Medicare recovery actions cannot be brought by uninjured parties, Court of Appeals says

Litigation seeking to win Medicare reimbursements from insurance companies has become big business over the past decade, making a Miami attorney a billionaire and causing costly and ongoing headaches for accident insurers.

But the federal law that allows third parties to obtain double damages by highlighting Medicare payments that should have been made by private insurers has its limits, a federal appeals court ruled this week, addressing some of the concerns raised by insurance carriers. insurance recently. years.

In a class action case that was prosecuted nationally, 4^th The U.S. Circuit Court of Appeals said Monday that the lead plaintiff, the widow of a deceased UPS worker in North Carolina, does not have standing to sue Liberty Mutual Insurance Companies because she was not actually injured and did not lose any money.

“Regardless of what right or cause of action a statute may confer on a plaintiff, she must have an injury in fact to sue in federal court,” a 4-person panel.^th The circuit judges wrote, citing a 2016 court ruling.

Yes, the Medicare Secondary Payer Act of 1980 requires private insurers, in many cases, to pay covered medical costs before Medicare chips are inserted. It also allows parties to act on behalf of Medicare to enforce the law, the court noted. But Article III of the US Constitution states that plaintiffs must have rights to bring legal action.

“Congress may raise damages that were previously insufficient to justify suit ‘to actionable legal standing’ through statutory causes of action,” the court wrote. “But that does not mean that Congress can override Article III and expand federal court jurisdiction beyond its constitutional limits.”

Although its requirements are often tedious, legal standing “ensures that we, as judges, do not exceed the authority to decide cases and controversies vested in us by the Constitution,” the appellate judges noted.

Advocates familiar with Medicare reimbursement said the ruling clarifies a 2018 4^th Circuit opinion in Netro vs. Greater Baltimore Medical Center, a decision heavily relied upon by the plaintiffs in Penegar. This week’s ruling could also help curb growing efforts by third parties to capitalize on the MSP Recovery Act, similar to what a company and a Miami law firm have done in recent years on their way to winning billions of dollars in damages.

The North Carolina case began in 2013, when Johnny Ray Penegar Jr., of Monroe, was diagnosed with mesothelioma. He filed a workers’ compensation claim against his employer, UPS, and his insurance carrier, Liberty Mutual. Before the application was completed, Penegar died in 2015.

The North Carolina Industrial Commission, which handles workers’ compensation litigation, awarded his widow the cost of treating the illness while Penegar was alive, as well as death benefits under state law. In 2020, the widow, Carra Jane Penegar, and Liberty Mutual settled for $18,500.

A few weeks later, Mrs. Penegar filed a Medicare recovery lawsuit in federal court in the Western District of North Carolina against Liberty Mutual, alleging that the insurer did not properly reimburse Medicare for her husband’s medical care. Liberty Mutual countered, arguing that it had, in fact, paid Medicare in full for an outstanding lien. The carrier also argued that Carra Penegar was not at fault and was not injured, according to the settlement agreements.

The federal district court agreed with Liberty Mutual and dismissed the case. Penegar also appealed 4^th The circuit upheld the lower court. The difference, wrote Court of Appeals Judge Julius Richardson, is that in the 2018 Netro case, the insurance company had been obligated directly to Medicare. In the Penegar case, Liberty Mutual paid Penegar in settlement of the claim, the court noted. The Centers for Medicare and Medicaid Services sent the widow a letter demanding reimbursement, but she never had to pay it.

“Because Liberty Mutual was not required to pay Penegar the funds owed to her by Medicare, the failure to pay did not injure her as it did the plaintiff in Netro.”^th The notice of the circuit is read.

The court agreed with some of the arguments made by Tampa attorneys Matt Lavisky and Mihaela Cabulea of ​​the law firm Butler Weighmuller Katz. Although the attorneys are based in Florida, Liberty Mutual asked them to help represent them in the Penegar case: For the past decade, Lavisky has been one of the lead attorneys for insurance companies fighting double-damage Medicare recovery lawsuits , brought by third parties, many of them represented by renowned Miami attorney John Ruiz.

Lavisky, a recent president of the Florida Bar Association, declined to comment on the Penegar case. But in their appeal filing, Lavisky and Cabulea suggested that Penegar and her attorney were hoping to take advantage of the financial rewards offered by the Medicare Secondary Payer Act.

“This is one of hundreds of lawsuits filed by uninjured plaintiffs across the country, likely spurred by the prospect of recovering double damages under the MSP Act,” the brief states.

But as earlier courts have found, the MSP Act is not a whistleblower or qui tam statute, which would have allowed Penegar to sue on behalf of the federal government for violation of a public right. Butler’s lawyers also argued Penegar’s team never informed Liberty Mutual that Medicare had asked it in 2020 to reimburse the $18,500. If Liberty Mutual had known, they would have paid the bond so quickly.

“Instead, Penegar rushed to court and filed suit eighteen days later, likely spurred by the prospect of recovering double damages,” Lavisky and Cabulea wrote.

The double damages allowed by the MSP statute received little attention until the mid-2010s, when Ruiz began filing thousands of lawsuits against auto insurers. His firm, then known as MSP Recovery, now LifeWallet, alleged that Medicare Part C companies, or Medicare Advantage companies, which offer a supplemental insurance plan for Medicare beneficiaries, covered medical costs after accidents for years — costs that should have paid. by primary insurers, car insurance carriers.

According to news reports, Ruiz became a billionaire from the litigation, purchasing a Boeing 767 airliner and promising to help the University of Miami build a new football stadium.

But until this summer, the publicly traded LifeWallet was in financial trouble.

Last week, Ruiz told investors it was doubtful the company would be able to continue operating, the Miami Herald reported. The company reported a net loss of more than $200 million for the second quarter of 2022.

It is unlikely that the 4^th The circuit’s ruling this week will have a big impact on Ruiz’s company’s litigation against insurers. The Medicare supplement companies, unlike Penegar’s widow, were actually hurt financially when they weren’t reimbursed by auto insurers, the lawyers said.

Ruiz could not be reached for comment Tuesday. The full 4th Circuit opinion can be seen here.

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