The United States Court of Appeals for the Sixth Circuit recently decided Hadden v. U.S., No. 09–60722011, WL 5828931 (6th Cir., Nov. 21, 2011), a case in which the plaintiff made several compelling arguments to avoid reimbursing Medicare 100% where the plaintiff contended he only recovered 10% of his damages.
In this case, Medicare paid plaintiff’s medical bills which totaled $82,036.17, and plaintiff Hadden thereafter recovered $125,000 in a personal injury claim. Medicare subtracted a portion of the attorneys’ fees Hadden paid to his lawyer relating to the settlement and demanded approximately $62,000. Hadden escrowed $62,000, paid it to Medicare under protest, and took an appeal.
Hadden’s essential argument was that the tortfeasor from whom he recovered was only 10% responsible for his damages, and thus, the $125,000 settlement represented only 10% of Hadden’s damages. Further, Hadden argued that the settlement compensated him for only 10% of his medical expenses, or $8,000. Therefore, Hadden claimed that the remaining $117,000 “compensated him for damages other than medical expenses . . . and was therefore off-limits to Medicare.” Id. at *1.
Applying de novo review, the Sixth Circuit affirmed the district court's judgment, and held that the government was entitled to recover 100% of the recovery, and that the beneficiary's own obligation to reimburse Medicare was defined by scope of beneficiary's own claim against third-party:
Consequently, the scope of the plan's “responsibility” for the beneficiary's medical expenses—and thus of his own obligation to reimburse Medicare-is ultimately defined by the scope of his own claim against the third party. That is true even if the beneficiary later “compromise[s]” as to the amount owed on the claim, and even if the third party never admits liability. And thus a beneficiary cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other.
That is precisely what Hadden attempts to do here. In his claim against Pennyrile, he did not demand that it pay for only 10% of the medical expenses that he incurred as a result of his accident; he demanded that it pay for all of them. That choice has consequences-one of which is that Hadden must reimburse Medicare for those same expenses. (To respond briefly to the dissent: Section 1395y(b)(2)(B)(v) affords the Secretary broad discretion to waive Medicare's right of recovery to the extent she sees fit in a particular case.)
Hadden v. U.S., 2011 WL 5828931, *3 (emphasis in original). The court also rejected Hadden's reliance on “equity and good conscience”, which the court determined did not favor returning money that beneficiary had paid under protest.