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Obligation to Reimburse Medicare Defined by the Scope of Plaintiff’s Claim Against Third Party, Sixth Circuit Says

Blogs, Erisa

The United States Court of Appeals for the Sixth Circuit recently decided Hadden v. U.S., No. 09–60722011, WL 5828931 (6th Cir., Nov. 21, 2011), a case in which the plaintiff made several compelling arguments to avoid reimbursing Medicare 100% where the plaintiff contended he only recovered 10% of his damages.

In this case, Medicare paid plaintiff’s medical bills which totaled $82,036.17, and plaintiff Hadden thereafter recovered $125,000 in a personal injury claim. Medicare subtracted a portion of the attorneys’ fees Hadden paid to his lawyer relating to the settlement and demanded approximately $62,000. Hadden escrowed $62,000, paid it to Medicare under protest and took an appeal.

Hadden’s essential argument was that the tortfeasor from whom he recovered was only 10% responsible for his damages, and thus, the $125,000 settlement represented only 10% of Hadden’s damages. Further, Hadden argued that the settlement compensated him for only 10% of his medical expenses, or $8,000. Therefore, Hadden claimed that the remaining $117,000 “compensated him for damages other than medical expenses . . . and was therefore off-limits to Medicare.” Id. at *1.

Applying for de novo review, the Sixth Circuit affirmed the district court’s judgment, and held that the government was entitled to recover 100% of the recovery and that the beneficiary’s own obligation to reimburse Medicare was defined by the scope of beneficiary’s own claim against third-party:

Consequently, the scope of the plan’s “responsibility” for the beneficiary’s medical expenses—and thus of his own obligation to reimburse Medicare-is ultimately defined by the scope of his own claim against the third party. That is true even if the beneficiary later “compromise[s]” as to the amount owed on the claim, and even if the third party never admits liability. And thus a beneficiary cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other. 

That is precisely what Hadden attempts to do here. In his claim against Pennyrile, he did not demand that it pay for only 10% of the medical expenses that he incurred as a result of his accident; he demanded that it pay for all of them. That choice has consequences-one of which is that Hadden must reimburse Medicare for those same expenses. (To respond briefly to the dissent: Section 1395y(b)(2)(B)(v) affords the Secretary broad discretion to waive Medicare’s right of recovery to the extent she sees fit in a particular case.) 

Hadden v. U.S., 2011 WL 5828931, *3 (emphasis in original). The court also rejected Hadden’s reliance on “equity and good conscience”, which the court determined did not favor returning money that beneficiary had paid under protest.