CMS has no obligation to accept an MSP liability allocation without an adjudication on the merits (W.D. Kentucky)
In this is Medicare Secondary Payer case, Hadden sought waiver of recovery of a condition payment. After suing to recover for injuries sustained in a collision, Hadden settled for $125,000, in addition to receiving $10,000 in Kentucky basic reparations benefits, apparently because an unidentified motorist was also at fault. Apparently, the settlement agreement allocated 90% of the liability to the unidentified motorist. After settlement, CMS demanded payment of $62,338.07 based on its conditional payments. Hadden paid that amount, plus interest because the claim was not paid within 60 days. Hadden then sought complete waiver of the claim, arguing that the unidentified motorist was primarily responsible and that CMS should limits its recovery based on each tortfeasor’s liability. Specifically, Hadden argued that since the unidentified motorist was 90% responsible, CMS could only recover 10% of its claim from the $125,000 paid by the insured driver who was only 10% responsible. CMS treated this as a request for compromise under 42 C.F.R. § 401.613(c)(2). CMS denied the request and denied reconsideration, informing Hadden he had no right to appeal the compromise determination. Hadden then requested waiver of the recovery, which was also denied. All appeals, from the QIC to the Medicare Appeals Council (MAC) were in CMS’s favor. Hadden appealed to district court. Seven months later, the MAC issued an amended decision further explaining its denial of Hadden’s claims. The MAC wrote that Medicare policy requires recovery without regard to how the settlement agreement allocates liability; Medicare only recognizes liability allocations based on a court order or adjudged on the merits of the case. Here, because the allocation was based on a settlement, Medicare could ignore it – and did so. In rejecting Hadden’s equitable allocation argument, the district court found the reasoning in the amended MAC decision determinative. “[H]ad Plaintiff wanted equitable allocation and subrogation principles to apply in this case, then he should have proceeded to trial on the merits of his tort claim in state court.” Hadden’s argument that an Ahlborn-type allocation should be used was rejected as inapplicable to Medicare was rejected, as was his made-whole argument. Hadden’s case was dismissed with prejudice.
Hadden v. United States, Case No. 1:08-CV-10, 2009 U.S. Dist. LEXIS 69383 (August 6, 2009)

Miller v. Center for Diagnostic Imaging, 2007 U.S. Dist. LEXIS 17869 (W.D. WA 2007). In a “short” order, the District Court adopted the Report and Recommendation of the Magistrate finding that a medical malpractice settlement was not subject to any Medicare repayment or lien. It does not appear as though CMS was a party to the action. Thomas G. Golden of Bainbridge Island, Washington, represented the Plaintiff. Mr. Golden explained in a telephone conversation (March 30, 2007) with the author that this case involved a failure to timely diagnosis cancer. Plaintiff’s argument was that chemotherapy would have been required anyway and, therefore, Medicare had no claim.

Glover v. Liggett Group, Inc., 459 F.3d 1304 (11th Cir. 2006). Plaintiff brought a claim under 42 U.S.C. § 1395y(b)(3)(A) to recover funds for the Medicare program attributal to cigarette smoking. The trial court dismissed the claim. On appeal, the court found that “[u]ntil Defendants’ responsibility to pay for a Medicare beneficiary’s expenses has been demonstrated (for example, by a judgment), Defendants’ obligation to reimburse Medicare does not exist under the relevant provisions. … After the Medicare beneficiary obtains a favorable judgment or settlement of state tort claims, Medicare is entitled to reimbursement to the extent of its conditional payments” The decision was affirmed. Decided: August 14, 2006. See also United Seniors Ass’n v. Philip Morris USA, 2006 U.S. Dist. LEXIS 60729 (D. Mass. 2006).

Note: This case does not prevent a party from filing the MSP claim in their complaint. See Rule 18(a). However, bringing this claim would not confer federal jurisdiction unless and until the underlying liability is established because the claim is dormant until that time.

Stalley v. Delta Health Group, Inc., 2007 U.S. Dist. LEXIS 5845 (D. Fla. 2007). Stalley brought a qui tam action against a group of skilled nursing facilities for failing to reimburse Medicare under the Medicare Secondary Payer Act (MSP). The action was removed and then the Defendants filed a motion to dismiss for lack of Article III standing. Because he was neither eligible for Medicare nor injured, the Court found that he lacked standing and dismissed the claim. See also Stalley v. Erlanger Health System et al., 2007 U.S. Dist. LEXIS 14589 (E.D. Tenn. 2007) (motions to dismiss granted); Stalley v. Ameris Health Systems, LLC, 2007 U.S. Dist. LEXIS 13200 (E.D. Ark. 2007) (staying action pending 8th Circuit appeal following dismissals in other courts); Stalley v. Genesis Healthcare Corp., 2007 U.S. Dist. LEXIS 17452 (D. Pa. 2007); Brockovich v. Cmty. Med. Ctrs., 2007 U.S. Dist. LEXIS 21355 (D. Cal. 2007).

Kelso v. Levitt, 2006 U.S. Dist. LEXIS 26695 (D. Mo. 2006). Plaintiff contested Medicare’s claim under the MSP statute. Initially counsel informed Medicaid by letter that there was no duty to reimburse Medicare due to the holding in Thompson v. Goetzmann, 315 F.3d 457 (5th Cir. 2002). Medicare responded that even if Goetzmann was relevant, it would not apply to beneficiaries residing outside the Fifth Circuit. Later, a malpractice claim was settled for $55,000 and Medicare asserted a claim against the proceeds for $6,896.72. Plaintiff appealed the claim raising four issues: that recovery should be waived due to financial circumstances; that the reimbursement calculation included expenses unrelated to the negligence at issue in the malpractice action; that the reimbursement calculation included amounts previously repaid; and issued involving prompt payment. A hearing was held before an ALJ who ruled in Medicare’s favor. On appeal, the court determined that a Medicare overpayment existed by virtue of Plaintiff’s failure to reimburse Medicare. The parties acknowledged that CMS had the burden of proving the claims were related to Plaintiff’s injury, but contended they discharged that duty by providing a detailed billing summary; the court found that the summary constituted substantial evidence on the record of CMS’s claims. Plaintiff had also requested a waiver of the claim. The court found that a waiver under 42 U.S.C. § 1395gg(c) is not proper unless the Plaintiff is without fault. Here, the Plaintiff was not without fault since she had knowledge of Medicare’s claim, failed to reimburse Medicare and had knowledge of the procedure having previously reimbursed Medicare for certain other payments from an earlier recovery. Plaintiff appealed. Decided: April 26, 2006.