Case Law Summaries of Relevant MSP Cases

Case 1: Vernon Hadden v. United States

Hadden v. U.S., 661 F. 3d 298 (2011), Court of Appeals, 6th Circuit

Facts: Plaintiff Vernon Hadden appeals the administrative decision of the Department of Health and Human Services denying his request for a waiver of recovery of a conditional payment made by Medicare for his medical expenses. On August 24, 2004, Plaintiff was severely injured when he was struck by a public utility vehicle in Todd, Kentucky. The vehicle, owned by Pennyrile Rural Electric Cooperative Corporation (“Pennyrile”), veered leftward and struck Plaintiff, a pedestrian, when an unidentified motorist ran a stop sign. Plaintiff settled his claims against Pennyrile and its driver for $125,000 in addition to receiving $10,000 in Kentucky basic reparations benefits. Under the terms of a release/indemnity agreement, Plaintiff agreed to pay and satisfy all medical expenses, liens, and/or claims related to the incident.

Plaintiff’s medical expenses were conditionally paid for by Medicare pursuant to the Social Security Act, 42 U.S.C. § 1395 et seq. Under the Medicare Secondary Payer Act, the Administrator of the Centers for Medicare and Medicaid Services (“CMS”) has a statutory right of recovery of conditional payments made by Medicare where a payment has been made under liability or no-fault insurance. 42 U.S.C. § 1395y(b)(2). CMS assessed Plaintiff’s conditional payment in the amount of $62,338.07 and sought recovery pursuant to 42 C.F.R. § 411.23. In total, Plaintiff submitted payments to CMS for $64,252.37.

On August 28, 2008, the Medicare Appeals Council (“Council”) issued an amended decision finding no merit to Plaintiff’s argument that the amount of recovery should be reduced to ten percent of the principal amount based on Kentucky comparative fault principles. Citing the Medicare Secondary Payer Manual, the Council explained that “Medicare policy requires recovering payments from liability awards or settlements, whether the settlement
arises from a personal injury action or a survivor action, without regard to how the settlement agreement stipulates disbursement should be made.” The Council held that it would not reduce the recovery amount because Medicare recognizes allocations of liability payments only when payment is based on a court order or adjudged on the merits of the case and, in this instance, payment was based on a settlement. Furthermore, the Council found that “the allocation of liability in this case is speculative since it was not determined by a judge or jury.” The Council also held that Medicare does not recognize the “make whole” doctrine. The Council explained
that Plaintiff had submitted no evidence demonstrating that the recovery would cause undue hardship, that he had changed his position to his detriment because of the recovery, or that he had been put in a worse position than before the accident. For these reasons, the Council determined that the recovery would not be against equity and good conscience and affirmed the ALJ’s decision denying Plaintiff’s waiver request.

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