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55 Ferncroft Road Suite 201
Danvers, MA 01923

(866) 630-CPSC Toll-free
(978) 774-0540 Facsimile

www.CPSCmsa.com

By: Peter Belsito, Esq.

On March 31, 2008, the U.S. District court for the District of New Jersey refused to hear the complaints of six Medicare beneficiaries who claimed that Medicare improperly sought reimbursement for certain medical costs under the Medicare Secondary Payer Statute (MSP). The District court grated the government’s motion to dismiss, stating that the claim lacked federal question jurisdiction because the plaintiffs had not exhausted their rights to administrative review by the Center for Medicare and Medicaid Services (CMS). The Court further stated that seeking administrative remedies, such as a request for waiver or appeal the MSP overpayment claim, are reasonably available and are not futile.

The dispute underlying the government’s motion to dismiss for lack of jurisdiction stems from a conflict between New Jersey tort law and the federal MSP. Under the MSP, Medicare has a right to recover any payments made on behalf of a beneficiary for medical treatment when it has been demonstrated that a worker’s compensation plan, automobile, liability (including a self-insured plan) or no fault insurance is primarily responsible for such payments. See 42 U.S.C § 1395y (b)(2)(B).    The MSP further states that the primary responsibility to pay for Medicare covered costs can be demonstrated by “a judgment, a payment conditioned upon the recipient’s compromise, waiver or release (whether or not there is a determination or admission of liability.” Id. Medicare is allowed to pay for medical costs only on the condition that the Medicare Trust Fund is repaid after the primary responsible party is determined by the execution of a settlement or judgment.

The plaintiffs in this case claim that Medicare is not entitled to recover any portion of their settlements because New Jersey law prohibits damages for costs of any medical treatment that has been paid for my Medicare. Thus, none of the funds received by the plaintiff’s can include monies subject to recovery by Medicare under the MSP. All of plaintiffs in this case had settled their tort claims and subsequently received letters from CMS demanding repayment and threatening other collection actions such as referral to the Treasury Department for collection and terminating Social Security benefits. Two of the plaintiffs’ experiences are worth noting here.

Dorothy Merrifield was injured on August 31, 2001, in an escalator accident at the Menlo Park Mall in Edison, New Jersey. Following settlement, Medicare sought reimbursement from Merrifield and she repeatedly requested administrative review of the reimbursement claim on numerous occasions in 2004 and 2005. However, the Medicare contractor assigned to the matter instead served Ms. Merrifield with a notice of intent to refer her matter to the Department of Treasury for debt collection. Medicare admitted that Plaintiff Merrifield's “debt” was referred to Treasury for collection, but note that it was recalled on May 23, 2007, more than two years after it was referred for collection and three months after she brought this action in federal District court.

Marie Burke was injured on or about April 13, 2001 in a fall at the Park Place/Hilton Casino Resort in Atlantic City, New Jersey. Medicare sought reimbursement of the conditional payments and threatened termination of Social Security benefits on which Burke allegedly depends. In June of 2004, Burke paid the Medicare reimbursement claim and “sought administrative review and refund of her payment to Medicare. During the ensuing two years of administrative review, the Medicare contractors conducting the review reaffirmed the Medicare reimbursement claim. Burke appealed the contractor's determination to an Administrative Law Judge (“ALJ”) and had a hearing on her claim in August 2006. The ALJ found that CMS must refund to Plaintiff Burke the amount she had repaid. CMS did not appeal this decision but did not comply with it before she brought this action in federal District court. In fact, Medicare’s first attempt at repayment was not made until May 30, 2007, more than nine months after the ALJ ordered it. Burke rejected the attempted repayment because, among other reasons, it did not include statutory interest or attorneys' fees.

The Court looks to 42 U.S.C. §405(h) of the Social Security Act which bars the court’s jurisdiction over these claims under 28 U.S.C. §1331 as claims “arising under” the Medicare Act and requires “exhaustion of the administrative review process.” Notwithstanding the difficulty experienced by Ms. Burke and Ms. Merrifield, the District court notes that there are two potential avenues for administrative review of CMS's reimbursement determinations: 1) a waiver and 2) a direct appeal contesting the MSP overpayment claim. A Medicare beneficiary may request a waiver of Medicare’s reimbursement claim even if it is factually determined that there was indeed an overpayment of Medicare benefits. The standard to be used in granting or denying these waivers is whether the beneficiary is without fault and if repayment would defeat the purposes of the Medicare Act or “would be against equity and good conscience.”  42 U.S.C. § 1395gg(c). Additionally, for beneficiaries who receive demands for reimbursement from Medicare on or after May 1, 2005, updated regulations provide for direct agency review under  42 U.S.C. § 1395ff(b)(1) without resorting to a request for waiver. Further, the denial of a waiver is defined as an “initial determination,” triggering administrative review procedures the court describes as “extensive.” This Court primarily relies on a Third Circuit decision that the Medicare Act provides sufficient administrative review procedures to satisfy the plaintiff’s procedural due process rights under Matthews v. Eldridge. See Fanning v. United States, 346 F.3d 386, 388-89 (3d Cir.2003). 

Although the Court finds it may waive the exhaustion requirement under § 405(h), it opts not to exercise it for reasons of policy. The policy considerations weighed by the Court are: “preventing premature intervention with agency processes so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record adequate for judicial review.” Bowen v. New York, 476 U.S. 467, 484 (1986) (quoting Weinberger v. Salfi 422 U.S. 749(1975)). 

This decision by the District Court of the District in New Jersey confirms what many of us in the MSP compliance business have discovered. There is no end run around dealing with the CMS or its various contractors. Each case must be taken on its merits within the administrative framework put in place by CMS.  

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