Hadden v. US a No-Go: SCOTUS Denies Cert

Posted date in Medicare

In a highly anticipated case that many thought had a chance to be heard by the US Supreme Court, Hadden v. US was denied certiorari on 10/1/12.  This leaves standing the 6th Circuit’s ruling that Medicare may seek full reimbursement even when Mr. Hadden only recovered 1/10th of his total damages.  The Supreme Court apparently didn’t agree with Hadden’s position and that of many of the amicus briefs that Hadden was in conflict with Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010). 

As I wrote in a previous post about the Hadden case, the plaintiff was hit by a vehicle owned by a local electrical cooperative corporation.  However, the accident was allegedly caused by a phantom second vehicle that wasn’t involved in the litigation.  The plaintiff settled with the electrical cooperative for $125,000.  Hadden’s medical bills totaled $82,036 which were conditionally paid by Medicare.  Medicare sought reimbursement for the monies it paid and Hadden paid the amount but pursued an administrative appeal.  His argument was that the phantom vehicle was 90% at fault and only $8,000 of his $125,000 settlement was for medical expenses.  The argument was rejected at every level of the Medicare appeals process and the federal district court.  When the case reached the 6th Circuit, the Court held that Section 1395y(b)(2)(B)(ii) was very clear in providing that "an entity that receives payment"-Hadden-"shall reimburse" Medicare "if it is demonstrated that such primary plan"-electrical cooperative-"has or had a responsibility to make payment." 

The 6th Circuit went on to point out that Hadden had sought all of his damages from the electrical cooperative.  Accordingly, the ruling stated "[a]s used in §1395y(b)(2)(B)(ii), 'responsibility' is no longer an undefined term into which courts might funnel their own notions (or Hadden's) of equitable apportionment," the appeals court said, concluding that "the scope of the plan's 'responsibility' for the beneficiary's medical expenses ... is ultimately defined by the scope of his own claim against the third party."  Thus Hadden "cannot tell a third party that it is responsible for all of his medical expenses, on the one hand, and later tell Medicare that the same party was responsible for only 10% of them, on the other".

In it’s brief to the US Supreme Court, Hadden had argued that the US Supreme Court’s ruling in Arkansas Dep’t of Health & Human Services v. Ahlborn, 547 US 282 (2006) was also in conflict with the 6th Circuit’s ruling.  Ahblorn involved the Arkansas state Medicaid recovery statute and the application of the anti lien law found in federal law relating to Medicaid beneficiaries.  In the Ahlborn case, the US Supreme Court held that Arkansas was limited in its recovery of the lien for past care to the portion that represented medical damages even if that was less than the lien.  The 6th Circuit didn’t buy the argument that somehow Ahlborn applied to Medicare and apparently neither did the US Supreme Court since cert was not granted. 

It is interesting that the US Supreme court has apparently ignored the split in the Circuits between the 6th’s holding in Hadden and the 11th’s holding in Bradley.  Admittedly there are some very different facts at play between Hadden and Bradley, but the underlying premise of allocating damages in a way tat serves to limit Medicare’s recovery are at the root of both cases.  In Bradley, the 11th Circuit held that a probate court’s allocation of the settlement monies between an estate claim and survivors’ claims under the Florida wrongful death statute was proper.  By approving the probate court’s allocation, the 11th Circuit effectively reduced Medicare’s recovery to nothing since nearly all of the settlement was allocated to the survivors to which Medicare had no claim for reimbursement.  This really is the same kind of result Hadden sought from the 6th Circuit.

It does appear that the issue is not dead though according to a recent email from Mary Alice McLarty, AAJ’s President.  There is currently a case being litigated in the lower courts of the Second Circuit that may lead to an expansion of the Bradley holding to the Second Circuit.  Time will tell how this area of law develops.  It does seem quite unfair that Medicare may demand 100% reimbursement in situations where the injury victim is made far from whole.  That premise can lead to a frustration of the legal system by preventing cases that should settle from being settled.  In a case such as Hadden, why settle a case where every dollar goes to fees and cost with the balance to Medicare.  The injury victim gets nothing in that situation which simply isn’t fair.