Top 10 MSP-Related Events of 2011 – Number 2

Medicare Set-Aside Blog on January 12, 2012
Posted by

6th Circuit Decision in Hadden v. US Appeal

After only a little over 400 days of deliberation, the 6th Circuit Court of Appeals finally rendered a decision in the appeal of U.S. v. Hadden on November 21, 2011, upholding Medicare’s right to recovery in full from Mr. Hadden’s insurance settlement. For those unfamiliar, Mr. Hadden was a pedestrian struck by a public utility vehicle that swerved to avoid a negligent driver. The accident occurred in Kentucky, a pure comparative negligence state, and the insurer of the not-at-fault driver settled claims against it for about 10% of Mr. Hadden damages. Medicare asserted a claim for over half of the settlement proceeds and denied all requests for waiver or compromise of that amount. Mr. Hadden appealed that decision through the four steps of the Medicare appeal process, through district court review of that determination, to finally have the 6th Circuit Court of Appeals affirm Medicare’s rights to the amount of its demand.

The outcome was not surprising as it follows all case law to date, with the exception of one case, but that is what makes its occurrence significant. In September 2010, the 11th Circuit Court of Appeals rendered a landmark decision in the Bradley v. Sibelius appeal in which it upheld a probate court decision to apportion a policy limits settlement over all claims, Medicare’s being weighed against the ten demands for loss of parental companionship by the surviving children. While not a perfect decision in that the probate court did not question the worth of the children’s claims but simply assessed the apportionment at the amounts demanded, the value in the opinion is the resulting public policy discussion.

Public policy favors settlement: our courts cannot handle adjudicating every insurance claim involving a Medicare beneficiary, let alone all those with a reasonable anticipation of becoming one, to determine Medicare’s stake, particularly when Medicare routinely refuses to participate. There is an art to settling insurance claims that involves a lot of tried and true practices based upon financial and legal implications, resulting in the best possible compromise of all parties. Parading that evidence through a court of law does not change the facts as to why the parties elected not to see a case through to trial. Yet CMS refuses to compromise its claim absent a ruling on the merits of the claim. This represents an enormous waste of government resources, both judicial and federal, given that the private sector already paid for the analysis that led up to the value of the settlement. Nevertheless, insurers routinely pay these demands because “it’s not enough money to fight over” or “there’s no winning against CMS’ track record,” thus the agency grows stronger and makes more wild demands and creates new overreaching policies and the problem continues. But I digress.

Returning to Mr. Hadden, we can only hope that he continues to pursue his appeal because every chink we can put in CMS’ armor, like the Haro injunction and the Stricker dismissal, helps rein in its reach little by little.