Source: http://flagshipservicesgroup.com/illinois-federal-district-court-finds-surviving-spouse-and-adult-children-must-reimburse-medicare-105000-from-med-mal-250000-settlement/
Timestamp: 2019-04-24 18:39:15+00:00

Document:
Toula Paraskevas (“Plaintiff”) sued Thomas E. Price as the Secretary of the United States Department of Health and Human Services (“Defendant,” “Medicare,” or the “Secretary”). Plaintiff is the surviving spouse of her deceased husband George Paraskevas (“George”). George was diagnosed with prostate cancer in April 2007 and passed away on January 2, 2012. From George’s diagnosis until his death, Medicare conditionally paid medical bills totaling $253,546.73 on George’s behalf.
In 2009, Plaintiff and her husband George filed a medical malpractice lawsuit in the Circuit Court of Cook County, Illinois against George’s primary care physician, his urologist, and their respective practice groups. Plaintiff and George sought to recover for failure to diagnose George’s prostate cancer at an earlier time. After George’s passing, Plaintiff was appointed as the Special Administrator for George’s estate. Plaintiff then filed a first amended complaint in the state court, alleging the estate’s survival claims pursuant to the Illinois Survival Act (“ISA”) and claims on behalf of the beneficiary’s next of kin, Plaintiff and George’s three adult children, under the Illinois Wrongful Death Act (“IWDA”).
In fall of 2012, Plaintiff tentatively settled the case, both the estate’s survival claims and the wrongful death claims with George’s primary care physician and his practice group for $250,000 plus costs. Those defendants were dismissed from the case. However, they were again added to the case on September 11, 2013 after the tentative settlement broke down. On September 23, 2013, the state court granted the urologist and his practice group’s motion to dismiss for failure to state a claim. The primary care physician and his practice group remained in the case. The state court also granted Plaintiff leave to file a second amended complaint; however, counsel failed to file the second amended complaint.
Plaintiff and the primary care physician continued to explore the possibility of settling the case, and in December 2013, they arrived at an agreement that the primary care physician and his practice group would pay $250,000 plus costs of $8,664.10, totaling the same $258,664.10 previously agreed upon. From this sum, $175,000.00 was to be distributed to the next of kin, with $25,000 going towards attorneys’ fees and $8,664.10 for expenses. Plaintiff’s counsel prepared the required documents for filing the settlement in the state court and requesting distribution of the settlement proceeds to the next of kin. Weeks later, Plaintiff realized her failure to file the second amended complaint. She obtained leave for a second time to file a second amended complaint.
Plaintiff then filed the second amended complaint, eliminating the estate’s survival claims pursuant to the ISA, leaving only the wrongful death claims pursuant to the IWDA. In conjunction with the second amended complaint, Plaintiff filed what she called a “Motion to Approve Settlement and Distribution, to Confirm that Settlement is Made Exclusively Pursuant to the Wrongful Death Act, and To Dismiss.” The motion stated that the “settlement should be ascribed wholly to damages in the wrongful death action,” and therefore not based on the value of the medical bills paid by Medicare, a clear attempt by Plaintiff to deny Medicare any right to reimbursement of the $253,546.73 it had made on George’s behalf.
Prior to finalizing the settlement, Plaintiff alerted Medicare as to the settlement proceedings. Plaintiff and Medicare also engaged in discussions about Medicare’s potential entitlement to reimbursement from a settlement if the state court settlement negotiations indeed resulted in a finalized settlement. On February 3, 2014, without a hearing, review of any evidence, or trial on the merits of the case, the state court approved Plaintiff’s settlement for $250,000 plus $8,664.10 in costs. The state court also approved the distribution of the proceeds. Although Plaintiff asserts that the state court made an express finding apportioning the settlement proceeds exclusively under the IWDA claim, that court simply signed the order verbatim as prepared by counsel and did so without any substantive hearing or consideration of the parties’ filings.
Beneficiaries may challenge the amount of reimbursement or seek waiver of any reimbursement amount. First, the beneficiary is required to ask that a Medicare Secondary Payer Recovery Contractor (“MSPRC”) make a redetermination of the reimbursement demand. 42 U.S.C. § 1395ff(a)(3)(B)(i). Second, the beneficiary may seek another reconsideration; however, this reconsideration is conducted by a qualified independent contractor (“QIC”). 42 U.S.C. § 1395ff(c)(1)-(2); 42 C.F.R. § 405.960. Third, if the beneficiary remains unsatisfied with the determination, she may seek a hearing before an administrative law judge (“ALJ”). 42 U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. § 405.1002. At the last step of the administrative process, the beneficiary may seek review of the ALJ’s decision by the MAC. 42 C.F.R. § 405.1100. That decision is binding absent modification or reversal by a federal court. 42 C.F.R. § 405.1130.
On January 27, 2014, the MSPRC issued a final demand letter, seeking reimbursement in the amount of $171,537.04 in the event that Plaintiff settled her state court case. On February 10, 2014, Plaintiff appealed the MSPRC’s final demand letter. There was a considerable delay. The redetermination decision was not issued within the requisite sixty-day period. Due to that delay, Plaintiff filed a federal claim for declaratory relief. The District Court heard the case and dismissed the case for failure to exhaust administrative remedies.
Plaintiff proceeded through the administrative process and lost at every stage. On April 6, 2015, the MSPRC issued its redetermination decision upholding the original determination that Medicare was entitled to a $171,537.04 reimbursement. On September 16, 2015, Plaintiff exercised her right to again appeal the determination, this time by a QIC. On October 23, 2015, the QIC affirmed the reimbursement determination.
On November 19, 2015, Plaintiff requested that an ALJ hear her case. On January 6, 2016, the ALJ held a telephonic hearing. Plaintiff’s counsel appeared on her behalf. The ALJ directly inquired as to the existence of a formal written agreement memorializing Plaintiff’s state court settlement. Plaintiff’s counsel represented that he believed there was a general release and that he would provide that release for the record. To the contrary, he could not do so. Rather, after the hearing concluded, Plaintiff submitted two affidavits obtained from her attorneys. The affidavits explicitly stated that Plaintiff’s counsel and opposing counsel could not locate any written settlement agreement.
Finally, on March 30, 2016, Plaintiff requested that the MAC review the ALJ’s decision. The MAC determined that Plaintiff attempted to convert her lawsuit containing estate survival and medical malpractice claims into a wrongful death suit exclusively under the IWDA in order to shield herself from having to reimburse Medicare. The MAC also found that Plaintiff’s counsel “did not document, in any way, the assertions that the matter was settled exclusively under the IWDA.” Moreover, Plaintiff made no mention and provided no explanation for the fact that the settlement recovery was identical to the amount of the preliminary settlement that fell apart. The MAC rejected Plaintiff’s position that the state court made a determination on the merits when it signed the order stating that the lawsuit and settlement were pursuant to only the IWDA. Notably, the MAC found that there was nothing in the record that reflected whether the Illinois court ever held a hearing on this matter. On August 16, 2016, the MAC ultimately affirmed Medicare’s entitlement to reimbursement but reduced the total dollar amount to $105,000.00 plus interest. Plaintiff here seeks for this Court to declare that the Secretary’s final decision was error, so that she need not pay Medicare the $105,000.00 reimbursement amount.
As a threshold matter, the Court here notes that Defendant does not dispute Plaintiff’s contention that Defendant cannot recover from claims brought pursuant to the IWDA. The parties’ summary judgment motions therefore turn on whether the Secretary was correct in determining that actions other than the IWDA claim were in play in the state court lawsuit and settlement.
The Court however finds Plaintiff’s position is a half-truth, and her assertion that the MAC ignored the state court order is unfounded. First, the MAC directly confronted the state court order when it decided that the order “was not on the merits.” The MAC based that decision upon the Third Circuit’s findings in Taransky v. Sec’y of U.S. Dep’t of Health & Human Servs., 760 F.3d 307 (3rd Cir. 2014). Taransky found that the state court order was not an order on the merits because it did not adjudicate any substantive issue in the case but instead merely rubber stamped the plaintiff’s requested order in an uncontested order. Here, no proof or transcript of any court hearing has ever been provided. Therefore, the Court finds the MAC correctly found that the state court did not address the merits of the case but rubber stamped the order prepared by Plaintiff.
The Court concludes Defendant had the statutory authority to seek reimbursement. Additionally, Defendant, as a federal body implementing federal law, did not waive its objections by not appearing in the state court proceedings. Defendant also did not abuse its discretion in finding that the state court order was not on the merits and had sufficient evidence upon which to rely in determining that the state court settlement compensated Plaintiff for not only the wrongful death action, but also the ISA claims in connection with medical malpractice. Because the MAC’s determinations were supported by substantial evidence, Plaintiff’s motion for summary judgment is denied, and Defendant’s motion for summary judgment is granted. The MAC’s decision is affirmed, and the Secretary’s final decision stands.

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