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Merrifield v. United States

March 31, 2008

DOROTHY MERRIFIELD, ET AL., PLAINTIFFS,
v.
UNITED STATES OF AMERICA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge:

OPINION

TABLE OF CONTENTS

I. INTRODUCTION....................... 3

II. BACKGROUND........................ 3

A. Medicare as Secondary Payer . . . . . . . . . . . . . 3

B. Plaintiffs' Experiences and Claims . . . . . . . . . . 7

C. Availability of Administrative Review . . . . . . . 15

III. PARTIES' ARGUMENTS . . . . . . . . . . . . . . . . . . . 20

A. Government Defendants . . . . . . . . . . . . . . . 20

B. Plaintiffs' Arguments . . . . . . . . . . . . . . . 22

IV. ANALYSIS........................ 23

A. Standard for Motion to Dismiss for Lack of Subject Matter Jurisdiction . . . . . . . . . . . . . . . . 23

B. Federal Question Jurisdiction . . . . . . . . . . . 25

C. Section 405(g) Jurisdiction . . . . . . . . . . . . 34

D. Whether Burke's & Frick's Claims are Moot ..... 43

V. CONCLUSION....................... 44

I. INTRODUCTION

This matter comes before the Court on the motion of Defendants, the United States of America, the Department of Health and Human Services ("HHS"), the Centers for Medicare and Medicaid Services ("CMS"), the Secretary of HHS and the Acting Administrator of CMS, to dismiss Plaintiffs' class complaint in its entirety, pursuant to Fed. R. Civ. P. 12(b)(1), for lack of subject matter jurisdiction. For the reasons explained below, the Court shall grant the motion to dismiss and require Plaintiffs to channel their claims through CMS before seeking relief in district court.

II. BACKGROUND

A. Medicare as Secondary Payer

Plaintiffs are New Jersey residents for whom Medicare paid medical expenses after they suffered personal injuries in accidents. (Compl. ¶¶ 1-2.) After bringing suits in New Jersey Superior Court against their alleged tortfeasors, all Plaintiffs settled for lump sums. Under New Jersey law, tortfeasors are not liable for the costs of any medical expenses that Medicare has already paid. N.J. Stat. Ann. § 2A:15-97. Thus, Plaintiffs allege, their settlements contained no remuneration for the costs Medicare incurred in paying for their treatment. (Compl. ¶ 16.)

Nevertheless, pursuant to a "secondary payer" provision in the Medicare Act, see 42 U.S.C. § 1395y(b)(2)(B), CMS sought reimbursement from Plaintiffs for the money it expended on Plaintiffs' medical expenses under Medicare. The relevant portion of the Medicare as secondary payer ("MSP") statute provides:

(2) Medicare secondary payer (A) In general Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that--(i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or (ii) payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.

In this subsection, the term "primary plan" means a group health plan or large group health plan, to the extent that clause (i) applies, and a workmen's compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance, to the extent that clause (ii) applies. An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.

(B) Repayment required

(i) Authority to make conditional payment The Secretary may make payment under this subchapter with respect to an item or service if a primary plan described in subparagraph (A)(ii) has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations). Any such payment by the Secretary shall be conditioned on reimbursement to the appropriate Trust Fund in accordance with the succeeding provisions of this subsection.

(ii) Primary plans

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means. If reimbursement is not made to the appropriate Trust Fund before the expiration of the 60-day period that begins on the date notice of, or information related to, a primary plan's responsibility for such payment or other information is received, the Secretary may charge interest (beginning with the date on which the notice or other information is received) on the amount of the reimbursement until reimbursement is made (at a rate determined by the Secretary in accordance with regulations of the Secretary of the Treasury applicable to charges for late payments).

42 U.S.C. § 1395y(b)(2).

Plaintiffs claim that this statute does not entitle CMS to any portion of their tort settlements because under New Jersey law, Plaintiffs injured in tort cannot be awarded damages for the costs of any medical expenses that Medicare has already paid. (Compl. ¶ 16). Thus, Plaintiffs allege, the lump sum settlements they received contain no money that could be considered a "primary plan" responsible for paying medical expenses and triggering CMS's right to reimbursement for payment. See 42 U.S.C. § 1395y(b)(2)(B)(ii).*fn1

In any event, when CMS has a MSP repayment demand, the law permits referral of that demand to the Treasury Department for collection and for reducing other federal benefits (including Social Security benefits), withholding income tax refunds, or for referring the so-called debt to private collectors. 42 U.S.C. § 1395gg; 31 U.S.C. §§ 3716(c), 3720(A). CMS's internal policy guidance indicates that debts shall not be referred for collection if the debts are "in appeal (pending at any level)." See CMS IOM Pub. 100-5 Medicare Secondary Payer Manual, Chapter 7, Section 60.3.1.1, at http://www.cms.hhs.gov/manuals/downloads/msp105c07.pdf (last visited Mar. 7, 2008). In this case Plaintiffs received collection notices and warnings that other benefits would be offset, despite Plaintiffs' ongoing efforts to contest CMS's MSP repayment demands. No other benefits were actually withheld from Plaintiffs, however.

B. Plaintiffs' Experiences and Claims

The plaintiffs in this case are Dorothy Merrifield, Marie Burke, Evelyn Frick, Adele Oberlander, Tara Kizukiewicz and Linda French Heiser. Plaintiffs brought this action individually and on behalf of all other persons similarly situated in March 2007, although they have not yet filed a motion for class certification.

The Complaint contains three counts. The first, for declaratory judgment and injunctive relief, alleges that Defendants wrongfully demanded reimbursement under the MSP "from the proceeds of recoveries obtained by plaintiffs and the class from third-party tortfeasors in [Plaintiffs'] actions for personal injuries." (Compl. ¶ 77.) This first count shall be called the "substantive claim." Plaintiffs allege this Court has jurisdiction over the substantive claim under 42 U.S.C. § 405(g) because they have exhausted their claims against Defendants "and/or the exhaustion of such administrative remedies as may be available would be futile." (Compl. ¶ 10.)

The second count alleges that Defendants violated Plaintiffs' constitutional due process rights under the Fifth and Fourteenth Amendments by depriving them of a property interest without due process of law, by demanding reimbursement from Plaintiffs without demonstrating third-party liability for Medicare-covered expenses or otherwise obeying the statutory and regulatory procedures mandated for making such claims. (Id. ¶¶ 78-88.) The second count shall be referred to as the "procedural due process claim." Plaintiffs allege this Court has jurisdiction over the procedural due process claim pursuant to 28 U.S.C. § 1331. (Id. ¶ 11.)

The third count is an unjust enrichment claim for which Plaintiffs seek restitution and disgorgement. (Id. ¶¶ 89-94.) Apparently Plaintiffs are also seeking 42 U.S.C. § 405(g) jurisdiction over that claim. Plaintiffs' unjust enrichment claim is itself a claim for benefits that shall be treated the same as the "substantive claim" in the first count throughout this Opinion.

1. Dorothy Merrifield

According to the Complaint, Plaintiff Dorothy Merrifield was injured on August 31, 2001, in an escalator accident at the Menlo Park Mall in Edison, New Jersey. (Compl. ¶ 21.) Some of the treatment she received for injuries was paid for by the Medicare program. (Id.) She filed a tort suit in New Jersey Superior Court and resolved that case on or about October 28, 2003 by way of a lump-sum payment. (Id. ¶ 22.) Following settlement, Defendants sought reimbursement from Merrifield in the amount of $1,186.63. (Id. ¶ 23.) Merrifield "consistently rejected the U.S. Defendants' demands for payment, and has notified [them] of her objections." (Id. ¶ 24). In response, the Government has sent Merrifield numerous letters and threatened to terminate her Social Security benefits, on which she allegedly depends. (Id. ¶ 25.) Merrifield alleges she "has repeatedly requested and been refused access to administrative . . . review of and relief from the Medicare reimbursement claim." (Id. ¶ 26.) Merrifield requested "administrative review" of Medicare's demand for repayment "[o]n numerous occasions in 2004 and 2005." (Id. ¶ 27.)*fn2 "However, the Medicare contractor assigned to the matter instead served Ms. Merrifield with a notice of intent to refer her matter to the Department of Treasury for debt collection." (Id. ¶ 27.)

Defendants concede that Plaintiff Merrifield's "debt" was referred to Treasury for collection, but note that it was recalled on May 23, 2007, more than two years after it was referred for collection and three months after this action was filed.

2. Marie Burke

Plaintiff Marie Burke was injured on or about April 13, 2001 in a fall at the Park Place/Hilton Casino Resort in Atlantic City, New Jersey. (Id. ¶ 29.) Some of the treatment she received for injuries was paid for by the Medicare program. (Id.) Burke filed suit in New Jersey Superior Court and settled for a lump sum on or about February 3, 2004. (Id. ¶ 30.) Following settlement, Defendants began seeking reimbursement from Burke in the amount of $3,596.11. (Id. ¶ 31.) In addition, Defendants threatened termination of Social Security benefits on which Burke allegedly depends. (Id. ¶ 32.) In June of 2004, Burke paid the Medicare reimbursement claim.*fn3 (Id. ¶ 33.)

Burke then "sought administrative review and refund of her payment from the U.S. Defendants with respect to their Medicare reimbursement claim. During the ensuing two years of administrative review, the Medicare contractors conducting the review reaffirmed the Medicare reimbursement claim." (Id. ¶ 34.) Plaintiff Burke appealed the contractor's determination to an Administrative Law Judge ("ALJ") and had a hearing on her claim in August 2006. (Id. ¶ 35.) The ALJ issued a favorable decision several days later, finding that CMS must refund to Plaintiff Burke the amount she had repaid. (Id. ¶ 36.) CMS did not appeal this decision but did not comply with it before this Complaint was filed on March 1, 2007. (Id. ¶ 37-38.) In fact, Defendants' first attempt at repayment was not made until May 30, 2007, more than nine months after the ALJ ordered it. (See Ex. 10 to Def. Mot. to Dismiss.) ...


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