Today, the Court heard oral argument in one of a recent spate of Medicare cases that have been shaping Medicare’s right to reimbursement for its expenses from tort settlements.  On appeal this time is the decision out of the Western District of Kentucky, Hadden v. United States (Case No. 1:08-CV-10, August 6, 2009) (pdf), in which the court ruled that Medicare is entitled to recover from a tort settlement all of the money it paid on behalf of a Medicare recipient when those expenses are caused by the tortfeasor.

The trial court’s decision discusses two points to watch for in the appellate decision.  First, there is the question of whether courts should defer to the Medicare Secondary Payer (“MSP”) Manual.  The Eleventh Circuit recently decided this issue against Medicare in Bradley v. Sebelius (Case No. 09-13765), as reported in SSD’s healthcare blog.  Although the District Court in Hadden did not discuss the MSP Manual in its decision, it upheld the the Administrative Law Judge’s ruling that relied heavily on the MSP Manual.

The plaintiff argued (unsuccessfully) that Medicare’s recovery should be limited to a pro-rata share of the settlement.  Because the plaintiff recovered only 10% of his total injuries in the settlement, Medicare should only recovery 10% of its total payments from the settlement.  The MSP Manual, though, requires that Medicare should pursue subrogation to the full extent of payments made by Medicare, except when a lesser amount is allocated by a court order or is adjudged on the merits of the case.  The MSP Manual does not recognize allocations made by the parties in settlement agreements.

The second issue that will hopefully be touched upon by the Sixth Circuit is whether dicta in a recent U.S. Supreme Court case Arkansas v. Ahlborn, 547 U.S. 268 (2006) (pdf), limits Medicare to a pro-rata share in the context of settlements.  The Sixth Circuit has yet to discuss the scope of the Ahlborndecision, which is being relied on heavily by plaintiffs’ attorneys seeking to limit Medicare subrogation.

In Ahlborn, the Supreme Court stated that Medicaid (a joint state-and-federal program) can only reach portions of a settlement designated as compensation for medical expenses, rather than pain and suffering or other damages, because there was no provision in the federal Medicaid statutes for a broader recovery.  The plaintiff in Hadden argued that the same rationale should apply to Medicare, but the district court disagreed, noting that the subrogation discussion in Ahlborn was dicta and involved Medicaid rather than Medicare.

Resolution of these questions by the Sixth Circuit will provide much-needed direction to all parties involved in personal injury settlements involving Medicare recipients.