Apportioning Settlement Proceeds to Exclude Medical Expenses Does Not Work: Medicare Wins
Jeff Signor
August 1, 2014

The Medicare Manual is cited, the definition of Primary Plan is questioned, and the quasi nature of a court “hearing” is addressed, among other interesting Medicare Secondary Payer issues, in Taransky, Individually and on behalf of all persons similarly situated v. Secretary of the US Department of Health and Human Services, US Department of Health and Human Services, and United States of America, 2014 U.S. App. LEXIS 14408 (3rd Cir. Court of Appeals).

The plaintiff in Taransky slipped and fell at a shopping mall and Medicare made $18,401.41 in conditional payments for treatment related to the loss.  The parties to that underlying lawsuit agreed upon a settlement of $90,000, and a release was executed wherein the plaintiff was to indemnify and hold harmless the defendant, as well as satisfy any liens or subrogation claims from the proceeds of settlement.  Post-settlement, plaintiff moved, unopposed, to apportion the proceeds to exclude medical expenses.  A New Jersey Superior Court granted the motion.  Plaintiff thereafter challenged Medicare’s right to reimbursement of $10,121.15 (conditional payment amount after reduction based upon attorney fees and costs to procure) at all levels of appeal: The Medicare Contractor level, the Administrative Law Judge, and the US District Court of New Jersey, thereby exhausting her administrative remedies.

The 3rd Circuit Court of Appeals carefully considered the following three main arguments put forth by the plaintiff:

  1. The shopping mall tortfeasor cannot be considered a “Primary Plan” as defined by the MSP Statute,
  2. The Government failed to prove the shopping mall had “demonstrated responsibility” to pay for medical expenses, based mainly upon the New Jersey Collateral Source Statute, and
  3. The Government should defer to the State Court order apportioning the settlement monies to exclude medical expenses.

The first argument was addressed neatly and easily dismissed by the court.  The December 2003 Amendments to the MSP Act explicitly broadened the definition of a primary plan to include tortfeasors and their insurers.  Likewise, the second argument held little sway by the court, based mainly upon Medicare’s own language contained in its manuals.  See Chapter 7, §50.4.4: “Medicare policy requires recovering payments from liability awards or settlements . . . without regard to how the settlement agreement stipulates disbursements should be made. That includes situations in which the settlements do not expressly include damages for medical expenses.”

The court cited to the same Chapter and Section of the MSP Manual to likewise dismiss the third argument submitted by the plaintiff.  Under the MSP Manual, “[t]he only situation in which Medicare recognizes allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case.” MSP Manual, Ch. 7, § 50.4.4 (emphasis added).  The nature of the unopposed motion to allocate expenses did not even remotely rise to the level of a hearing “on the merits” as envisioned by Medicare.

Since its inception, Franco Signor LLC has utilized the same MSP Manual references to counsel its clients.  Whether a case has gone to judgment, or whether the parties are considering a court hearing with respect to the medical element of damages, we have remained vigilant and consistent on this point: Do not attempt to sidestep Medicare by arriving at a court order that is without adverse submissions of proof.  Medicare’s right of recovery is much more than a subrogated interest or lien.  The 3rd Circuit considered the MSP landscape and ruled accordingly.

Section 111 data is being provided to the Government post-settlement, judgment or award.  If Medicare is not repaid then it will seek repayment from the plaintiff, plaintiff’s attorney, the primary plan — or any party to the settlement, judgment or award.  Do not get caught playing games with Medicare.  Call us today!