On July 29, 2014, the Third Circuit issued an interesting court decision concerning the Medicare Secondary Payer Act (MSP) that may provide guidance to the parties in tort litigation, particularly in New Jersey tort litigation, in a case styled Taransky v. United States. The Taransky case involved a slip and fall accident involving a settlement by a tortfeasor who tried to resolve the Medicare lien in the settlement process. The case pitted two statutes against each other, the Medicare Secondary Payer Act and a New Jersey statute prohibiting tort claimants from recovery twice under medical insurance and liability insurance. In the end, the Third Circuit found that the plaintiff had to reimburse Medicare from the tort settlement for medical bills incurred by Medicare. The logic of the case is pretty solid under the Medicare Secondary Payer Act. The beneficiary tried to rely (1) upon a New Jersey statute that said a claimant could not collect twice on collateral sources, and (2) upon a court ruling after the case settled that there was no allocation of the medical expenses. The Third Circuit found that the tortfeasor was the primary plan, the tortfeasor had sought to resolve the Medicare lien, and the court ruling on medical expenses was not on the merits. The court also found that the New Jersey statute did not apply to situations where conditional payments were made, like in Taranasky. Accordingly, the beneficiary was required to reimburse Medicare for the medical expenses from a slip and fall accident. While Medicare had been notified of the state court hearing, the government was not made a party and hence not bound by the state court ruling.
A few points to keep in mind from this case: First, the case affirms the government’s position that settlement, if it releases a tortfeasor from claims for medical expenses, is sufficient to demonstrate the beneficiary’s obligation to reimburse Medicare. This is classic MSP law from the perspective of the government. The Court also observed that plaintiff’s counsel had contacted the Medicare contractor to determine the amount of the Medicare lien and that the tortfeasor released medical expenses in the settlement and required the plaintiff to indemnify the tortfeasor for any Medicare lien. These facts underscored that the medical expenses were addressed in the settlement.
Second, the Third Circuit determined that the government did not need to defer to the apportionment order (finding no apportionment to medical expenses) plaintiff had obtained from the state court. To do so, the Court focused on the lack of basis behind the state court’s determination of whether or not medical payments were included in the settlement. The Third Circuit noted that the motion before the state court was uncontested and issued pursuant to a stipulation between the parties, and therefore was not an order made on the actual merits.
Finally, this case makes clear that allocation orders obtained as a part of a state court proceeding, to receive deference from Medicare for determinations on whether a potential lien is recoverable, may need to be the product of a full presentation of the opposing positions on allocation. Allocation orders obtained in a largely uncontested motion or proceeding may receive little consideration in the context of the government’s request for reimbursement. Of particular importance was that the government was not named a party to the proceedings below and merely was served with the papers to the no-allocation hearing.
Philip R. Matthews, of the San Francisco office, practices in the area of general civil litigation and insurance counseling and litigation with an emphasis on complex cases.