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In Benson, the plaintiff as the survivor and administrator of his mother’s estate, brought a wrongful death action due to injuries suffered in a fall and received a settlement of $90,000.  Before death, the plaintiff’s mother’s medical care was provided and paid for by Medicare.  The wrongful death suit brought by the plaintiff sought to recover medical costs incurred by his mother prior to her death.  Medicare paid out a total of $40,213.74.  After the claim was settled, CMS notified the plaintiff of this conditional payment amount and requested repayment.  CMS also explained to the plaintiff and his counsel that they had the right to contest the charges prior to payment.

When the claim was settled, 80% of the gross settlement was allocated for the wrongful death claim and 20% was allocated to the survival claim.  The release included provision releasing the defendant from “ ‘[a]ll liens against the proceeds of this settlement’ including liens related to his mother's medical expenses.”  The settlement was approved by the trial court and the order indicated that the $40,213.74 would be held in escrow pending resolution of the Medicare conditional payment.  CMS reduced its demand to $25,868.58 to account for procurement costs and demanded payment within 60 days. 

To avoid interest and penalties, the plaintiff paid the full amount under protest.  An appeal was instituted to HHS’s initial review board which upheld CMS’s demand.  The plaintiff continued with the MSP administrative process unsuccessfully appealing that decision to both the Office of Medicare Hearings and Appeals and the Medicare Appeals Council.  According to the DC District Court, the “Medicare Appeals Council ultimately held that CMS's recovery rights are broad and, as defined in the MSP manual interpreting the statute, allocations of settlements that are not the result of an adjudicatory process, like the allocation at issue here, do not limit those rights.”

After properly exhausting the MSP’s administrative remedies, the plaintiff brought an action in the DC Federal District Court seeking judicial review of the Medicare Appeals’ Council’s final decision.  The DC District Court agreed with the Medicare Appeals Council’s opinion and granted the Secretary’s motion for summary judgment because the plaintiff claimed his mother’s medical costs in pursuing his wrongful death action and these medical expenses were taken into consideration in calculating the ultimate wrongful death recovery.  Accordingly, Medicare was due repayment for conditional payments it made.

The court distinguished the Bradley v. Sebelius decision which seems to reach the opposite result.  In Benson, the DC District Court pointed out that the suit brought in Bradley was done on behalf of the surviving children and the estate.  The estate asserted medical costs but the surviving children didn’t.  The settlement proceeds in Bradley were apportioned by a state probate court between the survivor’s claims and the estate claims.  The Eleventh Circuit held that the MSP entitled CMS to recover medical expenses and costs from the decedent’s estate but not from the monies allocated to the surviving children because the survivors’ claims had south only “non-medical tort property claims.”  The Benson court stated that the Eleventh Circuit in Bradley “ruled that the MSP does not entitle CMS to recover medical costs for a wrongful death settlement award in which the plaintiffs never claimed medical costs in pursuing the wrongful death claim.”

In the Benson case, the plaintiff did claim his mother’s medical costs on pursuing his wrongful death action.  The record evidence suggested that the claimed medical expenses were “taken into consideration in calculating and negotiating the ultimate wrongful death settlement award.”  The plaintiff also released the defendant from “any and all claims and rights” including those associated with medical liens.  Further prior to settlement, CMS notified the plaintiff it would be seeking reimbursement for the medical costs incurred by Medicare.  The plaintiff didn’t specific that the settlement did not include medical expenses nor attempt to allocate a specific amount of the settlement to medical expenses.  Instead, the state court order approving the settlement ordered the full amount of the medical expenses be taken from the settlement funds and held in escrow pending resolution of CMS’s conditional payment.  Accordingly, the court held:

“The MSP is clear: if a third party is responsible for injuring a qualified individual and Medicare pays for the resulting medical treatment, the payment is considered conditional and repayment to Medicare is required. See Mathis, 554 F.3d at 732 (8th Cir. 2009) (noting the "crystalline statutory language" in upholding CMS's right to reimbursement from the proceeds of a wrongful death settlement). In this case, the plaintiff received a settlement from a wrongful death action that included compensation for his mother's medical costs, see A.R. at 595, and Medicare is thus entitled to reimbursement from those proceeds …”

In addition, the Benson court found there was no deprivation of Due Process Rights as a result of post deprivation hearings regarding the conditional payment controversy.  The plaintiff had argued that CMS’s obtainment of full reimbursement prior any hearing on the merits of his appeal deprived him of his property without due process ion violation of the 5^th Amendment.  CMS argued that the plaintiff had no property interest in the portion of the settlement award related to his mother’s medical costs and thus was not unconstitutionally deprived of his property.  The court outlined the factors on Matthew v. Eldridge and concluded the plaintiff was not deprived of his due process rights.  The court laid out the Matthew’s factors:

[f]irst, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail.

The Benson court then applied the factors as follows:

“A monetary interest, unlike, for instance, a property interest in one's employment or welfare assistance, is "completely compensable by a post-deprivation decision … Thus, this factor does not weigh in favor of finding that the plaintiff was deprived of a hearing at a meaningful time and in a meaningful manner.”

“Next, the court considers the risk that the procedures used by CMS resulted in the erroneous deprivation of the plaintiff's interest, as well as the ‘probable value, if any, of additional or substitute procedural safeguards.’  …  Here, CMS's decision did not turn on a fact-intensive inquiry, but rather appears to have been a straightforward application of routine regulatory procedures allowing CMS to seek reimbursement under the MSP.”

“Finally, the court considers the ‘public interest’ implicated by these proceedings, including ‘the administrative burden and other societal costs that would be associated with requiring, as a matter of constitutional right’ that CMS hold a hearing prior to attempting to collect from primary payers pursuant to the MSP. … In light of these considerations, the court concludes that the public interest weighs against finding that the plaintiff was deprived of a hearing at a meaningful time and in a meaningful manner.”

A take away from this case is that Bradley lays out a winning formula, at least in the 11^th Circuit, for situations such as in Benson.  Failing to adhere to that formula can cause results such as the one in Benson.  I don't think I agree with having this kind of technical distinction based upon the pleadings, but for the time being that is an important distinction.