Secondary Payer: Brief Says Supreme Court Review Needed On Limits to Settlement Recovery Authority

​The federal government overstepped its Medicare Secondary Payer Act authority when it sought recovery of all of its costs of caring for a Medicare beneficiary from that beneficiary’s third-party settlement, the beneficiary argued in a brief filed with the U.S. Supreme Court Aug. 7 (Hadden v. United States, U.S., No. 11-1197, reply brief filed 8/7/12).

A reply brief filed on behalf of Vernon Hadden said high court review of the issue—whether the government may recover all, as opposed to only an apportioned share, of a beneficiary’s settlement with a responsible third party—is necessary because of a split in the federal appeals court circuits that have addressed the issue and because the approach adopted by the appeals court below is at odds with the approach used by courts addressing government settlement recoveries under Medicaid and other federal health care payment programs.

The brief disputed the government’s claims, asserted in a brief in opposition filed July 26, that the case was not appropriate for high court review. The government claimed that there is no circuit split, that the U.S. Court of Appeals for the Sixth Circuit properly resolved the case, and that the issue is not of ‘‘national importance,’’ which otherwise might justify Supreme Court review.

The government said the Sixth Circuit properly determined that the United States may seek full repayment from a Medicare beneficiary of the amount Medicare provided when the beneficiary settles with a responsible tortfeasor for more than the amount Medicare paid. A petition challenging the Sixth Circuit’s November 2011 decision—a 2-1 ruling—was filed March 30.

Petition Seeks Reversal. Hadden, in his petition, argued that the Sixth Circuit majority misinterpreted the MSPA and issued a decision that conflicts with a ruling by the U.S. Court of Appeals for the Eleventh Circuit in Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010) and is inconsistent with the U.S. Supreme Court’s decision in Arkansas Dep’t of Health & Human Services v. Ahlborn, 547 U.S. 282 (2006). The high court, in Ahlborn, rejected a state’s efforts to recover all of its Medicaid costs from a third-party settlement.

‘‘The court’s holding is unsupported by the text of the Act and interprets the law contrary to Congress’s intent. Attempting to avoid the impact of this Court’s Ahlborn decision, the court of appeals rewrote the statute to deny Mr. Hadden recovery,’’ the petition said.

The Sixth Circuit, in its decision, rejected Hadden’s argument that he should repay only one-tenth of Medicare’s claim based on the fact that his settlement covered only 10 percent of his total damages. The court ruled that the Medicare statute clearly provides for full reimbursement when a settlement resolves a claim, even if the party believes the settlement only reflected a partial recovery.

A dissent filed in the case said that the majority was incorrect that the statute was clear regarding the amount of recovery. Rather, according to the dissent, the statute is ambiguous and the government’s ‘‘absolute priority’’ theory of full reimbursement, similar to the Medicaid proposal rejected by the Supreme Court in Ahlborn, was not entitled to deference and raised a serious impediment to settlements in a large number of cases

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