In a decision out of the Southern District of Florida, Shapiro v. Secretary of HHS, 2017 U.S. Dist. LEXIS 42278 (March 23, 2017), the District Court affirmed a final decision of the Medicare Appeals Council (“MAC”) rejecting a Medicare beneficiary’s challenge to Medicare’s conditional payment recovery. The Medicare beneficiary Plaintiff, Barbara Shapiro (“Shapiro”), was injured in an automobile accident with a United Parcel Service (“UPS”) delivery truck. UPS denied liability for the accident which prompted Shapiro to retain counsel and file an action in Florida state court. While the state-court action was pending, Medicare made conditional payments on her behalf for medical expenses. The initial conditional payment letter (CPL) from Medicare stated that its payments to date were $16,940.51. The letter clearly contained a notice cautioning that the amount was non-final and subject to change.
Shapiro ended up settling her case with UPS through binding arbitration for $250,000. Prior to agreeing to the settlement amount however, Shapiro inquired with her counsel to verify the current reimbursement amount that was owed to Medicare. At that point in time, Shapiro’s counsel was informed over the phone by the Medicare Secondary Payer Recovery Contractor (“MSPRC”) that the amount had increased to $17,306.03. Shapiro and her counsel relied upon the oral estimate of the conditional payment amount, and after the settlement was finalized, Shapiro received a demand notice stating that the total final conditional payment amount was $23,552.96, based on conditional payments totaling $40, 118.83.
Shapiro appealed that determination with the MSPRC, and lost. She then filed an administrative appeal with Maximus Federal services, which also denied her appeal, finding that the amount the MSPRC conveyed over the telephone was not final and subject to change. Shapiro then requested a hearing with an Administrative Law Judge (ALJ); the ALJ also ruled against Shapiro, finding that the conditional payment letters clearly include a disclaimer that they are not final and are subject to change. Lastly, Shapiro appealed the decision to the MAC, which also held against Shapiro, finding that she was on notice that the conditional payment amount was not final until a settlement is finalized.
Upon appeal to the Florida District Court, Shapiro not only continued to assert that she materially relied upon the MSPRC’s representations as to the conditional payment amount, but also contended that Medicare asserting recovery of the final conditional payment amount would be against equity and good conscience. Specifically, she cited to the Medicare Secondary Payer Manual, ECF No. 41-1, Ch.7, section 50.6.5 which allows Medicare to waive its recovery, or a portion thereof, if certain conditions are met.
Regarding reliance upon the MSPRC’s representation, the District Court found that substantial evidence supports that Shapiro was on notice that it was not reasonable for her to rely upon the amount conveyed on the telephone with the MSPRC. Further, as to Medicare’s recovery being against equity and good conscience, the Plaintiff will still receive $226,447.04 after payment to Medicare of its final conditional payment amount. Therefore, Shapiro did not suffer a material detriment.
Franco Signor Commentary: While it may seem elementary to those who frequently deal with workers’ compensation, liability, or no-fault settlements with Medicare beneficiaries that a CPL or an estimate over the phone from Medicare’s contractor is not the final amount, this decision is a good reminder to not take for granted that not everyone may have the same knowledge. Allowing a Plaintiff attorney who may or may not be familiar with Medicare’s recovery processes to control the resolution process could result in situations such as these, where the parties unknowingly rely upon interim conditional payment amounts. Here, Shapiro and her attorney expended substantial time and expenses through multiple levels of appeal hoping to defeat Medicare’s recovery of its final amount. Also similarly where a primary plan relies upon a plaintiff attorney to reimburse Medicare, and the plaintiff attorney fails to reimburse Medicare, Medicare has the right to switch the debtor back to the primary plan and pursue recovery against the primary payer and even potentially pursue double damages if the Secretary has to sue to recover.
Had Shapiro’s Plaintiff attorney worked with an expert that understood Medicare’s processes, it would have saved a great deal of time and expenses and all these unnecessary administrative appeals and litigation. Had the Plaintiff attorney desired a final conditional payment amount prior to settlement, Shapiro’s counsel could have utilized the SMART Act pre-settlement final demand process to obtain a final amount. So long as the parties settled within 3 business days of download of the conditional payment amount, the parties would know the final amount prior to finalizing settlement. Lastly, hardship waivers are rarely granted by CMS. This was a lost cause for Shapiro for the start, where she clearly was going to retain a substantial settlement amount even after Medicare was paid.
When it comes to conditional payments, working with an expert is always a best bet for saving time and money.
Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer, Franco Signor LLC