The Third Circuit has ruled that a state court order apportioning personal injury settlement proceeds to losses other than medical expenses does not shield a Medicare beneficiary from the government’s reimbursement claims.

In Taransky v. Secretary of the U.S. Dept. of Health and Human Services, a three-judge panel ruled that the post-settlement allocation order obtained by attorneys for Cecelia Taransky was not an adjudication “on the merits” with regard to the substance of her claim, and therefore dd not have to be honored by Medicare.  The Medicare Secondary Payer Manual, a guide to the agency’s policies, states that Medicare does not pursue reimbursement claims where allocation of liability payments to non-medical losses is based on a court order on the merits of the case.

The state court’s allocation order had been based on New Jersey’s Collateral Source Statute, which broadly prohibits a litigant’s tort recovery of any losses otherwise compensated by a collateral source of benefits.  Predicting how the New Jersey Supreme Court would rule, the Third Circuit panel held that because Medicare benefits are subject to reimbursement, and therefore conditional, they fall outside the scope of the Collateral Source Statute’s restrictions on tort recoveries.

In the appeal, Taransky had further argued that because she did not recover full value for her injuries in settling her trip-and-fall claim, Medicare’s reimbursement claim should also be subject to a reduction in its value, in a manner similar to reductions of Medicaid reimbursement claims mandated under the 2006 Supreme Court ruling in Arkansas Dept. of Health and Human Services v. Ahlborn.  But the Third Circuit declined to address the proportionality issue, ruling it had not been properly raised and exhausted in administrative proceedings before reaching the federal courts.

PRACTICE TIP:  Medicare benefits are now ruled to be outside the Collateral Source Statute’s recovery restrictions and the agency’s reimbursement right is not subject to a proportionality reduction based on inability to recover full value of all damages.  Accordingly, counsel representing Medicare beneficiaries in personal injury claims should include a specific claim for Medicare-covered expenses under the private cause of action provisions of the Medicare Secondary Payer Act, found at 42 U.S.C. 1395y(b)(3)(A).  Contact Solomon Law Firm for a sample form of pleading.