The Third Circuit Court of Appeals rules that New Jersey's collateral source statute does not prohibit Medicare from seeking reimbursement for conditional payments made to a tort victim when she settles a personal injury suit, despite a trial court's ruling that none of the settlement funds represented payment for medical expenses. Taransky v. Secretary of the United States Department of Health and Human Services (3rd Cir., No. 13-3483, July 29, 2014).
Cecelia Taranksy was injured in a New Jersey shopping mall and received $18,401.41 in conditional payments for medical care from Medicare. After Ms. Taransky sued the mall, the case settled for $90,000 and Ms. Taransky released the mall from all claims, including claims for medical treatment. The settlement agreement also stated that all liens and subrogation claims, including but not limited to Medicare liens, would be discharged from the settlement funds. As soon as she settled, Ms. Taransky obtained a trial court order stating that "no portion of the recovery obtained by [Taransky] in this matter is attributable to medical expenses or other benefits compensated by way of a collateral source."
The Medicare contractor requested reimbursement of $10,121.15 from the settlement proceeds after deducting its share of attorneys' fees and costs. Ms. Taransky claimed that she was not required to repay Medicare because of the court order, the New Jersey Collateral Source Statute barring recovery from tortfeasors for damages paid by another source, and the Medicare Secondary Payer (MSP) Act, which only allows recovery of medical payments made by a "primary plan." Ms. Taransky lost all four of her administrative appeals and filed suit in the district court.. The district court granted the government's motion to dismiss and Ms. Taransky appealed.
The Third Circuit Court of Appeals upholds the district court's decision. The court determines that the defendant in Ms. Taransky's suit falls within the the MSP Act's definition of a "primary plan" as "an entity that engages in a business . . . if it carries its own risk . . . in whole or in part." The court also rules that although New Jersey's Supreme Court has not specifically addressed Medicare conditional payments and the collateral source statute, the "MSP Act makes clear that Congress intended the Medicare program to serve only as a secondary payer . . . Medicare's benefits, then, are reimbursable and conditional. For that reason, the [New Jersey Collateral Source Statute], which operates only when the beneficiary is 'entitled to receive benefits' from another source . . . is inapplicable."
For the full text of this decision, go to: https://www2.ca3.uscourts.gov/opinarch/133483p.pdf
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