On October 30, 2026, the U.S. District Court for the District of Hawaii denied a motion to dismiss in Alpha Thirteen, LLC v. Oahu Transit Services, Inc., No. 26-cv-00092-MWJS-RT (D. Haw.). The court held that the assignee of a Medicare Advantage "downstream entity" can sue a settling defendant for double damages under the Medicare Secondary Payer (MSP) Act's private cause of action.
A “downstream entity” is any party that enters into a written agreement with a first-tier entity (or another downstream entity) to provide health care or administrative services related to a Medicare Advantage or Medicare Part D plan. This may include hospitals and health care systems operating under system-level sub-agreements, specialty providers and clinics, and other organizations contracted beneath a primary medical group or first-tier delegate.
For carriers and self-insureds, the lesson is simple. Settling with a Medicare Advantage enrollee does not resolve the Medicare Advantage lien. An unpaid lien can come back as a claim for twice the amount. The plaintiff may be a party you never dealt with.
The Facts
C.G., a UnitedHealthcare Medicare Advantage enrollee, was hurt in February 2023 while getting off an Oahu Transit Services (OTS) bus.
MDX Hawaii, a UnitedHealthcare downstream entity, made $8,907.71 in conditional payments for her care.
OTS settled all of C.G.'s claims, but the settlement did not resolve MDX Hawaii's claim for reimbursement.
MDX Hawaii assigned its rights to Alpha Thirteen, which sued for double damages under 42 U.S.C. § 1395y(b)(3)(A).
The court had dismissed an earlier complaint in June 2026 for lack of standing. That complaint did not allege that MDX Hawaii assigned the particular claims arising from C.G.'s injury.
What the Court Held
1. Settling makes you the primary payer. Under the MSP Act, a primary plan's responsibility can be shown by "a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability)." OTS's settlement with C.G. plausibly made it a primary payer.
2. Medicare Advantage Organizations (MAO) and downstream entities can sue for double damages. The court saw "no reason to treat downstream entities differently from MAOs." It held the Act "is best read as allowing any party— including a MAO or downstream entity—to invoke the double-damages cause of action if they have standing to sue."
3. The Medicare Advantage recovery statute is not the exclusive remedy. OTS argued that 42 U.S.C. § 1395w-22(a)(4) gives MAOs their only route to recovery. The court disagreed. In Parra v. PacifiCare of Arizona, Inc., 715 F.3d 1146 (9th Cir. 2013), the Ninth Circuit held that § 1395w-22(a)(4) creates no private right of action. Parra left open whether MAOs can use the MSP private cause of action. The court also relied on 42 C.F.R. § 422.108(f). That regulation gives MAOs "the same rights to recover from a primary plan... that the Secretary exercises."
4. Assignees must trace their claims to the specific beneficiary. The amended complaint cured the standing defect by listing only the claims tied to C.G.'s accident.
5. Upstream assignment defects go to the merits, not standing. Any gap in the UnitedHealthcare-to-MDX assignment did not defeat standing, because MDX Hawaii still paid $8,907.71. The same person signing for both assignor and assignee did not invalidate the assignment.
Where This Fits
Three circuits have held that MAOs can sue under § 1395y(b)(3)(A):
The Third Circuit in In re Avandia, 685 F.3d 353 (3d Cir. 2012)
The Eleventh Circuit in Humana Medical Plan, Inc. v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016)
The Second Circuit in Aetna Life Insurance Co. v. Big Y Foods, Inc., 52 F.4th 66 (2d Cir. 2022)
No circuit has held otherwise. The Ninth Circuit has not ruled, so Alpha Thirteen persuades other courts but does not bind them. The same assignee has had other suits dismissed in 2026. Those include a separate District of Hawaii case against Progressive and GEICO and a Central District of Illinois case against State Farm. Alpha Thirteen v. Oahu Transit itself is only at the pleading stage.
MSP Compliance Lessons for Carriers
Medicare Advantage and Part D liens carry federal recovery rights. MAOs exercise the Secretary's MSP recovery rights. Part D sponsors get the same rights under 42 C.F.R. § 423.462(a).
Paying the claimant does not end your obligation. Under 42 C.F.R. § 411.24(i), a primary payer "must reimburse Medicare even though it has already reimbursed the beneficiary or other party." The same applies when the payer pays someone else while it "is, or should be, aware" of a conditional payment.
Exposure reaches beyond the payer. The United States may also recover "from any entity that has received payment from a primary plan or from the proceeds of a primary plan's payment to any entity."²
The lienholder may not be the plan you know. Downstream entities are any party that enters into a written agreement with a first-tier entity (or another downstream entity) to provide health care or administrative services related to a Medicare Advantage or Medicare Part D plan. A demand may come from an assignee years after closing.
The exposure window is long. Most courts borrow the three-year limit from § 1395y(b)(2)(B)(iii).²⁴ The Eleventh Circuit applies a four-year limit to MAO claims.²⁵
Section 111 reporting carries penalties. CMS began enforcing the civil money penalty rules on October 11, 2025.²⁶ For liability, no-fault, and workers' compensation reporters, late records can cost up to $1,000 per day (as adjusted), capped at $365,000. Since January 2026, CMS has randomly audited 250 MSP records each quarter.
Settlement Checklist
1. Confirm the claimant's Medicare status and plan type (Traditional Medicare, Medicare Advantage, Part D) at intake and again before settlement.
2. Identify every payer: CMS, the MAO, the Part D sponsor, and any downstream entity that paid claims.
3. Get itemized, accident-related lien amounts in writing. Dispute unrelated charges before you settle.
4. Address each lien category in the release. Include claimant representations about enrollment, a duty to satisfy all liens, and indemnity.
5. Do not rely on claimant indemnity alone. Use holdbacks, escrows, or direct payment to lienholders, and require proof of satisfaction.
6. When an assignee makes a demand, require claim-level tracing and the full chain of assignment.
7. Report timely under Section 111, and calendar the limitations window.
How Sanderson Firm Can Help
Sanderson Firm handles lien resolution with Traditional Medicare, Medicare Advantage, Part D, and downstream entities. We can also draft settlement language that resolves conditional payments and covers other areas of MSP compliance. Contact us to learn more.
