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September 24, 1993

FLORENCE ZINMAN, et al., Plaintiffs,
DONNA SHALALA, Secretary of Health and Human Services, Defendant.

The opinion of the court was delivered by: JAMES WARE






 This matter comes before the Court on the parties' cross-motions for summary judgment and Defendant's motion to strike portions of Plaintiffs' summary judgment motion. The motions came on for hearing on July 9, 1993. Good Cause Appearing therefor, Defendant's motion to strike is DENIED. Plaintiffs' motion for summary judgment is GRANTED IN PART AND DENIED IN PART. Defendant's motion for summary judgment is GRANTED IN PART AND DENIED IN PART.


 Plaintiffs are Medicare beneficiaries who challenge provisions of the Medicare Secondary Payer ("MSP") recovery plan. The class is comprised of Medicare beneficiaries who were injured in accidents in which Medicare paid for medical expenses for which it was later determined that private insurance policies were obligated to pay. Under the MAP program Medicare is secondarily liable in instances in which a tortfeasor's insurance covers the accident related expenses. 42 U.S.C. § 1395y(b). Pursuant to the MSP statute, Medicare is only secondarily liable for payment to medical providers. However, in order to prevent the withholding of services or items by medical providers, Medicare usually pays first and then seeks reimbursement from the insurer once liability has been determined.

 The Health Care Financing Administration ("HCFA") is the department within Health and Human Services ("HHS") which has responsibility for the MSP program. The Medicare program, including the MSP program is carried out through approximately 80 private contractors which pay and process Medicare claims. Def's. Stmt. of Facts, P 1. The contractors maintain their own procedures and "exercise substantial discretion" subject to instruction and guidance from the HCFA on applicable statutes, regulations and polices. Id. at 2. Under the terms of their contracts with HCFA, the HCFA's instruction manuals are binding on the contractors. Id.

 In the instant action, Plaintiff class members are Medicare beneficiaries who reached settlements with insurers after Medicare made payments to the health care providers. Medicare subsequently attempted to obtain reimbursement from the beneficiaries. The class includes beneficiaries who sought waiver of the reimbursement and individuals who appealed a denial of waiver. Some class members may still be within the MSP program. The parties agree that the Court's ruling on the summary judgment motions will dispose of the action.

 Plaintiffs challenge the MSP statute and the Secretary's policies and claim: (1) Medicare must proportionately reduce its reimbursement demand when the beneficiary's settlement award does not fully cover medical expenses; (2) the notices of the MSP recovery claims should be sent directly to beneficiaries and not to personal injury attorneys retained to represent the beneficiaries in tort actions arising out of the accidents; (3) Defendant does not provide adequate notice of beneficiaries' rights to seek waiver of recovery and appeal denial of waiver requests; (4) the Secretary has failed to establish standards for making waiver determinations; and (5) language used in notices to personal injury attorneys asserting that attorneys may have financial liability for the MSP claims creates a conflict between the attorneys and their clients, the beneficiaries.

 Defendant moves for summary judgment on all of Plaintiffs' claims and argues: (1) the Medicare statute mandates that the MSP program seek full reimbursement for payments made for which Medicare does not have primary liability; (2) notice to personal injury attorneys meets Due Process standards; (3) the Secretary has taken steps to solve any inadequacies in notices sent to beneficiaries regarding MSP claims and rights to seek waivers and appeal denial of waiver requests; (4) the Secretary has established regulations regarding evaluation of waiver requests; and (5) there is no violation of the Medicare statute by the regulation's provision that Medicare may recover MSP conditional payments from "any entity."


 Defendant has moved to strike portions of Plaintiffs' instant motion on the grounds that it improperly briefs issues outside the scope of the existing complaint. The Court concludes that allegations regarding false, inaccurate information in notices is within the scope of the allegations in the initial complaint. The Court is unpersuaded that Defendant needs further discovery on use of the term "lien" in the notices to describe Medicare's recovery claim; this is an issue of law on which the Court is prepared to rule.

 Nor are the other portions of Defendant's motion more compelling. The process by which the HCFA determined waiver requests was a subject of discovery. Thus, Plaintiffs' challenge to the absence of guidelines are properly the subject of the instant summary judgment motion and Defendant's motion to strike is DENIED.


 Legal Standard

 Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A genuine issue is one on which a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The substantive law determines what is a material fact. Id. at 248.

 The Court views the evidence presented in the light most favorable to the party opposing the motion and draws all reasonable inferences in the opposing party's favor. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987).

 Medicare's Right to Reimbursement

 Plaintiffs maintain that the MSP statute provides for recovery of payment based on actual payment for an item or service. Pls.' P&A at 3; 42 U.S.C. § 1395y(b)(1), (2). The Plaintiffs contend that pursuant to the statutory provisions, Medicare may only recover from settlements paid to Medicare beneficiaries to the extent that the settlements actually covered the "item or service" for which Medicare made payment.

 Defendant argues in her motion for summary judgment that Medicare is mandated to recover 100% of its expenditures for items and services for which other insurance is responsible to pay primary. Defendant contends that the statute mandates recovery for all payments made under the Medicare Secondary Payer program regardless of whether the settlement award fully compensates or covers costs for the service or item for which Medicare paid. Def.'s Mem. Supp. Summ. J. at 12. 42 U.S.C. §§ 1395y(b)(2)(A)(ii); 1395y(b)(2)(B).

 The statutory provisions provide in pertinent part:

 (A) In general. Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that-

 (i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or

 (ii) payment has been made or can reasonably be expected to be made promptly (as determined in accordance with regulations) under a . . . plan of the United States or a State or under an automobile or liability insurance policy or plan ...

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