Coordination of Benefits              April 2011 | Vol. 19, No. 2 

Once again we have a case involving a dispute — between Medicare and a survivor of a deceased Medicare beneficiary — over who has the first right to recovery from a third party’s obligations to the Medicare beneficiary. The case deals with Medicare’s rights under the Medicare Secondary Payer (MSP) law (42 U.S.C. §1395y(b)(2)). The MSP law provides that Medicare can recover benefits it paid from amounts that the Medicare beneficiary recovers from a third party. In the January 2011 issue of the Newsletter, we discussed the case of Bradley v. Sebelius (see App. IV, Case No. 627), in which the 11th U.S. Circuit Court of Appeals ruled that the family member’s recovery took precedence over Medicare’s claim for reimbursement under the MSP law. We now see a decision by a U.S. district court in Nevada dealing with a similar issue. This time, the family and Medicare were seeking to recover the benefits that were paid under the uninsured motorist (UM) rider to the Medicare beneficiary’s auto insurance policy. The case is Farmer’s Insurance Exchange v. Forkey, 2011 WL 5477726 (D. Nev., Dec. 29, 2010). 

The Facts of the Case

David Forkey, a Medicare beneficiary, was critically injured when he was struck by a vehicle while crossing a street. He was taken to a hospital for emergency treatment, but died the next day. Medicare paid about $10,700 toward the cost of his hospital care. His auto insurance with Farmers Insurance Exchange (hereafter Farmers), provided $35,000 of UM coverage. 

Medicare claimed its right to reimbursement under the MSP law from the UM fund proceeds, but his daughter, Leona Forkey, claimed entitlement for herself to that amount in her capacity as an “additional insured” under Nevada’s wrongful death statute (NRS 41.085), which entitled her recovery for their “grief or sorrow, loss of probable support, companionship, society, comfort and consortium.” She argued that she was seeking recovery for her own losses and not for David Forkey’s medical expenses. 

Farmers initiated this lawsuit by filing an interpleader action under which it deposited the $35,000 it owed into court and joining Forkey and Medicare as codefendants, thereby discharging its liability for the UM benefits and leaving it up to the court to sort out which party should be entitled to the proceeds. 

The Decision

Forkey claimed that other family members would be entitled to a share of a wrongful death claim. Based on her estimate that her wrongful death claim would be worth at least $500,000, she concluded that if the $35,000 were to be distributed on a pro rata basis to the survivors and Medicare, Medicare would be entitled to only 2 percent of the amount held by the court in the interpleader action. 

The court disagreed, stating that the MSP statute grants Medicare an independent right of recovery against any entity responsible for the payment of Medicare-related items or services, which would be separate and distinct from its right of subrogation. Accordingly, the court concluded that Medicare’s claim would not be limited by the principle of apportionment stemming from a right of subrogation. The court ruled that Medicare was seeking to recover funds it spent on David Forkey’s health care from the proceeds of a primary plan (that is, Farmer’s UM policy) responsible for bearing those medical costs. Thus, the court held that Medicare was asserting its right of direct action, so apportionment would be inapplicable.

That led the court to conclude that Medicare’s claim was rational and consistent with the MSP law, and found that Medicare’s direct action claim to the funds from the UM policy took precedence over all other claims. It ordered the payment of the $10,700 to Medicare, with the balance to go to Ms. Forkey. 

Implications

In the Bradley case, the Medicare beneficiary’s family settled a wrongful death action against the doctor treating the Medicare beneficiary, for about $160,000. The court in that case indicated that the Medicare beneficiary’s claim was brought under Florida’s wrongful death statute and thus was not a claim for health benefits. Any judgment in that case would be payable to the individual family members and not to the Medicare beneficiary’s estate. Furthermore, in that case, if Medicare had a similar claim, based on the fact that it had paid almost $39,000 on account of the Medicare beneficiary’s medical expenses, it would only have been entitled to about $787, which would have been the amount left from the wrongful death claim after his survivors shared the $160,000. 

Of course, since Nevada is in the 9th U.S. Circuit Court of Appeals, the decision in the Bradley case is not binding on the Nevada district court. Nevertheless, it would have been more satisfying if the Nevada district court had been aware of the decision in the Bradley case and addressed the issue as framed by the 11th Circuit. The difference between this case and the Bradley case is that the proceeds at issue were payable by Farmers for David Forkey’s medical expenses. In Bradley, the settlement was based on the potential statutory damages payable to family members, and had nothing to do with Bradley’s medical expenses. That alone appears to justify the different outcome in this case. The Bradley decision was published on Sept. 28, 2010. We know that this case was decided on Dec. 21, 2010 — approximately three months after the publication of the Bradley decision, but we don’t know when briefs in this case were filed with the Nevada court or when the case was argued. 

Tags:

This entry was posted by cmonfils on Tuesday, May 3rd, 2011 at 7:46 pm and is filed under 11th, Medicare, Nevada. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.