Federal Court in Missouri remands to state court in wrongful death action
Roy Franco
July 21, 2011

We’ve written on the difficulty in obtaining jurisdiction against Medicare multiple times. Recently, a U.S. District Court denied the Government’s motion to dismiss a state lawsuit against it for lack of subject matter jurisdiction and the case was remanded back to state court for further proceedings. Although an apparent victory for establishing jurisdiction against the Government, it remains to be seen if the prevailing party will ultimately win as the suit progresses in State Court.
Background
Wasson v. Sebelius, 2011 U.S. Dis. LEXIS 77771 involved a wrongful death claim filed under Missouri state law that had settled. The decedent was a Medicare beneficiary. Medicare paid for medical items and services related to his care which it now claimed reimbursement for under the Medicare Secondary Payer Law. The settling parties filed a waiver with Medicare which was denied as it did not “fall within the criteria used to grant waiver.” Medicare then renewed its demand for $8,327.01 plus interest in the amount of $234.21, but also offered the parties an opportunity to file for a further administrative appeal. Instead, the parties filed a state court action to determine Medicare’s lien, based on what would be the allocated share.
The Problem
In a typical wrongful death claim the parties involved are the Estate’s personal representative and heirs. The Estate under the statute collects for the expenses connected with the loss, such as medical expenses; while the heirs claim compensation for the loss of the comfort and society of the decedent. As the claims between the Estate and heirs are distinct, an interesting issue arises when a Medicare beneficiary decedent is involved. Under present interpretation of the Medicare Secondary Payer Law, the parties in a wrongful death action cannot privately allocate a settlement and pay Medicare its pro-rata share. Medicare takes the position that its claim is primary over the entire settlement, however, in recent cases some courts (both State and Federal) have parsed the settlement between the two claimant types and only allowed Medicare to proceed against the Estate. Medicare will respect a judgment of the court, so long as it is heard on the merits, however, it is usually not a party to the proceeding.
The Impact of the Court’s Ruling in Wasson
Plaintiffs file their action in state court seeking allocation against the Department of Health & Human Services. The U.S. responded by requesting removal to Federal Court and Dismissal for lack of subject matter jurisdiction. The Government usually wins this argument, because of the jurisdictional requirement that administrative remedies must first be exhausted. However, this case came out with a slightly different result, leaving the U.S. to fight its jurisdictional argument in state court.
The Wasson court never reached the subject matter jurisdiction argument, rather their analysis focused on whether removal by the U.S. was authorized under 28 U.S.C. §§1441 and 1442(a)(1) and decided it was not. The underlying matter did not involve an action for the collection of revenue, as the value of Medicare lien was not being contested. Rather it was an action for apportionment of the settlement amount between the claims of the Estate and heirs; and then to limit Medicare’s reimbursement claim to the Estate’s portion of the settlement. Since this is a matter of state law, not involving a collection of revenue from the United States, the case was sent back to state court.
Plaintiffs won to keep the matter in state court. It would appear the United States may find it difficult after this decision to seek removal to a Federal Court that is protective of its ever growing docket. The state court will have the authority to allocate the settlement amount between the plaintiffs, but any ruling of that court to reduce the amount owed Medicare by the Estate, may not be enforceable. Medicare will continue to claim it must be paid in full from the Estate’s proceeds. If the Estate is not in agreement, it may have to pursue an administrative appeal. The Wasson Court made it clear that its decision to remand has no effect on the rights they [plaintiffs] may waive by failing to exhaust administrative remedies in regard to repayment to Medicare for the Decedent’s medical expenses. Thus, an Estate should remain mindful of administrative deadlines or be left without a remedy to contest the value of Medicare’s reimbursement claim.
This case is further evidence that the courts are weakening Medicare’s reimbursement rights when the issue concerns wrongful death. Practitioners should take note of this trend and be sure to make the arguments in your wrongful death cases involving a Medicare beneficiary. It is especially important to segregate the claims of the Estate and heirs.
At Franco Signor LLC we are closely following the various court cases across the country wherein the issue for determination is the extent to which Medicare is entitled to its full reimbursement amounts in cases involving wrongful death. The cases were uniform across the country until Bradley v. Sebelius was decided last year. See 621 F3d 1330 (11th Cir. 2010). Since Bradley, we have had experience with actual cases we are handling on behalf of our clients wherein the various CMS Regional Offices are taking a good deal of time to determine this issue. Call upon us to assist with navigating your Medicare secondary Payer issues!