The deference due to a Court’s allocation order was discussed in the recently decided Third Circuit Court of Appeals decision in Taransky vs Secretary US DHHS. The appeal involved the interaction of the MSP Act with the New Jersey Collateral Source Statute (NJCSS). The NJCSS provides that a tort plaintiff cannot recover damages from a defendant when she has already received funding from a different source. Taransky claimed that reimbursement to CMS would be inequitable, since her settlement did not allow for any medical expenses. She also argued that a tortfeasor cannot be a “primary plan” from which the government may recover under the MSP.
By way of background, it is important to note that during settlement negotiations, Taransky’s attorney sought conditional payment information from Medicare on several occasions. After settlement was reached, Taransky filed a motion with the New Jersey Superior Court requesting an apportionment of the settlement proceeds between the various damage elements. This motion was intended to allow Taransky to secure documentation relevant to “anticipated administrative proceedings with CMS”. The New Jersey Court entered an order on November 20, 2009 finding that the settlement did not include any Medicare expenses.
Taransky disputed Medicare’s conditional payment demand through CMS’ administrative procedures. The Administrative Law Judge found against Taransky, ruling that the Government may be reimbursed from the proceeds of a tort settlement. He also refused to recognize the state court’s allocation order because it was “not made on the merits”.
The Appellate Court ruled against Taransky finding that the MSP Act authorizes the Government to seek reimbursement from her settlement. Neither the NJCSS or the Superior Court’s allocation order of the settlement prevented her from obtaining damages for medical expenses. The Government also did not need to recognize the allocation order because it was not on the merits. The Appellate Court noted that a court order is “on the merits” when it is delivered after the court has heard and evaluated the evidence and the parties’ substantive arguments”. Taransky’s motion requesting apportionment of the settlement proceeds was not intended to resolve any issues in her suit . It was sought “only to the extent necessary to obtain specified documentation relevant to anticipated administrative proceedings with the federal Centers for Medicare and Medicaid Services”. In light of this, the order in question was “the antithesis of one made on the merits”.
Although the Taransky decision was not issued in the context of a workers’ compensation claim, Senate Bill 2731 if passed and applied to liability claims, would likely have resulted in a different outcome. We will continue to keep you advised of further developments.