the enrollee's healthcare costs as a result of the accident. But the enrollee will not likely receive the proceeds of any settlement with, or judgment against, the tortfeasor in time to pay her hospital bills. In such a situation, Medicare will pay the hospital bills on the condition that either the tortfeasor reimburse the Medicare Trust Fund directly, or the enrollee reimburse the Trust Fund, to the extent she has already received monies from the tortfeasor.

The Medicare Act provides that “the United States may bring an action against any or all entities that are or were required or responsible ... to make payment with respect to the same item or service (or any portion thereof) under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iii). The statute also establishes “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 the statute. 42 U.S.C. § 1395y(b)(3)(A).

2. Medicare Advantage Program

This case involves benefits received under the Medicare Advantage (“MA”) program, which is set forth in Part C of the Medicare Act. See42 U.S.C. §§ 1395w–21–1395w–29. Under this part, Medicare enrollees may elect to receive their benefits from private insurers, called MA organizations, rather than from the government. MA organizations enter into contracts with the Center for Medicare and Medicaid Services (“CMS”), the branch of HHS that administers the Medicare program. Under these contracts, CMS pays an MA organization a fixed amount for each enrollee, per capita, and the MA organization must provide the same (or more) benefits and services that the enrollee would receive under traditional Medicare. See42 U.S.C. § 1395w–22(a)(1)-(3). See generally Matthews v. Leavitt, 452 F.3d 145, 147 n. 1 (2d Cir.2006) (describing legislative history and provisions of Medicare Part C).

The Medicare Advantage statutes incorporate many of the MSP provisions into the MA organization context. Specifically, the statute provides:

Notwithstanding any other provision of law, a [MA] organization may (in the case of the provision of items and services to an individual under a [MA] 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 policy for such services.

42 U.S.C. § 1395w–22(a)(4).

The case turns on the extent to which MA organizations are granted the same reimbursement rights as the Secretary under the MSP provisions.

B. The New York Statute

Plaintiffs bring their claims under Section 5–335 of New York's General Obligation Law. That law, passed in November 2009, provides as follows:

§ 5–335. Limitation of non-statutory reimbursement and subrogation claims in personal injury and wrongful death

(a) When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement. By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.

Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.

GOL § 5–335.

C. The Instant Action

Plaintiffs are Medicare-eligible individuals who received their Medicare benefits from MA plans. Defendants are MA organizations and their collection/subrogation agents. The plaintiffs allege that each of them sustained personal injuries as a result of accidents caused by third parties. The plaintiffs received medical benefits from their respective MA plans. The plaintiffs later sued their alleged tortfeasors and settled with them. Defendants and their agents asserted subrogation liens under their respective MA plans, seeking to recover the costs of the medical expenses that the MA organizations paid on behalf of the plaintiff. Plaintiffs allege that these liens violate GOL § 5–335.

The putative class is defined as

(i) all persons who have paid monies to Defendants and/or their agents pursuant to Medicare Advantage health insurance plans (Parts C and D) in violation of [N.Y. GOL § 5–335], (ii) all persons against who Defendants and/or their agents have, pursuant to Medicare Advantage health insurance plans (Parts C and D) wrongfully asserted and continue to assert liens and/or rights of subrogation and/or reimbursement from...