Court Order Not Based Upon a Hearing on the Merits Does Not Limit Conditional Payment Claim Recovery

In Cecelia Taransky v. Sebelius, et al., 2013 U.S. Dist. LEXIS 107429 (D. N.J. decided June 12, 2013), a plaintiff who had previously settled a slip and fall was ordered to repay Medicare its $10,121.15 demand for conditional payment claims.

As a result of the plaintiff's underlying accident, a fall at a shopping center, Medicare had made $18,401.40 in conditional payments. After the plaintiff settled her case for $90,000.00, she requested and obtained an unopposed order from New Jersey's Superior Court. This order provided that "no portion of this recovery ... [was] attributable to medical expenses" (Id. at *5), and plaintiff apparently believed that this would prevent Medicare from recovering their conditional payments. After set

The plaintiff's attorney appealed the demand, unsuccessfully, through Medicare's administrative process, and ultimately filed an action for declaratory judgment and injunctive relief with the District Court of New Jersey. He argued that Medicare was not due reimbursement on various grounds, all of which failed. Because the plaintiff failed to timely raise a due process argument (under both the Fifth and Fourteenth Amendments), the district court was unable to consider this argument. The remaining arguments were almost identical to the arguments that failed in Mason v. Sebelius (Mason v. Sebelius and its failing arguments were previously discussed in our newsletter of April 5, 2012). What makes this case worth our consideration is two "slight tweaks" (Id. at *23) in the arguments made in Mason v. Sebelius: here, plaintiff (who was represented by same attorney, apparently, as the attorney in Mason) obtained an order providing that the recovery was not attributable to medical expenses. Second, plaintiff argued that Medicare's recovery, if it could recover at all, should be limited to the proportion of the settlement proceeds attributable to medical expenses.

Unfortunately for the plaintiff, the court order obtained by Taransky was not based on the merits of the case and as such it did not limit Medicare's right of recovery. Because this order was based only upon an unopposed stipulation of the plaintiff and not on an independent inquiry into the issues, with opposing arguments promoted in an adversarial setting, it could not be used to limit Medicare's recovery. In fact, there was ample evidence that contradicted the order: the lawsuit claimed medical costs as damages, and plaintiff's correspondence to opposing counsel showed that plaintiff's counsel had used the tentative conditional payment letters from Medicare as leverage for settlement. The settlement documents themselves even provided that the plaintiff would be responsible for outstanding conditional payments.

Like the due process arguments that failed, plaintiff's argument that Medicare was only entitled to the proportion of the settlement actually attributable to plaintiff's medical damages was made too late to be considered. It is unfortunate that this argument was not timely made, as (in my opinion) this argument had the most promise of succeeding.

This case is consistent with prior decisions that support Medicare's claim that a plaintiff cannot demand repayment for medical expenses during settlement negotiations and then, to avoid conditional payments, tell Medicare that the settlement ultimately obtained was only for pain and suffering. The upside of cases such as these is that they may ultimately curb the pursuit of unmeritorious claims for medical care damages.
tlement, however, Medicare treated the claim like any other with a Medicare beneficiary: it reduced its claim by its share of attorney fees and demanded repayment of $10,121.15 in related claims.