Employers, insurance carriers and brokers in the US have been struggling the last few years to prepare for the requirements of a new law pertaining to state-funded medical aids, namely Medicare, Medicaid & State Children’s Health Insurance Program (SCHIP) Extension Act (MMSEA) Section 111 Reporting.
Courts are beginning to weigh in on the enforcement of these MMSEA provisions and one of the major cases which will have future bearing on the need for protecting Medicare/Medicaid is the Hadden case published on November 21, 2011.
The United States Court of Appeals for the Sixth Circuit, in Vernon Hadden v. United States of America, addressed the extent of Medicare’s reimbursement rights to conditional payments made on behalf of an injured party and was eagerly anticipated. This case is the subject of our Strategic Outcomes Practice’s latest You Should Know publication, which discusses the potential implications of the case in some detail.
Implications of Hadden Case
For the Medicare compliance industry, litigants and beneficiaries, the Hadden case brings to light at least one court’s interpretation of the Medicare Secondary Payer Act and the seeming disconnect between Medicare’s broad right of recovery and the reality of tort settlements and awards.
Hadden, injured in 2004 when he was struck by a vehicle, argued that he had recovered only 10% of the total damages in his case (the remaining 90% were the fault of the driver that was never identified). Of the $125,000.00 settlement paid by the at fault insured party, Medicare claimed a reimbursement right to $62,338.07. Hadden took the position that Medicare’s reimbursement rights should be reduced as a result of his failure to recover the lion’s share of the damages that resulted from the accident.
The court held that Medicare was entitled to recover 100% of its conditional payment demand asserted in this case regardless of the fact that the injured party may have received a reduced settlement or that the settlement compensated the plaintiff for only a portion of his damages.
This decision could create havoc for defendants trying to settle cases for nuisance value. You could offer a settlement for a cost of defense nuisance settlement, yet still be on hook for the Medicare/Medicaid obligations.
This is one of rare cases where the plaintiff’s bar and US Chamber of Commerce are both on the same side: they both object to the court’s findings. For the Medicare compliance industry and Medicare beneficiary tort litigants, the Hadden case seems to suggest that Medicare will not be inclined to consider arguments including a reduced tort award as a means to compromise conditional liens (payment money owed to Medicare).