Supreme Court Will Not Review Sixth Circuit Ruling That Government May Seek Full Reimbursement of Medicare Payments to Beneficiary Who Settled With Third-Party Tortfeasor

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On October 1, 2012, the United States Supreme Court said it would not review a decision by the U.S. Court of Appeals for the Sixth Circuit which ruled 2-1 that, upon settlement by a Medicare beneficiary with a third-party tortfeasor, the government has authority under the Medicare Secondary Payer Act (MSPA) to recover against the beneficiary for expenses that Medicare had paid on his behalf separate and distinct from its rights of subrogation.  See Hadden v. United States, 661 F.3d 298, 304 (6th Cir. 2012), cert denied Oct. 1, 2012.

This case stemmed from injuries sustained when Mr. Hadden was hit in Kentucky by a truck owned by Pennyrile Rural Electric Cooperative Cooperation.  As a result of this accident, Mr. Hadden sued Pennyrile.  The parties settled for $125,000.  Prior to the settlement, Mr. Hadden was treated for widespread injuries from the accident and Medicare conditionally paid his medical bills, totaling $82,036, pursuant to the MSPA.  See 42 U.S.C. §1395y(b)(2)(B)(i) (Medicare may pay a beneficiary’s expenses if the responsible entity will not promptly pay); 42 U.S.C. §§1395y(b)(2)(B)(ii) & (iii) (when a beneficiary receives a third-party settlement, Medicare may seek reimbursement).  As a result, Medicare sought full reimbursement of the $82,036, but Mr. Hadden paid the amount under protest and pursued an administrative appeal, arguing that because his settlement covered only ten percent of his total damages, he should only be required to repay ten percent of Medicare’s claim.  This argument was rejected by both the Medicare Appeals Council and a federal trial court.

The Sixth Circuit, in upholding the lower court and Medicare Appeals Council rulings, held that the Medicare statute provides for full reimbursement upon a settlement resolving a claim, even if the party thinks the settlement was only a partial recovery.  The Sixth Circuit held that §1395y(b)(2)(B)(ii) provides that “an entity that receives payment” shall reimburse” Medicare “if it is demonstrated that such primary plan” “has or had a responsibility to make payment.”  See Hadden, 661 F.3d at 302.

The petition for certiorari, filed March 30, 2012, argued that Supreme Court review was necessary because of a split in the circuits.  In his petition, Mr. Hadden argued that the Sixth Circuit misinterpreted the MSPA and issued a decision conflicting with a ruling by the U.S. Court of Appeals for the Eleventh Circuit in Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010).  Further, Mr. Hadden claimed the Sixth Circuit ruling was also incompatible with the Supreme Court’s decision in Arkansas Dep’t. of Health & Human Svcs. v. Ahlborn, 547 U.S. 282 (2006), in which the Supreme Court rejected Arkansas’ efforts to recover its Medicaid costs from a third-party settlement.

According to amicus briefs filed pursuant to the petition for cert, the Supreme Court’s refusal to hear this case “will frustrate settlements and increase litigation costs unnecessarily in the more than 400,000 cases involving MSP claims that otherwise would be expected to settle annually,” and will “will clog the courts with litigation that the parties might have been willing to settle and actually leave the federal government with less than it would have received if it had agreed to accept a proportionate share of the beneficiary's recovery.”  See Supreme Court Lets Stand Appellate Ruling Refusing to Limit MSP Settlement Recoveries, Peyton M. Sturgess, BNA’s Medicare Report, Oct. 5, 2012, available here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822, klucas@kslaw.com.

Topics:  Healthcare, Medicare, Settlement, Subrogation

Published In: Administrative Agency Updates, Civil Procedure Updates, Civil Remedies Updates, Health Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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