In a decison that has garnered significant commentary, the United States Court of Appeals for the Eleventh Circuit recently held that the Medicare Secondary Payer ("MSP") Manual is not entitled to deference in deciding the amount the Medicare program can recover from wrongful death settlements. In doing so, the court rejected Medicare's claim it could recover the full amount of medical bills it had paid and, instead, limited Medicare to recovering $787 of its claimed $22,480 as the proportionate share of medical expenses in comparison to all of the claims settled.

In Bradley v. Sebelius (11th Cir., Case No. 09-01690) (pdf), a patient's family made a wrongful death claim of approximately $2.5 million against the patient's nursing home, but settled for the insurance limits of $52,500. Relying on the MSP Manual, Medicare argued it could recover the full amount of the patient's medical treatment because the family had not filed a lawsuit and received a judgement on the merits of the claims that allocated the recovery.

The Eleventh Circuit indicated that the allocation methodology set forth in the MSP Manual was not entitled to any deference, unless it was supported by specific statutes or regulations. The court did not discuss whether Medicare had priorty over the claims by the family, but instead relied on a Florida law that a family member's wrongful death claim is not an asset of the estate. The court also noted that the MSP statutes (specifically 42 U.S.C. 1395y(b)92)(A)) do not include family-member tort claims as a category of primary plans that are subject to recovery by Medicare.

Because the regulations and statute did not supply any way to allocate settlement funds between medical expenses and other claims, the court found that the plaintiff's pro-rata approach was the most reasonable allocation methodology. Notably, the court was quite troubled that Medicare had an opportunity to raise its arguments in a probate court proceeding initiated by the patient's family to allocate the settlement, but Medicare had chosen not to participate in those proceedings.

We should be provided more guidance from the courts on these issues soon, as similar issues were raised in Hadden v. United States (pdf), which is now pending before the Sixth Circuit Court of Appeals. Additional commentary on the Bradley decision can be found in a posting by SNR Denton's Janice Ziegler and Ramay Fayed.