State Court Unable to Allocate Medicare’s Reimbursement Amount in Death Case
Jeff Signor
March 28, 2013

Edith Weinstein v. Sebelius, 2013 U.S. Dist. LEXIS 41594 (U.S. District Court, Eastern District of Pennsylvania, 2/13/2013).

Facts & Procedural History:

Plaintiff brought actions for wrongful death and survival against Albert Einstein Hospital and other defendants (“Medical Defendants”) for her husband’s prolonged hospitalizations and death between April 10, 2005 and September 4, 2005.   Her complaint sought all damages “allowed, recognized and recoverable” under the State law and she settled her claims for $425,000.     Medicare claimed it was owed $58,393.57 for the treatment provided for Plaintiff’s husband.  Plaintiff, however, was able to convince a state court to limit Medicare to a reimbursement of $2,922.34, less procurement costs.

Plaintiff paid the amount claimed by Medicare, to prevent interest from accruing, but immediately disputed the amount based on the State Court’s allocation.    Plaintiff lost her appeals, and, after exhausting her administrative remedies, filed this action in U.S. District Court for relief.

The issues for the federal court to determine were:

  1. Whether the ALJ imposed the appropriate burden of proof on Medicare; and
  2. Whether the state court Order limiting Medicare’s reimbursement demand was binding upon Medicare.

U.S. District Court Holding:

The Eastern District of Pennsylvania denied plaintiff’s request and ordered judgment to be entered in favor of the Secretary.  The Court applied the arbitrary and capricious standard applicable to administrative findings and found that the Secretary’s acceptance of the ALJ’s decision did not exceed this standard.  A key finding in the Court’s determination was that the state court order, decreasing Medicare’s reimbursement amount over $55,000, was not a hearing on the merits.

Franco Signor LLC Commentary:

It is not surprising that the federal court applied the heightened arbitrary and capricious standard.  If Medicare makes payments in a matter and a primary payer ultimately settles the loss then Medicare’s administrative framework is deferred to, and accepted.  This same issue was decided somewhat differently in Bradley vs. Sebelius. See 621 F. 3d 1330 (11th Circuit).  In Bradley, the court found that principles of equity and fairness controlled, and the 11th Circuit accepted the findings of the Florida probate court, reducing Medicare’s claimed amount owed from $22,480 to $787.50.

Also of worthy note are the pleadings in this case. Plaintiff sought all possible damages recoverable under state law.  Such allegations would presumably include medical expenses associated with the care, which, more likely than not, was considered when evaluating the settlement.  This issue comes up often, and it is difficult to argue that such medical expense, on one hand, is necessary to establish the value of the case, but, in terms of owing Medicare, are to be discounted.

The law as it stands today is Medicare gets 100% based on U.S. v. Hadden.  Unlike Medicaid, there is no anti-lien language attached to the Medicare Secondary Payer statute that would allow a proportionality adjustment.  Unless evidence can be presented to the State Court that clearly demonstrates treatment is not related to the claim, it will have no weight in a later dispute with Medicare.  Rubber stamps by Parties will not work when resolving Medicare reimbursement claims.  The U.S., with its MSP Recovery Audit Contractors, Department of Treasury and other tools available, will collect its past medical expense.  Further, the Medical Defendants in Weinstein were fortunate that Plaintiff paid over the disputed funds to Medicare, because under current law they would have been responsible to reimburse Medicare once the ink on the Release dried.

At Franco Signor LLC we have experienced CMS Regional Offices taking differing positions with respect to wrongful death actions.  Ever since the Bradley decision, various CMS Regional Offices have become much more accepting of lowered, allocated amounts and Medicare has reduced its reimbursement demands accordingly.

It is also interesting to note that, on March 24, 2013, CMS issued an Alert revising information that is collectable for Section 111 Reporting purposes.   Several of the Fields requiring revision concern cases wherein the injured party is a decedent.  See Alert, here.

Parties to a wrongful death action need to understand that some CMS Regional Offices are reducing Medicare’s reimbursement amount with seeming deference to Bradley and state court wrongful death statutes.  The Weinstein case cuts against such deference, and, once again, Medicare’s administrative framework is the winning party.  It is our recommendation that the parties to wrongful death litigation take the steps necessary to obtain a reduced reimbursement amount, but the court in your jurisdiction could have the last say.  Call upon us to assist in such dispute-reduction requests!