Insurance Developments

Obligation to Reimburse Medicare Defined by the Scope of Plaintiff's Claim Against Third Party, Sixth Circuit Says

The United States Court of Appeals for the Sixth Circuit recently decided Hadden v. U.S., No. 09–60722011, WL 5828931 (6^th 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.

Kentucky Court of Appeals Upholds Decision Finding Preinjury Liability Waiver Enforceable

The Court of Appeals of Kentucky recently affirmed a trial court decision finding a preinjury liability waiver valid in Bowling v. Asylum Extreme, LLC, No. 2010-CA-001687-MR, 2011 WL 5119151 (Ky. Ct. App. Oct. 28, 2011).   

The action arose when Christina Bowling (“Bowling”) was struck in the eye with a paintball, suffering permanent injury.  Prior to participating in the paintball game, Bowling read and signed a waiver agreement, but nonetheless later asserted that Asylum Extreme, LLC (“Asylum”) was negligent in failing to instruct her on proper use of her safety mask.  The trial court granted Asylum’s motion for summary judgment, finding the waiver valid and enforceable. 

On appeal, Bowling argued that the waiver was not sufficiently clear to preclude her claim.  In support of this argument, Bowling relied on Hargis v. Baize, 168 S.W.3d 36 (Ky. 2005), where the Kentucky Supreme Court stated that “the wording of the release must be so clear and understandable that an ordinarily prudent and knowledgeable party to it will know what he or she is contracting away; it must be unmistakable.”  The court in Hargis set forth four necessary factors for such a release; the release will only be upheld if (1) it uses the word “negligence” to clearly express intent to exonerate, (2) it indicates intent to release a party from liability caused by a person’s own conduct, (3) the only reasonable construction is protection against negligence, and (4) the hazard was clearly contemplated by the agreement. 

Having reviewed the waiver, the Court of Appeals of Kentucky disagreed with Bowling’s claim that the waiver was too general: 

Our review of the waiver indicates that it clearly states that Bowling was releasing appellees from any liability resulting from negligence. It specifically lists eye injury as a potential injury and clearly and specifically indicates intent to release appellees from liability. Furthermore, the only reasonable construction of the waiver's language is to release appellees from liability, and the hazard, an eye injury, was clearly, and specifically, contemplated. Thus, not only does the waiver meet one of the Hargis requirements, it meets all four. No ordinarily prudent and knowledgeable party would be unaware as to what he or she was contracting away by signing the waiver. Therefore, the trial court acted properly in enforcing it.

Bowling, 2011 WL 5119151 at *3 (internal citations omitted).  Bowling further argued that summary judgment was improper because a question existed as to whether Asylum’s failure to instruct her on proper adjustment of her safety gear constituted willful or wanton negligence.  Again, the Court disagreed, finding that Bowling had been instructed not to remove her mask, and that she never complained of it falling off or asked for assistance in adjusting her mask.  As such, the Court found no evidence of willful or wanton negligence, and upheld the trial court’s order granting summary judgment for Asylum.  

You may view the court's opinion here.