On November 21, 2011, the US 6th Circuit Court of Appeals rendered its much anticipated ruling on Hadden v. United States, finding that despite receiving only a percentage of his damages, the Medicare Secondary Payer Act required Hadden to reimburse Medicare to the full extent that the government had requested and therefore affirmed the judgment of the District Court, which had previously ruled that Hadden owed $62,338.07 in conditional payments out of the $125,000 settlement he had received from the tortfeasor.
On March 30, 2012, Hadden filed his Petition for Writ of Certiorari with the United States Supreme Court. Hadden challenges the government’s argument that Medicare is entitled to 100% of its outlay, regardless of whether the beneficiary receives a reduced recovery by settling his tort claim for only a portion of his undifferentiated damages, is legally incorrect. Therefore the question presented for the Court whether the government is entitled to full reimbursement under the Act when a beneficiary compromises a tort or other claim and recovers a reduced amount, as the 6th Circuit Court of Appeals held, or whether the government, like its beneficiary, is entitled to only a proportionate recovery, as the 11th Circuit Court has held.
Hadden argues that the Court should grant the petition and hear the case as there are now conflicting Medicare Secondary Payer Act (MSPA) Circuit opinions, Bradley v. Sebelius, out of the 11th Circuit, and Hadden v. United States, out of the 6th Circuit.
Bradley v. Sebelius
On September 29, 2010, the 11th Circuit Court published its opinion on Bradley v. Sebelius, concluding that the district court erred in upholding the decision of the Secretary because it was unsupported by substantial evidence in the record taken as a whole. It therefore reversed, finding Medicare entitled to the sum of $787.50, as determined by the allocations of the state probate court.
In Bradley, the Secretary refused to accept the probate court’s determination that Medicare should only recover $787.50. Therefore, the estate paid Medicare under protest, perfected its administrative appeal, and exhausted its administrative remedies. The case proceeded as an appeal to the district court from a final decision of the Secretary, wherein the surviving children filed their brief in opposition to the Secretary’s decision, the Secretary filed her brief in support of her final decision, and the case became ripe for district court review.
The district court, adopting the report and recommendation of the magistrate judge, held that the Secretary’s interpretation of the MSP, 42 U.S.C. § 1395y(b)(2)(B)(ii)(2006), and its attending regulations, 42 C.F.R. §§ 411.37(c)(1), (c)(2), (c)(3)(2004), was reasonable. Accordingly, the district court held that Medicare was entitled to reimbursement in the amount of $22,480.89, not $787.50, for conditional medical expense payments paid on behalf of the Decedent. Burke then appealed to the 11th Circuit.
The 11th Circuit Court concluded however that the Secretary’s position was unsupported by the statutory language of the MSP and its attending regulations. The Secretary’s ipse dixit contained in the field manual does not control the law. The district court also erred in relying upon the advisory language contained in a field manual as the rationale for its opinion upholding the actions of the Secretary.
Hadden v. United States
In comparison, on November 21, 2011, the US 6th Circuit Court of Appeals rendered its ruling on Hadden v. United States, finding that the Medicare statute required Hadden to reimburse Medicare to the full extent and therefore affirmed the judgment of the District Court, which had previously ruled that Hadden owed $62,338.07 in conditional payments out of the $125,000 settlement he had received from the tortfeasor.
In Hadden, an administrative law judge found that the plain language of the Medicare statute required Hadden to reimburse Medicare the full amount that Medicare had demanded. The ALJ also found that the reimbursement was not against “equity and good conscience.” The Medicare Appeals Council agreed with each of those findings. Hadden appealed that decision to the district court, which remanded the case back to the Appeals Council. The Appeals Council issued an amended decision in which it again agreed with the ALJ’s findings. The district court agreed with them as well, resulting in Hadden’s appeal to the 6th Circuit Court.
In its opinion, the 6th Circuit Court made it clear that it is undisputed that defendant is a “primary plan” and that Hadden is an “entity that received payment from a primary plan” within the meaning of 42 U.S.C. § 1395y. It is also undisputed that Medicare paid for $82,036.17 of medical services rendered to Hadden. Thus, Hadden “shall reimburse” Medicare to the same extent that defendant “had a responsibility to make payment” with respect to those services.
The court pointed out that in 2003, Congress amended § 1395y(b)(2)(B)(ii), making it clear that a primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means. As a result, a beneficiary cannot claim that a third party is responsible for all of his medical expenses on the one hand, and later argue to Medicare that the same party was responsible for only 10% of them, on the other. In his claim against defendant, Hadden did not demand that it pay for only 10% of the medical expenses that he incurred as a result of his accident; he demanded that it pay for all of them. That choice, the court said, has consequences—one of which is that Hadden must reimburse Medicare for those same expenses.
In his Petition for Writ of Certiorari, Hadden argues the 6th Circuit Court of Appeals decision is erroneous on several counts, as it essentially rewrites the MSPA leading to absurd results. Hadden further argues that the majority’s holding contravenes the legislative history and the government’s interpretation of the MSPA. Hadden also argues the Court of Appeals made reversible error by attempting to avoid Ahlborn, the US Supreme Court’s landmark decision limiting a state’s right to reimbursement when claiming a Medicaid lien, by manufacturing a distinction between responsibility and liability. In addition, Hadden further argues that the Court of Appeals’ holding ignores the well-established policy of favoring settlement of disputes, as compared to prolonged and protracted litigation. Last, Hadden argues the MSP Manual is not entitled to deference, as it is not statutory law or regulatory provisions.
In addition to these arguments, Hadden points out that the question presented is one of exceptional importance and therefore one that the Court must hear. Because of the split in the 6th and 11th Circuits, Medicare, a uniform federal program, is now being implemented disparately. As a result, Hadden argues the Court must intervene to provide consistency for all Circuits to appropriately administer such reimbursement claims. In addition, Hadden argues that given the number of baby boomers coming into the Medicare program over the next several years, this question will recur frequently. Consequently, this case will provide the Court with an opportunity to clarify the erroneous public policy Court of Appeals’ decision.
Download the MSP Compliance Protocols user guide today!
About the Author: Rafael Gonzalez is Director of Medicare Compliance & Post-Settlement Administration. He brings over 20 years of experience in the Workers’ Compensation and Liability insurance industries with a specific focus on Medicare Compliance. Rafael has been responsible for all areas of Medicare Set Aside Allocations (MSAs) including the preparation of MSAs and their approval by the Center for Medicare & Medicaid Services. At Gould & Lamb, Rafael’s duties include assisting clients with Medicare Compliance issues, specifically on Post-Settlement Administration and client education.
Gould & Lamb is a global leader of MSA/MSP Compliance Services in the country, serving domestic and international insurance companies, third-party administrators and self-insured entities.