Medicare Recovers Despite Failure to Treat Being the Claim

CMS, Commentary, Liability, Medicare, Medicare Set-Aside Blog, MSP Litigation on March 4, 2016
Posted by Jennifer Jordan, JD, MSCC

Alleging medical damages and receiving compensation for release from liability for those same medical damages will result in reimbursing Medicare for related medical expenses pretty much regardless of your legal theory as to why you should keep that windfall rather than the federal government. On March 3, 2016, the U.S. District Court for the Eastern District of Michigan rendered an opinion in Anderson v. Burwell that does a nice job outlining the rational for this outcome, despite the cleverly crafted defense to the reimbursement demand. The legal theory here was if properly diagnosed and she didn’t die, then Medicare would have paid a lot more and therefore shouldn’t get anything from this settlement.

The case involved a med mal/wrongful death suit brought as a result of the 2006 death of plaintiff’s mother following what he alleged was a failure to diagnose and/or treat her heart condition. Stress tests in 2004 and 2006 indicated myocardial ischemia and for over a month leading up to her death, her complaints of severe chest pains, shortness of breath and fatigue were attributed to reflux esophagitis and gastritis. Plaintiff alleged that their misdiagnosis and failure to timely order the proper treatments to deal with her coronary artery blockages are what resulted in her death. Because there was no treatment rendered, there should be no medical liens. However, medical damages are permitted by the state wrongful death statute and were claimed nonetheless.

During settlement negotiations, CMS sent a $41,340.46 conditional payment letter to which the plaintiff replied that he was not responsible for reimbursement because his legal theory was that his mother failed to receive treatment, therefore how can any reimbursement be required for treatment never received. A few months later CMS issued a new letter, claiming only $1,713.77 due for treatment received for a period prior to August 11, 2006. After the parties settled the claim relying upon that number as stated in the order approving the settlement, CMS issued a final demand in the amount of $22,668.01 for services rendered September 11-20, 2006. Plaintiff exhausted his administrative appeal disputing that claim, which brings us to the case at hand.

Plaintiff maintained his position throughout that it was the lack of treatment that should have been ordered and Medicare should have paid but for the failure to diagnose/treat that ultimately resulted in his mother’s death, therefore any treatments that were rendered were Medicare’s responsibility as his mother’s primary payer. Had surgery been performed negligently and killed her, then his point was that all treatment from the surgery to her death would be related to the negligence and reimbursable. Because no treatment was rendered, his position was that the treatment leading up to her death would have occurred whether he filed suit or not. Because Medicare should have been paying for treatment that never occurred, he felt it was not owed anything from the settlement, as it actually saved them significantly in the lack of treatment and death.

Unfortunately for the plaintiff, this is not the first time the courts have seen this case. In Weinstein v. Sebelius in 2013, the plaintiff alleged that the failure to administer TPA lead to her husband’s stroke and ultimately his death. Although she alleged medical damages for all treatment leading up to the death, she felt she only needed to reimburse the services rendered between the two strokes. Medicare disagreed and prevailed. Because she alleged the medical damages and received compensation in exchange for release from all medical liability, she was responsible for reimbursement of payments based upon her demands and release and not for what she deeded related. Similarly, in Hadden v. U.S, plaintiff alleged that he was only responsible for 10% of the amount demanded by Medicare because he only received compensation for about 10% of his alleged damages. The court there said that because he demanded full reimbursement of all his medical expenses, and released all liability for all medical damages despite compromising his recovery, that decision to compromise had no bearing on Medicare and it was still due full reimbursement. The point is that liability, perceived or actual, is irrelevant – the insurance payment triggers Medicare’s reimbursement rights and the scope of the damages claimed and released dictate what Medicare payments are reimbursable.

While a novel approach, plaintiff’s theory still failed. Allowing him to claim and receive compensation for medical expenses paid by Medicare would result in a windfall to him despite this result actually ending up in a windfall to Medicare overall since it would have paid for these related services absent this lawsuit. Additionally detrimental reliance arguments on the $1,712.77 CPL also failed as the letter itself was quite clear that it is was not a final demand and the inclusion of the exact amount in the order approving settlement was rubber stamped and not the result of a hearing on the merits. Notably if you read between the lines, the MAC and the court inferred that the use of the word “only” before the amount might have made a difference in limiting Medicare’s rights, but wasn’t the case here.

No. 14-cv-13840
2016 U.S. Dist. LEXIS 26633
March 3, 2016, Decided