Sixth Circuit Court of Appeals Rules that Medicare is Entitled to Complete Reimbursement of Any Conditional Payments

In a recent decision by the United States Court of Appeals for the Sixth Circuit, the court ruled that the Center for Medicare Services (CMS or Medicare) is entitled to the complete reimbursement of any conditional payment regardless of the negligence attributed to a tortfeasor. Hadden v. U.S., 661 F.3d 298 (6th Cir. Nov. 21, 2011).
Plaintiff Vernon Hadden was injured in August 2004 when he was struck by a utility truck that was run off the road by the driver of another car that ran a stop sign. The driver of the car, who was responsible for the accident, was never identified. Medicare paid for plaintiff’s medical expenses related to the accident. Plaintiff settled his claims against the owner of the truck and agreed to pay and satisfy all expenses, liens, and claims related to the incident. The settlement reflected the fault that could be attributed to the settling defendant only (approximately 10%).  However, plaintiff was ordered to pay Medicare its full reimbursement even though the primarily liable tortfeasor was never found, and no payments were made on the tortfeasor’s behalf.
The Medicare Secondary Payer Act (MSP) provides:
A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. . . .
42 U.S.C. § 1395y(b)(2)(B)(ii).
According to the decision, the use of the term “responsibility” clearly and unambiguously dictates that a Medicare beneficiary’s tort recovery from a tortfeasor/primary plan is subject to Medicare’s claim for reimbursement for the entire amount of Medicare’s conditional payments without regard to whether the tort recovery included full payment for the items and services paid for by Medicare. The court found that the amount the beneficiary is obligated to reimburse remains unchanged even if the settlement reflects a reduced amount because of the alleged tortfeasor’s share of liability.
While the Hadden decision arises out of a negligence case, there is no doubt that CMS will attempt to use the court’s interpretation of the statute in other areas, most notably in workers’ compensation. The likelihood that CMS will abide by amounts parties set aside in settlement agreements has always been in question, but the Hadden decision gives Medicare less incentive to negotiate and more incentive to recover the full amount of benefits paid.  As a result, settlement in workers’ compensation cases will be more difficult and less likely overall when involving a Medicare beneficiary.
Roetzel & Andress will continue to provide further information and guidance on this issue to assist you as developments arise.  If you should have any questions, please contact any of our offices to discuss this matter further with one of our workers’ compensation attorneys.


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