Giving an Inch, Then Taking a Mile: How the Government's Unrestricted Recovery of Conditional Medicare Payments Destroys Plaintiffs' Chances at Compensation through the Tort System
Miklos, Nicole, St. John's Law Review
On a snowy February morning, Susan Smith, a retired nursery school teacher, aged seventy, who had generally been in good health her whole life, slipped and fell on the steps to her apartment. Ms. Smith's fractured ankle required surgery to heal properly. Although she had a modest retirement cushion, Ms. Smith could not cover the costs of surgery and rehabilitation. Luckily, Ms. Smith had some assistance from Medicare, enabling her to pay for the metal rods and bolts the doctors installed in her bones to allow for proper healing. Unluckily, Ms. Smith suffered a severe infection following the surgery, resulting from poor aftercare. Unable to return home, Ms. Smith endured an extended, painful recovery in a nursing home. Weighed down by the unanticipated medical expenses, Ms. Smith contacted an attorney to learn what compensation she might recover if she sued the hospital. The attorney informed Ms. Smith that while she could recover a substantial sum, the amount recovered would likely be significantly reduced in light of the fact that the government would be entitled to recover from such a lawsuit any amount that Medicare had paid for Ms. Smith's treatment. Ms. Smith decided to sue, and her attorney notified Centers for Medicare & Medicaid Services ("CMS") that the suit would be brought.
Ms. Smith sued the hospital alleging negligence and medical malpractice, hoping to receive compensation for her past and future expenses and troubles. Ms. Smith alleged damages of $110,000 in medical expenses (of which Medicare paid $50,000); $10,000 in lost wages and future earning potential; and $80,000 in pain and suffering. The claim for damages totaled $200,000. The case quickly settled for $50,000. x After the settlement funds were dispersed, the Secretary of Health and Human Services filed suit against Ms. Smith and her attorney under the Medicare Secondary Payer Act ("MSP"), seeking reimbursement for the $50,000 Medicare had paid on Ms. Smith's behalf.2
If the government is entitled to recover its entire claim, Ms. Smith will be left uncompensated for her injuries and more dependent than ever on public assistance. When a Medicare beneficiary settles, one can infer that the beneficiary has been compensated for a portion of each damage claim. Thus, Ms. Smith recovered only twenty-five percent of the total value of her damages, suggesting she was not fully compensated for any one of her damage claims, but rather compensated for a portion of each. As a general matter, the government is justified in recouping payments it made through Medicare because this money was paid out by the government, not by Ms. Smith. If the government recoups its entire $50,000 payout, however, it will actually be recovering the portion of money designed to compensate Ms. Smith for non-Medicare related costs, such as her out of pocket medical expenses, pain and suffering, and future care costs. Because the MSP does not directly address the issue of apportioned recovery,3 the statute should be read to limit the government's recovery to only those settlement funds intended to compensate her for past medical expenses paid for by Medicare.
This Note argues that the government's recovery of conditional Medicare payments should be limited to those settlement proceeds designated for past medical expenses, calling for a reconciliation of the government's financial interests and the plaintiffs compensatory interests in the tort system. Part I of this Note discusses the evolution of Medicare's and Medicaid's role as public medical insurance programs. This Part also examines the confusion regarding the extent of the government's reimbursement rights. Part II addresses the Supreme Court's recent decision in Arkansas Department of Health & Human Services v. Ahlborn,4 which held that Medicaid reimbursements are limited to those settlement funds intended to compensate the plaintiff for past medical expenses. Part III argues that this limited recovery rule should extend to Medicare reimbursements in light of similar language in the Medicaid and Medicare statutes, as well as the common need to balance the government's statutory rights with the tort system's compensation goals. …