Monthly Archive for January, 2011

NEVADA DISTRICT COURT HOLDS THAT MEDICARE IS ENTITLED TO RECOVER FULL AMOUNT OF ITS LIEN IN DIRECT ACTION CLAIM WITH PRIORITY OVER ALL OTHER CLAIMANTS

Published on January 19, 2011 in Uncategorized. Closed Tags: , , .

Unlike the Eleventh Circuit, the U.S. District Court for the District of Nevada in Farmers Insurance Exchange v. Forkey, et al., gave deference to the Department of Health and Human Services’ (the “Department”) interpretation of the Medicare Secondary Payer Act,  giving the Department priority over all other claimants when it seeks to recover conditional payments made by Medicare.  In Forkey, David Forkey was seriously injured when struck by a vehicle.  Medicare paid his accident-related medical expenses.  As a result of his injuries, Mr. Forkey died, and his wife (“Forkey”) made a claim against the insurance proceeds of his Underinsured Motorist (“UM”) policy.  The Department also made a claim against the UM provision of the policy claiming that it was entitled to $10,070.22, the amount Medicare paid for Forkey’s medical expenses. 

Because of the competing claims, the insurance carrier filed a motion for interpleader and for discharge, which was granted by the court.  Forkey argued the funds should be apportioned on a pro rata basis.  Since her wrongful death claim was worth at least $500,000.00, the Department should only be entitled to about 2% of the proceeds of the UM policy.  The Department argued that Medicare was entitled to reimbursement of the entire $10,070.22 and had a superior right to be reimbursed from the policy pursuant to 42 U.S.C. §§ 1395y(b)(2)(B)(i)-(iii).

Following the Ninth Circuit’s ruling in Zinman v. Shalala, 67 F.2d 841, 845 (9th Cir. 1995), that a direct action right “is not limited by the equitable principle of apportionment stemming from the subrogation right,” the court agreed with the Department.  It held that the Department has priority over all other claimants when it seeks to recover conditional payments and ordered that the Department receive $10,070.22 from the remaining proceeds of the UM policy.

The district court’s decision is at odds with the Eleventh Circuit Court of Appeal’s decision in Bradley v. Sebelius et al., No. 09-13765 (11th Cir. 2010), which held that Medicare was not entitled to a full recovery of its lien in a wrongful death action. (Click here to read our previous post on Bradley.)  An appeal can be expected.  Should it be taken and the Ninth Circuit Court of Appeals agrees with the district court, then an obvious conflict exists, which may only be resolved by the U.S. Supreme Court.  The practical import for those claims involving Medicare liens in the Eleventh Circuit will be that the Department will be much less willing to negotiate its interest, taking the position that it is entitled to its full share regardless of equitable arguments.  This position may make settlements more difficult and the use of interpleader more prevalent, both of which may increase the cost of defense and potential exposure.

Date of Decision: December 29, 2010
Farmers Ins. Exchange v. Forkey, et al., United States District Court for the District of Nevada, No. 2:09-cv-00462, 2010 U.S. Dist. LEXIS 137716 (D. Nev. Dec. 29, 2010)

LOUISIANA DISTRICT COURT DETERMINES SET ASIDE AMOUNT TO PROTECT MEDICARES INTERESTS

Published on January 14, 2011 in Uncategorized. Closed Tags: , , , , , .

After an evidentiary hearing, the United States District Court for the Western District of Louisiana recently determined the amount of future medical expenses to set aside from settlement proceeds in order to protect Medicare’s interest in compliance with the Medicare Secondary Payer Act, 42 U.S.C. 1395y.  In December of 2009, David Wayne Benoit became disabled when he injured his back and hip in an accident while working aboard a towboat.  Due to Benoit’s status as a seaman, Big R Towing paid maintenance and cure benefits under the general maritime law.  Benoit’s doctors agreed that Benoit needed back surgery and one of his doctors recommended he undergo a left hip replacement.  Big R Towing filed a declaratory judgment on the issue of whether maintenance and cure was owed for the recommended left hip replacement.  Benoit filed a counterclaim seeking damages under the Jones Act, 46 U.S.C. § 688(a), which allows seamen to bring actions against ship owners for negligence. 

At a settlement conference, the parties agreed to settle the case for $150,000.00.  Because Benoit was receiving Social Security disability benefits, as part of the consideration for the settlement, the parties agreed that Benoit would be responsible for protecting Medicare’s interests under the Medicare Secondary Payer Act.  The parties made an oral motion for the court to determine Benoit’s future medical expenses in order to set aside funds to protect Medicare’s interests.  With the consent of the parties, the court held a hearing in open court in which health care providers testified regarding Benoit’s future medical expenses.

In an opinion and order dated January 5, 2011, the court found that the settlement amount represented a reasonable compromise to avoid the uncertainty and expense of trial.  Based on information provided by the health care providers, the court determined that Benoit’s future medical expenses arising out of the December 2009 accident were $52,000.00 – $32,000.00 for the back surgery and $20,500.00 for a left hip replacement and that the medical expenses would not materially change if Benoit opted not to have surgery on his left hip and, instead, sought palliative treatment. 

In concluding that the parties “have reasonably considered and protected Medicare’s interests in the settlement of this matter,” the court held that Medicare was a secondary payer to the extent Benoit incurred Medicare-covered expenses, in the past or in the future, arising out of the accident and injuries alleged in the lawsuit.  Further, the court concluded that Benoit was obligated to reimburse Medicare for all conditional payments made before settlement and all medical expenses submitted to Medicare before the date of the order.  Since it was “reasonably expected” that Benoit may become a Medicare beneficiary in the future, the court ordered Benoit to set aside $52,500.00 to protect Medicare’s interest as the secondary payer for future medical expenses arising out of the injuries alleged in this lawsuit.

Date of Decision: January 5, 2011
Big R Towing, Inc. v. Benoit, et al., No. 10-538, 2011 U.S. Dist. LEXIS 1392 (W.D. La. Jan. 5, 2011).