United States District Court, D. New Jersey
For CECELIA A. TARANSKY, Individually and on behalf of all persons similarly situated, Plaintiff: FRANKLIN P. SOLOMON, LEAD ATTORNEY, SOLOMON LAW FIRM, LLC, CHERRY HILL, NJ; ALAN HERSCHEL SKLARSKY, WILLIAMS CUKER BEREZOFSKY, CHERRY HILL, NJ.
For KATHLEEN SEBELIUS, IN HER CAPACITY AS SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, THE UNITED STATES OF AMERICA, Defendants: DANIEL SHAY KIRSCHBAUM, LEAD ATTORNEY, OFFICE OF THE U.S. ATTORNEY, NEWARK, NJ.
Memorandum Opinion & Order
Hon. Joseph H. Rodriguez, UNITED STATES DISTRICT JUDGE.
This matter is before the Court on the motion of Defendants Kathleen Sebelius in her capacity as Secretary of the United States Department of Health and Human Services, the United States Department of Health and Human Services, and the United States of America to dismiss Plaintiff Cecelia A. Taransky's putative class action Complaint for lack of jurisdiction, failure to state a claim, or in the alternative for summary judgment [Dkt. 9]. For the reasons described herein, the Court will grant Defendants' motion.
This matter concerns Ms. Taransky's obligation to reimburse the federal Medicare program for its payments of her medical expenses related to injuries that she sustained during a trip-and-fall accident. The Medicare program is a federal program of health benefits for elderly and disabled individuals. See 42 U.S.C. 1395 et. seq. When it was first enacted, the Medicare program acted as the " primary payer" for covered medical items and services, regardless of whether the beneficiary was also covered by another health plan. See Fanning v. United States, 346 F.3d 386, 388 (3d Cir. 2003) (citing Social Security Amendments of 1965, Pub.L. No. 89-97, § 1862(b), 79 Stat. 286). However, beginning in the 1980s, Congress enacted a series of cost-cutting amendments to the Medicare program, which are collectively known as the Medicare as Secondary Payer (" MSP" ) statute. Id. The MSP requires beneficiaries to " exhaust all available insurance coverage" before turning to Medicare's coverage. Id. Accordingly, under the MSP, these other sources of coverage are considered " primary" and Medicare acts as the " secondary" payer responsible for those amounts not covered by the " primary" payer.  Id.
The MSP prohibits Medicare from making payments where payment has already been made or where a primary payer could be reasonably expected make the payment. 42 U.S.C. § 1395y(b)(2)(A)(i). Additionally, in the event that a primary plan has not made or cannot reasonably be expected to promptly make payment with respect to the covered item or service, the MSP allows Medicare to make these payments, which are " conditioned on reimbursement to the appropriate Trust Fund." 42 U.S.C. § 1395y(b)(2)(B)(i). The MSP further provides that such reimbursement is required " if it is demonstrated that such primary plan has or had a responsibility to make payment," which " 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." 42 U.S.C. § 1395y(b)(2)(B)(ii). Further, the MSP provides that in the event that reimbursement is not paid, the United States may bring an action against those entities " required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan." 42 U.S.C. § 1395y(b)(2)(B)(ii).
This case arises out of a trip-and-fall accident that occurred on November 7, 2005, in which Ms. Taransky was injured at the Larchmont Commons Shopping Center in Mount Laurel, New Jersey. (Compl.) The federal Medicare program paid $18,401.41 in conditional payments for Ms. Taransky's medical care related to her injuries sustained in this accident. (AR 196)  Ms. Taransky sued the owners and operators of the shopping center on October 26, 2007, seeking damages for her personal injury losses. (Compl.) On October 26, 2009, Ms. Taransky settled the claims against these tort defendants in return for a lump-sum payment of $90,000.00. (AR 222-23).
Following the settlement, Plaintiff's counsel filed a " Motion to Adjudicate Allocation of Settlement Proceeds" in the Superior Court of New Jersey, Law Division, Burlington County, that included a proposed order stating that " no portion of this recovery obtained by plaintiff in this matter is attributable to medical expenses or other benefits compensated by way of a collateral source." (AR 209-210) In addition, to this proposed order, Plaintiff's counsel filed a " certification," in which he states that " New Jersey law does not permit a plaintiff's tort recovery of losses (such as medical expenses) that have been compensated by way of collateral sources of benefits, such losses were not considered in settlement negotiations between the parties to this action and are not part of any recovery that may be obtained." 
(AR 217-20) The state court entered the unopposed proposed order on November 20, 2009. (AR 211-212).
On December 8, 2009, the Medicare Secondary Payer Recovery Contractor, on behalf of the Centers for Medicare and Medicaid Services (" CMS" ), sent Ms. Taransky a letter request that she reimburse Medicare $10,121.15.  (AR 195-199) Ms. Taransky then proceeded through the Medicare administrative process, challenging her obligation to reimburse Medicare. (Compl.) On January 4, 2010, Ms. Taransky sought redetermination from the Medicare Secondary Payer Recovery Contractor, which was denied by way of letter dated March 30, 2010. (AR 185-193) Ms. Taransky again sought redetermination of Medicare's reimbursement decision, which a " Qualified Independent Contractor" affirmed via letter dated October 15, 2010. (AR 143-48, 125-130) Ms. Taransky then proceeded before an Administrative Law Judge (" ALJ" ) by way of telephonic hearing on March 9, 2011. (AR 029).
Ms. Taransky made the following arguments before the ALJ: (1) that under the Medicare Secondary Payer Manual, Chapter 7, § 50.4.4, " the only situation in which Medicare recognizes allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case" and that Medicare must defer to the state court's allocation order because through its order, " the state court issued a decision on the merits of the case in which it allocated no part of the settlement to medical expenses or other benefits by way of a collateral source" ; (2) that the New Jersey Collateral Source Statute (" NJCSS" ) " prohibits a plaintiff's tort recovery from including any insured loss, apart from worker's compensation and life insurance benefits" and as such the Medicare payments were a collateral source and a New Jersey court would be legally prohibited from including them in any verdict; (3) that Medicare is obligated to abide by the state court's order; and (4) ...