At What Point Does a Preauthorized Medicare Covered Surgery Stop Being Medicare’s Payment Responsibility? – Salveson v. Sebelius

Medicare Set-Aside Blog on May 14, 2012
Posted by

I think too frequently our problems with Medicare are brought on by our own irrational acts. Recall that the 2003 Medicare Act amends were innacted in the first place to provide Medicare recovery rights without any admission of liability because for decades parties would allocate damages to everything but medicals to avoid a repayment obligation. But following the power shift, it is now Medicare acting irrationally believing itself entitled to 100% reimbursement from dollar $1 regardless of any relevant circumstances. Sadly the law in its current form supports that right and we are at the mercy of the Secretary of Health and Human Services to accept anything less. Accordingly the only shot we have at such a waiver is to articulate reasonable requests supported by valid legal arguments and anything less than that will cause CMS to stand its ground and all hope will be lost.

Take for example a case recently reported out of South Dakota in which Medicare is seeking $110,864 reimbursement out of a $621,000 med mal settlement. On December 20, 2004, plaintiff underwent hernia repair during which her bowel was nicked, resulting in fecal material leaking into her abdominal cavity and eventually causing infection and sepsis. A re-anastomosis was performed 10 days later following which the condition worsened and extensive further care and convalescence followed resulting in total Medicare expenses of $194,543.63. CMS adjusted for procurement costs and to remove some unrelated services, but plaintiff felt Medicare was not entitled to recover at all and submitted a written request to Medicare requesting a complete waiver.

MSPRC denied indicating that plaintiff provided no new information or documentation upon which to grant her requested waiver of disputed charges and restated that all charges were related to the December 20, 2004 accident. It also advised her of her appeal rights and provided a form to request waiver for financial hardship which she did not apply because by her own admission she didn’t believe she would have qualified for. She instead filed a Request for Reconsideration which was denied and appealed to an ALJ who affirmed all previous decisions. Plaintiff appealed to the Medicare Appeals Council which affirmed the ALJ, resulting in the action at hand seeking judicial review of the Secretary’s final decision.

The ALJ noted that plaintiff’s request for a waiver of reimbursement was based on her assertion that “there is not sufficient basis for Medicare to assert a claim against [her] settlement proceeds for all its conditional payments during the dates of services from January 4, 2005 through January 26, 2007.” In later pleadings she argued that at the very least, “none of the medical charges incurred between her first surgery on December 20, 2004 and her second surgery on December 30, 2004 should be recoverable by Medicare, because (she claims) the record contains ‘not a scintilla of competent expert medical testimony’ that any malpractice occurred before the second surgery. Is she implying that the infection and sepsis would have occurred without the fecal material leaking into her abdomen? Did I mention the 6 figure settlement which obviously includes medical damages? The best plaintiff could have hoped for was that Medicare own up to the cost of the hernia repair it preauthorized and discounted by that. Medicare is plaintiff’s primary form of insurance and an entitlement earned upon a lifetime of payroll contributions after all . But instead plaintiff made an irrational request and put CMS on the defensive and got nothing.

Then to make matters worse, the court places the emphasis of its analysis on the financial hardship aspect, which plaintiff by her own admission did not believe existed. But because she did not incur any, nor did she file the proper form to evaluate it, the court found that the ALJ denying her request on that basis was proper. The court then brought Hadden into the discussion, citing it as persuasive given them factually similar in that they were both settlements of a tort claim with disagreement over Medicare’s right to full reimbursement. But Haddden’s reduction was requested due to defendant’s liability/responsibility in a comparative negligence state and not similar at all to the case at hand. The only reason that Medicare should not have received full reimbursement in this case was because it was “responsible” for the original surgery and hospital stay as plaintiff’s primary insurer. But because this case was not plead rationally or reasonably, we have yet another bad piece of case law to add to the ever growing heap. The court never had an opportunity to analyze whether Medicare should have paid for the hernia surgery because it was never brought up outside the context of plaintiff adjuring that all care through the second surgery was its responsibility.

We reap what we sow, but enough is enough. There is a balance that desperately needs to be achieved between parties to an insurance claim and Medicare and it is one that is not going to be gained through the SMART Act or any other pending MSP legislation in Congress today. When fighting your battles with Medicare, first accept the fact that the MSP in its current form does appear to provide Medicare to a priority right of 100% recovery from any insurance payment and plead your case from there. There are very real reasons why Medicare should not recover what it attempts to in many cases but unless you present well articulated and supported legal arguments all along the way, there is very little a court can do in a judicial review of the underlying determination. It is my hope that the reason we only ever see the bad cases reported is because all the good ones were resolved during the administrative appeal process.

BETTY J. SALVESON, Plaintiff, -vs- KATHLEEN SEBELIUS, Defendant.
CIV. 104045
2012 U.S. Dist. LEXIS 66293
May 11, 2012