• Plaintiff Ordered To Reimburse Medicare for Medical Expenses Despite State Court Order Allocating Settlement to Non-Medical Expenses
  • December 16, 2013
  • Law Firm: Fineman Krekstein Harris P.C. - Philadelphia Office
  • In Taransky v. Sebelius, a New Jersey district court ordered plaintiff to reimburse Medicare despite a state trial court’s order allocating the tort settlement recovery to non-medical expenses. No. 12-4437, 2013 U.S. Dist. LEXIS 107429 (D.N.J. June 12, 2013). In the underlying suit, the plaintiff sued the owners and operators of a shopping center seeking damages for her personal injury losses, and ultimately settled the claim against the defendants for a lump-sum payment of $90,000.00. Following the settlement, plaintiff filed a Motion to Adjudicate Allocation of Settlement Proceeds. The proposed order included a provision that “no portion of this recovery... is attributable to medical expenses or other benefits compensated by way of a collateral source.” The plaintiff’s counsel also filed a certification stating New Jersey law prevents a plaintiff’s tort recovery of losses that have been compensated by way of a collateral source of benefits, and that such losses were not considered in the settlement negotiations or compensated through the settlement agreement. The court entered the unopposed proposed order pursuant to a stipulation by the parties.

    Medicare subsequently challenged the settlement and sought reimbursement under the MSP Act. Plaintiff proceeded through the administrative process challenging her obligation to reimburse Medicare arguing that Medicare should recognize allocations of liability payments to non-medical losses when payment is based on a court order, as in the plaintiff’s case. Additionally, the plaintiff argued Medicare was obligated to abide by the state court’s order and that reimbursement would be inequitable.

    Plaintiff first presented these arguments to an Administrative Law Judge (ALJ), who found the state court’s order was not “on the merits” and, therefore, did not require deference because it was entered subject to a stipulation by the parties. As a result, the ALJ determined that the plaintiff was liable for repayment of Medicare’s conditional payments. The plaintiff appealed the ALJ’s determination to the Medicare Appeals Council (MAC), which found no error in the ALJ’s decision and adopted the ALJ’s decision in its entirety. The MAC also made a specific factual finding that the settlement and accompanying release of all claims included compensation for medical expenses already paid for by Medicare with conditional payments.

    Plaintiff filed a lawsuit against CMS in the United States District Court for the District of New Jersey asserting multiple claims, including one for injunctive relief and declaratory judgment, in an attempt to force CMS to abide by the state court order. The defendants moved for dismissal of the complaint or for summary judgment. The court explained that its role was limited to determining if the MAC’s factual finding that the settlement included compensation for medical expenses was supported by substantial evidence in the administrative record. The court determined that the MAC’s finding was appropriately supported because the plaintiff had requested the Medicare lien amount, specifying it was needed for purposes of negotiating a settlement, on four separate occasions. The court held that the MAC applied the appropriate legal standard, which required determining if the plaintiff received a payment from a primary plan responsible for payment of her medical expenses that had been covered by Medicare. The court found that it was appropriate to require reimbursement of the Medicare lien because the plaintiff had received payment from the underlying defendants’ liability insurance. Finally, the court held that the ALJ and MAC correctly disregarded the underlying settlement order because the order was issued pursuant to a stipulation by both parties and not actually heard, the judgment was not on the merits. Therefore, the plaintiff was required to reimburse Medicare for its conditional payments pursuant to the MSP Act.