The case involves MSP Recovery, which includes several entities that have assigned claims related to the Medicare Secondary Payer Act (MSP Act) against multiple insurance companies, collectively referred to as the Defendants. The district court dismissed MSP Recovery's claims for failing to establish that the Defendants had a "demonstrated responsibility" to reimburse the medical expenses in question. MSP Recovery's appeal seeks to determine whether their complaint adequately alleged such responsibility. Upon review and oral argument, the appellate court reversed the district court's dismissal and remanded the case for further proceedings.
The MSP Act, enacted in 1980, aims to reduce Medicare costs by clarifying the allocation of liability among insurers when multiple sources may cover an individual's medical expenses. It defines "primary plan" broadly to include various insurance policies, ensuring that Medicare does not pay for expenses that another insurer is primarily responsible for covering.
Before the enactment of the Medicare Secondary Payer (MSP) Act, Medicare frequently acted as a primary insurer, covering medical expenses even when other insurance or third parties were responsible. The MSP Act was designed to position Medicare as a secondary payer, stipulating that Medicare would not pay if another party was expected to cover the costs. Specifically, the Act prohibits Medicare payments for services if another insurance policy, including automobile or liability insurance, has made or is expected to make payment (42 U.S.C. 1395y(b)(2)(A)(ii)). If a primary plan does not make timely payments, Medicare may initially cover the costs, contingent upon reimbursement from the primary plan (42 U.S.C. 1395y(b)(2)(B)(i)). The primary plan is liable to reimburse Medicare if it can be shown that it had a responsibility to pay (42 U.S.C. 1395y(b)(2)(B)(ii)), a requirement referred to as the "demonstrated responsibility requirement." Evidence of this responsibility can include judgments or settlements related to the claim.
To enforce this, Congress established private and governmental causes of action for double damages against primary plans that fail to fulfill their payment obligations (42 U.S.C. 1395y(b)(2)(B)(iii), (b)(3)(A)). A private cause of action exists for entities that can prove a primary plan's responsibility to pay, which must be demonstrated before legal action can be taken (Glover, 459 F.3d at 1309; Allstate, 835 F.3d at 1359).
The MSP Recovery entities specialize in recovering funds for parties within the Medicare Advantage system and have filed a class action against defendants who offer automobile and liability insurance. MSP Recovery claims that these defendants, as primary plans, failed to honor their payment and reimbursement obligations for accident-related medical expenses, leading to Medicare Advantage Organizations (MAOs) covering these costs without receiving due reimbursement. The claims from the MAOs have been assigned to MSP Recovery for recovery under the MSP Act.
MSP Recovery claimed that Defendants were responsible for reimbursing Medicare Advantage Organizations (MAOs) under two conditions: (1) when contractually obligated to cover accident-related medical expenses due to “no-fault” coverage, and (2) when they entered settlement agreements related to their liability insurance policies. After filing an initial complaint, MSP Recovery amended it, referring to this updated version as “the complaint.” The complaint alleged that Defendants had acknowledged their obligation to provide primary payments for enrollees’ claims by reporting to the Centers for Medicare & Medicaid Services (CMS). However, specific instances of these admissions were not detailed within the complaint; instead, they were outlined in “Exhibit A,” which included hundreds of claims assigned to MSP Recovery. Exhibit A provided critical information about each claim, including beneficiary ID, assignor details, primary payment plan, insurance policy number, and the basis of the payment obligation. MSP Recovery asserted that Exhibit A was incomplete and that further discovery was necessary to fully understand the claims' scope.
Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), contending that MSP Recovery did not adequately demonstrate Defendants' responsibility to pay the claims. MSP Recovery opposed this motion and sought permission to amend the complaint if needed. The district court ultimately granted Defendants' motion to dismiss, finding that MSP Recovery had not sufficiently alleged Defendants' responsibility for the claims. The court highlighted that merely including factual allegations in an exhibit did not suffice and that the allegations in the complaint were inadequate to withstand dismissal. It referenced a prior ruling emphasizing that an exhibit cannot replace necessary factual allegations in a complaint.
The district court ruled that a complaint must include at least one instance of the plaintiff's alleged injury, not just exemplars in attached exhibits. It found MSP Recovery’s complaint deficient and fatal to its claims, noting a lack of non-conclusory factual allegations necessary to establish whether the Defendants had a responsibility to make payments under the Medicare Secondary Payer (MSP) Act. The court denied MSP Recovery's request to amend the complaint, deeming it procedurally defective and lacking substantive support. MSP Recovery's subsequent motion for reconsideration was also denied, leading to a timely appeal of both the dismissal and the reconsideration order.
On appeal, the court reviewed the dismissal de novo, accepting all well-pleaded allegations as true and favoring the plaintiff’s perspective. MSP Recovery argued that its complaint adequately alleged the necessary elements for a private cause of action under the MSP Act, specifically the Defendants' responsibility to pay. The Defendants countered that dismissal was justified under the two-dismissal rule of Fed. R. Civ. P. 41(a)(1)(B) and claimed lack of personal jurisdiction over two Defendants.
The court first evaluated whether the district court erred in its dismissal for failure to state a claim under the MSP Act, emphasizing that a complaint must present sufficient factual matter to state a plausible claim for relief. It reiterated that mere conclusory statements are insufficient for a valid claim. The private cause of action under the MSP Act is straightforward, allowing recovery for double damages when a primary plan fails to provide for payment or reimbursement of conditional payments by a secondary payer. Three elements must be established: (1) the defendant's status as a primary plan, (2) the failure to provide for primary payment or reimbursement, and (3) the amount of damages.
The appeal focuses on the defendant's failure to demonstrate responsibility for primary payment or appropriate reimbursement regarding a Medicare beneficiary's expenses. The court emphasized that such responsibility must be established before pursuing reimbursement, as outlined in MSPA Claims 1, LLC v. Kingsway Amigo Ins. Co. Until this responsibility is shown, defendants are not deemed to have failed in providing reimbursement. The district court dismissed MSP Recovery’s complaint, finding it did not adequately allege defendants' responsibility, noting that Exhibit A could not substitute for necessary factual allegations. It identified deficiencies in the complaint, including a lack of details about the enrollee, amounts charged, payments made, treatments provided, and coverage determinations by the defendants. MSP Recovery contests this dismissal, arguing that the district court erroneously disregarded Exhibit A and that, with it included, the complaint sufficiently states a claim under the MSP Act. The defendants maintain that the district court was correct in ignoring Exhibit A, asserting that their contractual obligations and settlements do not prove responsibility. The court determined that the district court erred by not considering Exhibit A, which is typically part of the pleading under Federal Rule of Civil Procedure 10(c). Consequently, the court concluded that the complaint, including Exhibit A, should be evaluated to ascertain whether it plausibly alleges that the defendants had a demonstrated responsibility to pay before the lawsuit. The MSP Act mandates that a primary plan must reimburse Medicare only if it is shown that the primary plan had a responsibility to make payment. Furthermore, primary payers must be aware of this responsibility to face potential double damages under the Medicare Secondary Payer Act.
Plaintiffs can establish a primary plan's responsibility to pay through various means, including a judgment, conditional payment related to a claim, or other forms of evidence such as a contractual obligation or a settlement agreement. Precedent confirms that a contractual obligation can meet the demonstrated responsibility requirement, but plaintiffs must still prove that such obligation renders the defendants liable for the specific expenses sought. Defendants can present valid contract defenses against liability. Additionally, a settlement agreement with a beneficiary can demonstrate a defendant's responsibility to pay, indicating at least constructive knowledge of that obligation. Defendants’ filings with the Centers for Medicare & Medicaid Services (CMS) further reflect their knowledge of primary payment responsibilities. The Medicare Secondary Payer Act mandates certain insurance plans to report on claims where they are primary payers, reinforcing the obligation to acknowledge and manage those claims. To survive a motion to dismiss under the MSP Act, plaintiffs must plausibly allege that a defendant’s responsibility to pay was established prior to litigation, and that the defendant was aware of this obligation, which can be shown through contractual agreements, settlements, or CMS filings.
MSP Recovery's complaint alleges that Defendants failed to timely reimburse their assignors for conditional payments related to beneficiaries' accident-related medical expenses. The complaint asserts that Defendants had a demonstrated responsibility to pay these claims, as they reported to CMS their obligation to provide primary payments under no-fault and liability policies. MSP Recovery attached Exhibit A to detail specific claims, which includes the beneficiary's ID, the assignor who made the conditional payment, the primary responsible plan, the insurance policy number, and the basis for the primary payment obligation. The claims were identified by comparing the assignor's data against Defendants' CMS filings and reported settlements.
The court determined that MSP Recovery's allegations sufficiently met the demonstrated responsibility requirement at this stage, referencing precedent that contractual obligations or settlements can establish such responsibility without needing a judgment from a separate proceeding. Defendants, however, argue for dismissal based on the two-dismissal rule of Rule 41(a)(1)(B), claiming that MSP Recovery had previously filed and dismissed two similar complaints. MSP Recovery contends that those cases involved different plaintiffs and defendants, with distinct failures to reimburse arising from separate assignment agreements.
Defendants argue that the district court lacked personal jurisdiction over two of them because Metropolitan Group Property and Casualty Insurance Company does not operate in Florida and MetLife Auto, Home Group is non-existent. MSP Recovery counters that the Defendants' reporting to CMS undermines their claims, suggesting that any errors in naming the Defendants were due to the Defendants' inaccurate reporting. The district court did not address these arguments, and generally, issues not decided by the district court are not considered on appeal. Consequently, the appellate court declines to address these issues at this stage and directs the district court to determine personal jurisdiction and whether the case is barred by Rule 41(a)(1)(B) upon remand.
The court finds that MSP Recovery’s complaint plausibly alleges that the Defendants have a responsibility to pay the claims, leading to a reversal and remand for further proceedings. Judge Jordan concurs in the judgment, stating that while the district court correctly dismissed the complaint, it erred in denying the plaintiffs leave to amend. He emphasizes that the insurers’ reports to the government about Medicare benefits can serve as evidence of their responsibility under the Medicare Secondary Payer Act. However, the plaintiffs’ first amended complaint lacked sufficient factual detail, relying on a chart with over 1,500 claims that did not provide adequate notice to the Defendants about the specific claims against them.
Exhibit A identified beneficiaries using MSP Recovery Member IDs, which the defendants could not access or verify. It included a "contract" or "plan" number, potentially representing a group plan with multiple members. The exhibit listed the insurer's name and address for each beneficiary, but this information did not clarify the defendants' alleged liabilities. It also noted the "insurance type," such as "other liability insurance is primary," but lacked sufficient detail to inform the defendants of their responsibilities under the MSPA. Additionally, the exhibit contained a column for the MSP client/assignor, identified only by an inaccessible MSP number. Crucially, it did not specify any dollar amounts or dates for the claims, complicating the defendants' understanding of their alleged liabilities. For instance, the first entry on Exhibit A did not adequately inform Metropolitan Property and Casualty of its obligations. Citing Johnson v. City of Shelby, the document emphasizes that a complaint must clearly outline the basis for damages. Although the plaintiffs offered to provide additional beneficiary information upon request, this did not remedy the complaint's deficiencies. Concerns regarding HIPAA were deemed unfounded, as the plaintiffs later proposed a second amended complaint that included identifiable information and redacted details to comply with privacy regulations, indicating a willingness to provide necessary information while addressing confidentiality issues.
HIPAA concerns raised in the first amended complaint were deemed exaggerated and manageable, especially given the plaintiffs' potential dismissal. The plaintiffs, identified as "collection agencies" in the Medicare sector, appeared to be testing the limits of pleading requirements to minimize litigation costs and maximize potential recoveries. The district court correctly dismissed the first amended complaint, but it should have granted the plaintiffs leave to amend. The court cited Newton v. Duke Energy Florida, LLC, to deny the amendment request because it was included in a motion for reconsideration. However, a detailed analysis of Newton indicates that such a request can be made properly under Rule 59(e) or Rule 60(b). Since the plaintiffs requested reconsideration under Rule 59(e), their amendment request was valid. The proposed second amended complaint addressed prior pleading deficiencies by including detailed exemplars, beneficiary names, and a chart of occurrences. These amendments were significant enough to avoid legal futility, warranting the granting of leave to file the second amended complaint. The conclusion is to reverse the dismissal and allow the defendants to respond accordingly.
