High Court Asked to Hash Out Details of Medicare Repayment Rule

The following article was published in the Westlaw Journal on January 16, 2015.  If the United States Supreme Court grants certiorari and issues an opinion the landscape for applying Medicare repayment rules may be clarified or made more confusing.  We will keep you posted.

 

UpdateTaransky petition for writ of certiorari was denied on Feb. 23, 2015. 

 

HIGH COURT ASKED TO HASH OUT DETAILS OF MEDICARE REPAYMENT RULE

Taransky v. U.S. Dep't of Health & Human Servs.

By Michael Scott Leonard, Senior Legal Writer, Westlaw Journals

Copyright © 2015 Thomson Reuters .

The U.S. Supreme Court should decide for the first time what types of tort awards Medicare can subrogate under a federal law that lets the program recoup “conditional” payments to beneficiaries who also have another source of insurance, according to newly filed court papers.Taransky v. U.S. Department of Health & Human Services et al., No. 14-758, petition for cert. filed (U.S. Dec. 24, 2014).

In a Dec. 24 certiorari petition, Cecelia A. Taransky asks the justices to decide whether the Medicare Secondary Payer Act lets the federal government demand reimbursement from a post-injury settlement award that a state court described as “nonmedical” in a declaratory judgment order.

The law, codified at 42 U.S.C. § 1395y, generally allows the Centers for Medicare and Medicaid Services to subrogate, or recover “conditional benefits” repayments from, the money a Medicare member claims down the line from her primary insurer or a tort judgment.

But the law's implementing regulations, contained in the Medicare Secondary Payer Manual, prohibit the agency from touching any tort award that an on-the-merits court order has designated as “nonmedical.”

The question in Taransky's case -- and many others like it, she says -- is what kind of ruling counts under the Secondary Payer Act as “on the merits.”

“Interpreting similar language in dissimilar contexts, the court has characterized ‘merits' determinations as those that finally resolve an issue on substantive grounds,” the petition says. “These interpretations should prevail in the Medicare reimbursement context.”

Slip-and-fall

Taransky's case concerns more than $18,000 in medical expenses Medicare spent on her behalf after she slipped and fell at a New Jersey shopping center in 2005.

Taransky sued the mall's owners, operators and maintenance contractors for negligence in 2007 in the Burlington County Superior Court. The personal injury suit settled two years later for $90,000. Part of the agreement provided that it would cover any Medicare lien or subrogation claim resulting from Taransky's injuries.

After the state court approved the settlement, Taransky moved for an order allocating the full settlement amount to noneconomic damages, including bodily injury, pain and suffering, and emotional distress.

Since she was ineligible to recover medical expenses under New Jersey's Collateral Source Statute, N.J. Stat. Ann. § 2A:15-97, the agreement by definition could not have covered them, Taransky argued in her motion.

*2 The state court agreed. That ruling effectively placed Taransky's tort recovery outside the scope of the Secondary Payer Act, she has maintained.

'Rubber-stamped'

According to the certiorari petition, Medicare then demanded that Taransky spend $10,000 of her settlement award reimbursing CMS for some of the $18,000 in medical bills the agency paid on her behalf.

When CMS repeatedly refused to reconsider its demand in light of the state court ruling, Taransky filed a declaratory judgment action in the U.S. District Court for the District of New Jersey. Her suit sought a court order declaring that her damages were nonmedical and therefore not subject to Medicare subrogation.

The District Court sided with CMS in June 2013, finding that, notwithstanding the state court's decision, the settlement covered reimbursable medical expenses, which made it fair game under the Secondary Payer Act. Taransky v. Sebelius et al., 956 F. Supp. 2d 563 (D.N.J. 2013).

The 3rd U.S. Circuit Court of Appeals affirmed that ruling last July. Taransky v. U.S. Dep't Health & Human Servs. et al., 760 F.3d 307 (3d Cir. July 29, 2014).

“The state court in effect rubber-stamped [Taransky's] request,” the unanimous three-judge panel said. “Taransky's motion was uncontested, issued pursuant to a stipulation between Taransky and [the defendant], and prepared and submitted by Taransky's counsel for the judge's signature. This order is the antithesis of one made on the merits.”

In finding the underlying settlement purely nonmedical, the state court ignored clear language in the agreement expressly purporting to cover medical liens or Medicare subrogation claims, the appeals court added.

'These exact issues'

In her Supreme Court petition, Taransky says that ruling contradicts Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010), in which an 11th Circuit panel held that a post-settlement allocation order is a merits decision for Medicare subrogation purposes.

The 11th Circuit got that issue right and the 3rd Circuit got it wrong, Taransky argues.

According to her petition, the vast majority of civil suits eventually settle, and those cases do not yield a traditional merits ruling resolving the substantive questions of fact and law underlying them.

A court order formally dividing a settlement amount into economic and noneconomic damages is the closest most settling plaintiffs can get to trial-style opinion, the petition says.

Moreover, the type of allocation order Taransky received in state court does indeed resolve issues that are material and dispositive in the subrogation context, which makes it a merits ruling for Secondary Payer Act purposes, she argues.

“[T]he only substantive issues before the state court when Taransky filed her post-settlement motion to allocate damages were whether and to what extent allocation would be permitted,” the petition says. “In granting Taransky's motion, the state court decided these exact issues.”

'Frustrates public policy'

*3 According to Taransky's petition, the 3rd Circuit's interpretation would deter virtually any tort plaintiff on Medicare from settling an injury suit since a settlement would expose her award to Medicare subrogation.

That rule would make little sense in light of the efficiencies associated with settlements, Taransky claims, and the law should not force parties who are on the verge of an agreement to go to trial on a technicality.

“[T]he 3rd Circuit interpreted Medicare's requirement of an adjudication ‘on the merits' in such a restrictive manner as to make any such determination a virtual impossibility without a full trial,” the petition says. “Not only is there no legislative mandate for such a rule, but the panel's decision effectively frustrates public policy goals of judicial economy and fostering settlements in civil litigation.”s: