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Medicare Not Limited to the Portion of a Settlement Designated for Medical Losses when Seeking Reimbursement under MSP

The U.S. Court of Appeals for the Sixth Circuit has ruled that Medicare is not limited to the portion of a settlement or verdict designated for medical losses when seeking reimbursement under the Medicare Secondary Payer Act, 42 USC § 1395(b)(2) ("MSP"). Hadden v United States (Lawyers Weekly No. 01-76843).  This ultimately could lead to a chilling effect on settlements.

In Hadden, Mr. Hadden was injured in Kentucky in 2004 when a vehicle owned by Pennyrile Rural Electric Cooperative Corporation struck him.  Medicare paid $82,036.17 for his medical expenses.  Hadden sued Pennyrile and settled the suit for $125,000.  After deducting Hadden's attorney fees, Medicare demanded the remaining $62,338.07.  Hadden paid under protest, arguing that the unidentified vehicle that caused the Pennyrile truck to swerve into him was 90% at fault, Pennyrile was only 10% at fault, and thus the settlement with Pennyrile should entitle Medicare to reimbursement of only 10% of its lien, or about $8,000.

The Sixth Circuit disagreed and affirmed an administrative law judge's decision that held that a 2003 amendment to § 1395y(b)(2)(B)(ii) did not leave room for Hadden's argument.

However, this opinion was not unanimous with Judge Helene White dissenting on the ground that the majority's interpretation was, among other things, inconsistent with the reasoning in the U.S. Supreme Court's opinion in Arkansas Dep't of Health & Human Servs. v Ahlborn, 547 U.S. 282 (2006).  She also noted that the majority's decision "discourages settlements and may ultimately hinder CMS's efforts to recover conditional Medicare payments."  In essence if Medicare gets the entire settlement amount without regard to fault, individuals will likely be less apt to settle (as they have nothing to personally gain).

Given the potential hindrance to settlement, it is unlikely to be the final word.  For now, however, it is the law in Michigan.

Categories: Medicare/Medicaid

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