Medicare Must be Reimbursed for Conditional Payments Made on the Plaintiff's Behalf

In Taransky v. Sec’y of the United States HHS, 2014 U.S. App. LEXIS 14408 (3rd. Cir. July 29, 2014), the Plaintiff was injured from a fall at a New Jersey shopping center in 2005.  Throughout the settlement negotiations, Plaintiff’s attorney contacted Medicare multiple times in an effort to obtain the amount of Medicare’s conditional payment claim.  After settlement was reached, Plaintiff filed a motion in the New Jersey Superior Court requesting that the Court issue an order apportioning the settlement funds and, notably, stating that no portion of the settlement funds was for medical expenses because the New Jersey Collateral Source Statute precludes plaintiffs from recovering such expenses already paid by another source (in this case, Medicare).  Despite the fact that the settlement agreement specifically released all claims for medical treatment and medical expense benefits, the court granted her motion and issued an order stating that the settlement did not include any Medicare/medical expenses.

Shortly thereafter, Medicare issued a demand for reimbursement of conditional payment claims in the amount of $10,121.15.  The Plaintiff appealed Medicare’s demand (filing this suit after exhausting all administrative remedies), asserting that Medicare was not entitled to reimbursement from the settlement proceeds.

The Plaintiff argued that a tortfeasor cannot be considered a primary payer under the MSP Act and that the Medicare failed to prove that the tortfeasor had a “responsibility to make payment” for her Medicare expenses, which is a condition precedent for reimbursement.  In response, the Court pointed out that the 2003 amendments to the MSP Act expanded the act to include tortfeasors specifically.  Further, the Court followed existing precedent and held that “the fact of settlement alone, if it releases a tortfeasor for claims for medical expenses, is sufficient to demonstrate the beneficiary’s obligation to reimburse Medicare,” and found substantial evidence that the Plaintiff was compensated for her medical costs.

Finally, the Plaintiff argued she had no obligation to reimburse Medicare because of the New Jersey Superior Court Order stating that no part of the settlement was for medical expenses.  As we know, Medicare will not “seek recovery from portions of court awards that are designated as payment for losses other than medical services,” as long as the order is based on the merits of this case.  Unfortunately the New Jersey Superior Court did not evaluate the evidence or hear the parties’ arguments, and did not adjudicate any substantive issue in the primary negligence suit.  As such, the Court held that the Order was not “on the merits” and “need not be recognized by [Medicare].”  The Plaintiff was responsible for reimbursing Medicare for its conditional payments, despite the Superior Court’s allocation order.
                                           
As CMS has made clear, and as evidenced by this case, when medicals are a consideration in arriving at the settlement, Medicare must be reimbursed for conditional payments made on the claimant’s behalf. An order that is simply rubber-stamped by the court will not relieve the parties of such responsibility.