Medicare is a federal health insurance program administered by the Centers for Medicare & Medicaid Services. Medicare covers the following individuals: most people 65 years and older; persons receiving Social Security Disability for a period of 24 months or longer; and people with end stage renal disease. Medicare is divided into four “Parts.” Medicare Part A covers hospital and skilled nursing facilities. Medicare Part B is the supplemental insurance program covering doctor visits and other health care expenses. Medicare Part D provides medication coverage. Medicare Part C (aka Medicare Advantage Plans) is a replacement of the original Medicare coverage; however, it is provided by a private insurance company.

A recent decision out of a U.S. Appeals Court found that private insurance companies offering coverage under Medicare Part C have the right to sue for conditional benefit payments they made when they were not properly reimbursed. The U.S. Court of Appeals for the Third Circuit in Humana v. GlaxoSmithKline, LLC, 685 F.3d 353 (3rd Cir. 2012), found that private insurers offering Medicare Part C plans can sue insurance carriers, employers, or other entities where payment has been made by the private insurance company under Medicare Part C. The payments are defined as ones that have been made or can reasonably be expected to be made under a workers’ compensation law, under an automobile or liability insurance policy, or under no fault insurance. This decision out of the U.S. Court of Appeals for the Third Circuit is significant in that it is the first appeals court in the United States to address the issue of whether these third-party insurance carriers under Medicare Part C have the same rights to pursue reimbursement for conditional Medicare benefits as the federal government. The Third Circuit found that they do.

In Humana, GlaxoSmithKline, the manufacturer and distributor of Avandia, a Type II diabetes drug, had been sued by patients for various injuries resulting from their use of the drug. Glaxo then began entering into multiple settlement agreements for these claims. As part of this settlement process, where the Plaintiff was insured by Medicare, Glaxo set aside reserves to reimburse Medicare for payments it had made to cover the cost of treatment for Avandia related injuries. Thus, Glaxo had appropriately set aside settlement dollars to cover traditional “conditional benefits” under Medicare’s Parts A, B, and D. There was, however, a certain select group of Plaintiffs in the settlement that elected to receive their medical benefits through private insurance companies whom contracted with the government to provide “Medicare Advantage” plans. This is more commonly known as Medicare Part C. These select Plaintiffs under the “Medicare Advantage” plans (aka Medicare Part C) did not have settlement dollars set aside by Glaxo to cover the cost of treatment for any Avandia related injuries. Humana, a private insurance company offering Medicare Advantage plans (aka Medicare Part C) to some of the select Plaintiffs in the Glaxo suit, then filed a class action lawsuit against Glaxo under 42 U.S.C.§1395y(b)(3)(A) asking for double damages for a failure to reimburse Humana as a secondary payer.

The Eastern District of Pennsylvania court agreed with Glaxo dismissing Humana’s complaint on the basis that no implied private right of cause of action existed for Humana. Humana then appealed to the U.S. Third Circuit, who reversed the District Court’s decision. In interpreting the statute {42 U.S.C.§1395y(b)(3)(A)}, which provides for double damages for failure to reimburse Medicare for conditional benefits paid, the Appeals Court stated that the regulations make clear that the provision extends a private cause of action to private insurance carriers under Medicare Part C. The Third Circuit noted that the statute is broad enough, and places no limitations upon which private (i.e. non-governmental) companies can bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer. Because Glaxo paid the settlement proceeds for the Avandia suits out of its own pocket, they are considered self-insured and, therefore a primary payer in this instance. Thus, Humana has a private cause of action against Glaxo to pursue double damages for payments Humana made to its Medicare Part C policy holders who settled the Avandia related claims with Glaxo.

This decision out of the U.S. Court of Appeals for the Third Circuit, although not binding on jurisdictions in Ohio, Kentucky, and Indiana is very instructive as to what the rights may be for third-party insurance companies offering Medicare Part C benefit plans. Going forward any insurance carrier, employer, or other plans that can reasonably expect to make payments under a workers’ compensation system, automobile or liability insurance policy (including a self-insured plan), or under no-fault insurance should also conduct conditional benefit research against any possible Medicare Part C providers. Current conditional benefit research only covers Medicare Parts A, B and D. Thus, research must be done with the private carriers directly. As the identity of any possible Medicare Part C carriers will be hard to uncover, the single best option is to request the identity of any Medicare Part C providers directly from the injured worker/Plaintiff and his/her counsel. The request should cover any and all insurance plans that the injured worker/Plaintiff may be a part of, and request copies of any/all insurance cards. This request should be done prior to executing full and final settlement documents. By requesting this information in advance, it allows any insurance carrier, employer, or other entity operating a plan to determine if the injured worker/Plaintiff is a plan participant under Medicare Part C. Should there be a potential that the injured worker/Plaintiff is a plan participant under Medicare Part C, a conditional benefit request letter could then be sent directly to the private carrier. Failure to request conditional benefits research from a Medicare Part C carrier, under the Humana v .GlaxoSmithKline case, could result in a private cause of action against the insurance carrier, employer, or other entity or plan for double damages of those conditional benefits paid under Medicare Part C.

If you would like a copy of this Decision, or have any further questions, please do not hesitate to contact a member of our Workers’ Compensation or General Casualty/Excess and Surplus Lines Practice Groups.

Practice Areas

Jump to Page

By using this site, you agree to our updated Privacy Policy and our Terms of Use