Important Medicare Subrogation Decision From the 9th Circuit Court of Appeals

The 9th Circuit Court of Appeals has ruled that a private Medicare Advantage Organization plan cannot sue a plan participant’s survivors for reimbursement of medical payments out of the proceeds of an automobile insurance policy.

The case is Parra v. PacificCare of Arizona, No. 11-16069 (9th Cir. April 19, 2013),  Parra was struck by car and was seriously injured.  His medical expenses were paid by Defendant, a Medicare Advantage Organization ("MAO").  Parra died from his injuries, and his survivors brought a claim under Arizona’s wrongful death law.  The MAO also asserted a claim for monies it paid for medical expenses.  GEICO, the tortfeasor’s insurer, issued a joint check to the parties for the full amount of the MAO’s claimed interest, to be held in trust pending the outcome of the dispute between the survivors and the MAO. 

The survivors sued PacificCare, saying that it had no right to seek recovery of monies from the wrongful death settlement.

The 9th Circuit affirmed dismissal of the MAO’s claims, holding that it did not have a right to pursue its claim under the statutes that creates MAOs.  The Court also ruled that a private right of action did not exist under the facts.  The decision includes an extensive discussion about Medicare subrogation generally and the rights of MAOs in particular.

Neither the district court nor the appellate court reached the issue of whether the contract between Parra and the MAO gave MAO a right in the recovery.  (Note:  Arizona law has a provision similar to that in Tennessee that provides that wrongful death proceeds are free from claims of the decedent’s creditors.)  Presumably, that issue will be hashed out in state court.


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