Michigan District Court: Medicare Conditional Payments are Recoverable for Medical Expenses Claimed and/or Released
Heather Sanderson
March 11, 2016

Anderson v. Burwell, 2016 U.S. Dist. LEXIS 26633 (March 3, 2016), arises out of the United States District Court for the Eastern District of Michigan, Southern Division.  It raises many interesting Medicare Secondary Payer (MSP) conditional payment reimbursement issues. The background of the case essentially involves a Plaintiff, Roland Anderson, Jr. (“Plaintiff”) who was the personal representative of the estate of Barbara Anderson. Barbara passed away on September 20, 2006, and Plaintiff alleged that her doctors misdiagnosed Barbara’s symptoms and failed to timely treat her, which resulted in her death.

Plaintiff filed a medical malpractice/wrongful death suit against the doctors that treated Barbara. Plaintiff settled with Barbara’s doctors in two separate settlement agreements, for a total settlement amount of $140,000. Both settlement agreements expressly released all “claims.” Just before Plaintiff signed the settlement agreements on November 9, 2009, the Medicare Secondary Payer Recovery Contractor (MSPRC) issued a conditional payment letter (“CPL”) to Plaintiff notifying him that $41,340.46 had been paid by Medicare. Plaintiff, through his attorney, disputed the CPL through a letter to the MSPRC explaining that Medicare would have paid for Barbara’s treatment regardless of the negligence/wrongful death that occurred and resulted in Barbara’s death.

Subsequently, the MSPRC issued another CPL claiming $1,713.7 in conditional payments. This second CPL did not include any of the payments for medical services provided from August 11 through September 20, 2006; only claims from October 14, 2002 to August 11, 2006 were listed. However, as the first CPL explained, the conditional payment amount listed in the CPL was not final and was subject to change. At this point in time, Plaintiff requested a final demand from the MSPRC. However, prior to receiving the final demand, Plaintiff filed a motion in the Wayne County Circuit Court requesting approval of the settlements using only the $1,713.77 amount noted in the January 31, 2011 CPL as the amount reserved in the total settlement for the Medicare reimbursement amount. A hearing was held on May 13, 2011, and an order approving distribution of the settlement funds was entered that same day.

On July 1, 2011, after having received the final settlement documents, the MSPRC issued a notice to Plaintiff requesting payment for the final demand amount of $22,668.01. This final demand was for medical expenses for services rendered to Barbara from September 11 to September 20, 2006, i.e., within the negligence period set forth in Plaintiff’s malpractice complaint and the settlement agreements.

The Plaintiff then filed an appeal with the MSPRC on July 6, 2011. In his letter of appeal, Plaintiff’s attorney essentially reiterated the same argument it had made in protesting the first CPL that Medicare  would have paid for Barbara’s treatment regardless of the negligence/wrongful death that occurred. On August 14, 2011, the MSPRC affirmed its original decision. The Plaintiff thereafter made a Request for Reconsideration to Medicare’s Qualified Independent Contractor (“QIC”). The QIC affirmed the MSPRC’s decision finding that Plaintiff remained responsible for payment of the reimbursement amount. The QIC specifically found that there was no demonstration that the charges in the final demand were unrelated.

Plaintiff subsequently filed an appeal for an ALJ review on December 12, 2011. In the ALJ hearing, Plaintiff reasserted his prior arguments, but also argued that Plaintiff relied upon the second CPL of $1,713.77 in settling his case. The ALJ defeated that argument by simply pointing to the language in the CPL which noted that the amount was not final. The ALJ additionally found no merit to Plaintiff’s argument that Medicare would have been responsible for the charge for Barbara’s care in the absence of the alleged negligence. Even if it is likely that Medicare would have provided coverage for Barbara’s conditions, the likelihood does not obligate Medicare to pay for care when another payer has financial liability for the medical expenses.

The Plaintiff’s last administrative appeal was to the Medicare Appeals Council (“MAC”) on July 13, 2012. Plaintiff continued to assert his prior arguments, but this time additionally argued that Medicare should not be permitted to recover because the state court order allocating the settlement funds was made after the judge conducted an “evidentiary hearing” and “as a matter of law the allocations to the heirs and interested parties were for losses other than for medical services.” The MAC rejected these arguments and affirmed the ALJ’s opinion. Further, the MAC found that as the settlement was the direct result of the alleged negligence, the Plaintiff could not then argue that the treatments had nothing to do with the claimed negligence and that Medicare therefore had no right to recovery. In other words, the Plaintiff could not have his cake and eat it too.

Further, the MAC found that Medicare was not bound by the $1,713.77 which was the Medicare lien provided within the settlement agreements. The judge did not determine this amount, but rather relied upon Plaintiff’s counsel’s representations of what the lien amount was. Furthermore, the MAC agreed that the express language within the CPL noted that the amount was not final.

Finally, after Plaintiff exhausted and failed in all of three of his administrative appeals through the MSPRC appeal, ALJ appeal, and MAC appeal, he then sought the instant judicial review of the MAC decision and reiterated the same arguments he made at each level of his administrative appeal in Michigan District Court. The Michigan District Court found that there was substantial evidence to support the recovery of the conditional payments from the Plaintiff.

Let’s discuss each reason why, and key take-aways from each.

  1. The conditional payments are all “related” since the Plaintiff’s malpractice complaint sought any and all damages under Michigan’s Wrongful Death Act. Additionally, because the Plaintiff entered into a settlement to resolve these claims, the complaint sought medical expenses for purposes of Medicare reimbursement. Take-Away: Medical expenses that are claimed and/or released/settled fall under the purview of the MSP and are recoverable by Medicare.
  2. It is irrelevant whether Medicare may have been responsible for the payments if not for the negligence because “Medicare is not obligated to pay for medical care when another payer is determined responsible for the costs of that care.” Take-Away: Medicare is secondary where another payer is primary. Tenuous arguments such as these will not defeat a conditional payment demand from Medicare.
  3. The state court’s order allocating only $1,713.77 to the Medicare lien was not binding with regard to the amount reimbursable to Medicare. There was no evidence or anything in the record showing that the state court reviewed medical evidence. Additionally, an order is only considered “on the merits” where it is “based on evidence, after development of the facts, rather than on technical or procedural grounds.” Take-Away: If parties want to make the argument that CMS is bound in its recovery to the amount allocated toward medical and/or the lien in a settlement agreement, that amount must be court-allocated and based upon evidence taken before a trier of fact.  A “rubber-stamped” settlement agreement is not an order issued “after a hearing on the merits.” Additionally, the Plaintiff here should not have relied upon the CPL as final in settling his case. Parties should always be sure to critically ascertain the type of correspondence received from Medicare and whether the conditional payment correspondence is simply a CPL or a final demand.

Working with an MSP compliance partner to fully understand your rights and responsibilities in response to conditional payment correspondence received from Medicare is critical to Medicare compliance. Contact us at engage@francosignor.com to learn more about our conditional payment solutions.  We can help!


Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer
Franco Signor LLC