11-28-11; Medicare grabs their money back in a motor vehicle settlement and Plaintiff may get the short straw in the deal

In Hadden v. U.S., Medicare paid about $82,000 in medical bills to claimant after a motor vehicle accident, as he was and remains a Medicare beneficiary. Plaintiff Hadden sued and settled the claim against the company whose driver hit him in the accident. Defendant was were willing to pay him $125,000.00 to close all rights in the claim.

Medicare was willing to deduct attorney’s fees to recover their money, leaving them a net lien of about $62,000. Please note that would mean Medicare would get just under one-half of the entire settlement. It is our understanding Plaintiff’s attorney would also get legal fees on the remaining balance to be paid to Plaintiff Hadden over and above the Medicare lien recovery, so Plaintiff might receive as little as $25,000 of the $125,000 being paid. Obviously, personal injury lawyers don’t like such outcomes as the attorney would get as much or more in combined legal fees from Medicare and claimant, as claimant would receive himself. In this claim, we would estimate

·         Medicare would receive $62,000;

·         The attorney’s fees on that money were about $20,000;

·         There is about $43,000 of the original offer of $125,000 left after netting out Medicare’s recovery and fees related to the recovery;

·         Claimant would have to pay his attorney a 1/3 fee on that money, giving claimant about $28,666.67;

·         Attorney’s fees on $43,000 at 1/3 are $14,333.32.

If the above approximations are accurate, the payout about be:

·         $62,000 to Medicare;

·         $34,333.32 to the attorney who is actually working for both Medicare and Plaintiff;

·         $28,666.67 to Plaintiff Hadden.


At long last, the 6th Circuit Court of Appeals finally rendered their decision in the appeal on November 21, 2011, only 404 days after oral arguments were presented. It is no surprise to observers to note the majority followed the status quo and ruled in favor of Medicare. In their five page opinion, the court says little more than strict interpretation of the MSP gives Medicare a fairly opened ended, unquestioned right to recovery without the burden of equity considerations. This is the way that it has always been dating back to Zinman v. Shalala in 1995.

In all of its attempts to avoid the issue, observers feel this Federal Appellate Court’s ruling is somewhat troubling as they tried to create a basis for the decision on the distinction between liability and responsibility. The MSP states:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. . . .

One can assume responsibility or be made responsible by order of a court. Anything short of that does not equate to "responsibility" as some legal scholars view it. Insurance settlements represent financial transactions in which injured parties sell the right to bring legal claims against purported tortfeasors. Injured parties receives compensation in exchange for a release from liability in an amount commensurate with their likelihood of prevailing at trial--each right released carries a monetary value.

In this personal injury claim, it is important to note Kentucky is a pure comparative negligence state. Arguably the defendant driver was only minimally at fault given all he did was swerve to avoid a more significant catastrophe. Based on such facts, many view Plaintiff Hadden would have received a fair settlement. Critics feel Medicare should be satisfied taking the portion of compensation representative of medical expenses and then use its subrogation rights and seek the remaining balance directly from the defendant. Scholars feel the government will not assert its own claims against what it deems "responsible" primary payers, where it would actually have to prove its claims to reimbursement. They feel the government elects to wait until others have spent time and resources obtaining compensation and then just step forward and take what it wants regardless of the underlying issues.

In summary, we feel the industry should look to Medicare’s recovery as a “hard” lien that will not be subject to discounts based on relative fault. Everyone in the U.S. personal injury industry has to take notice and fall into line, unless and until the U.S. Supreme Court takes a test claim and reaches a different outcome.

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