U.S. District Court Upholds MAC Finding Permitting Medicare Recovery
A U.S. District Court upheld the Medicare Appeals Council’s (“MAC”) finding that a plaintiff cannot shield liability settlement funds from Medicare by simply drafting a settlement order to remove a claim that would allow recovery of conditional payment claims.
In Paraskevas v. Price, the Plaintiff settled her case with her deceased husband’s physician. Upon finalizing settlement, she amended her complaint to remove a survivorship medical malpractice claim, which would have allowed Medicare to recover conditional payments. She also filed a motion to approve settlement with the state court, which stated that the settlement should only apply to her other claim, a wrongful death action. Without holding a hearing, the state court approved the settlement agreement and the Plaintiff’s motion.
The MAC determined that Medicare was entitled to seek reimbursement from Plaintiff’s settlement proceeds because the settlement agreement covered the medical malpractice claim and the state court’s order did not preclude Medicare’s recovery right. On appeal, the District Court considered whether the MAC’s determination was supported by substantial evidence.
First, the District Court held that the MAC had substantial evidence to support its finding that the settlement agreement included the medical malpractice claim because: (1) at the time of settlement, the operative complaint still included the medical malpractice claim; (2) the tentative settlement amount, which included compensation for the medical malpractice c
laim, was the same amount as the final settlement; and (3) at the ALJ hearing, Plaintiff’s counsel stated that the parties had settled the medical malpractice lawsuit.
Next, the District Court considered whether the state court’s order approving settlement precluded Medicare’s recovery right. Generally, when a liability settlement releases medical expenses, Medicare is entitled to reimbursement for any claim-related conditional payments. The District Court noted that, under the Medicare Secondary Payer Manual, however, when a court order, based on the merits of the case, designates a specific amount as not related to medical services, Medicare will not seek recovery from that portion of the settlement proceeds. Therefore, if the state court’s order was based on the merits of the case, Medicare would not exercise its recovery rights. To be considered on the merits, the order must have been issued after the court had heard and evaluated the evidence and the parties’ substantive arguments. Here, the Plaintiff was unable to show that the state court even held a hearing. Additionally, the fact that Plaintiff’s counsel prepared the order for the court to sign and it was unopposed showed that the state court did not consider the merits of the case. Simply stated, the state court rubber stamped the Plaintiff’s order. For these reasons, the District Court held that the MAC had substantial evidence to conclude that the state court’s order was not based on the merits of this case.
Because the MAC had substantial evidence to support its determination that the parties included the medical malpractice claim in the settlement agreement and the state court’s order was not based on the merits of the case, the MAC’s decision was affirmed. Thus, Medicare could seek recovery from the liability settlement proceeds.