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MAO-MSO Recovery II, LLC v. Progressive Corp.

United States District Court, N.D. Ohio, Eastern Division

July 17, 2018

MAO-MSO RECOVERY II, LLC, et al., Plaintiffs,



         This matter is before the Court on Defendant The Progressive Corporation's (“Defendant”) Motion to Dismiss (ECF DKT # 35). For the following reason, the Court grants Defendant's Motion and dismisses the above-captioned case.

         Background Facts

         Plaintiffs MAO-MSO Recovery II, LLC; MSP Recovery, LLC and MSPA Claims I, LLC (collectively, “Plaintiffs”) filed this putative class action suit against “Progressive Corporation, its direct and indirect subsidiaries; Progressive; Progressive Insurance; Progressive Casualty Insurance Company; and Progressive Group of Insurance Companies.” First Amended Complaint (“FAC”). This case is one of several filed around the country by Plaintiffs against various automobile insurance companies.[1]

         This action arises under the Medicare Secondary Payer (“MSP”) provisions of the Medicare Act, 42 U.S.C. § 1395, et seq. When the Medicare program was enacted in 1965, Medicare “paid for all medical treatment within its scope and left private insurers merely to pick up whatever expenses remained.” Bio-Med. Applications of Tennessee, Inc. v. Cent. States Southeast & Southwest Areas Health and Welfare Fund, 656 F.3d 277, 278 (6th Cir. 2011). In 1980, Congress “inverted that system” by “mak[ing] private insurers covering the same treatment the ‘primary' payers and Medicare the ‘secondary' payer” when overlapping coverage exists. Id. Automobile insurance plans may be primary payers under this system. Stalley v. Methodist Healthcare, 517 F.3d 911, 915 (6th Cir. 2008). However, “[i]f the primary payer has not paid and will not promptly do so... Medicare can conditionally pay the cost of treatment.” Id.

         “The MSP empowers Medicare to seek reimbursement for any conditional medical payments from the primary payer... if it is demonstrated that the primary payer has responsibility to pay.” Id. The MSP also provides for a “private right of action with double recovery to encourage private parties who are aware of non-payment by primary plans to bring actions to enforce Medicare's rights.” Id.

         In 1997, Congress created Medicare Part C, which allows for private Medicare Advantage plans. 42 U.S.C. §§ 1395w 21-28. Under this system, private insurers may become Medicare Advantage Organizations (“MAOs”) and administer Medicare benefits pursuant to contracts with the Centers for Medicare and Medicaid Services (“CMS”). Id.

         Plaintiffs are entities which allege that they have been assigned “all rights, title, and interest allowing them to bring these claims” by several unspecified MAOs. FAC at 2, n.2. Plaintiffs allege that Defendant provided no-fault automobile insurance coverage, which obligated Defendant to pay all medical expenses up to a certain threshold to several Medicare enrollees. FAC ¶ 3. Plaintiffs thus contend that Defendant was a primary payer and that the MAOs covering these Medicare enrollees were secondary payers. FAC ¶¶ 3-4. Plaintiffs allege that Defendant failed to pay medical bills that it was statutorily obligated to pay, resulting in economic loss to Plaintiffs. FAC ¶ 4. Plaintiffs assert claims for Double Damages under the Private Right of Action established by the MSP in 42 U.S.C. § 1395y(b)(3)(A) and for Breach of Contract.

         Defendant's Motion

         Defendant moves to dismiss Plaintiffs' claims for lack of jurisdiction under Fed.R.Civ.P. 12(b)(1) and for failure to state a claim under Fed.R.Civ.P. 12(b)(6). Defendant argues that Plaintiffs' claims should be dismissed for lack of subject matter jurisdiction because Plaintiffs do not have Article III standing to pursue this lawsuit since they have failed to plead an injury that is concrete and particularized. Plaintiffs have similarly failed to allege sufficient facts to connect any injury to Defendant.

         Next, Defendant contends that MAOs do not have any private right of action under the MSP provisions of the Medicare Act. Furthermore, even if MAOs did have a private right of action, Defendant contends that the MAOs improperly made payments before determining whether there was a primary payer, making the payments illegal and not proper “conditional” payments within the meaning of the MSP provisions.

         Finally, Defendant also argues that the FAC fails to state a claim upon which relief can be granted because “it is bereft of even the most basic factual allegations” and “does not identify a single claim that any MAO paid conditionally.” Similarly, Plaintiffs have not alleged any facts demonstrating the existence of valid assignments between themselves and any MAO. Therefore, “the Amended Complaint is a textbook example of a barebones pleading that does not provide the Defendants fair notice of the allegations against them, ” and the Court should dismiss the FAC with prejudice.

         Plaintiffs' Response

         Plaintiffs contend that they represent MAOs, “who, for all practical and legal purposes, stand in the same shoes as the Centers for Medicare and Medicaid Services in providing Medicare Benefits.” Therefore, if there is a primary payer available, any payment made by MAOs is automatically conditional, and MAOs are entitled to recover the payment from the primary payer. Plaintiffs allege that there is a pattern of “MAOs almost never ...

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