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Convoluted Conditional Payment Arguments Fail to Persuade Court in Florida Collateral Source Case

May 11, 2021

Rasa Fumagalli JD, MSCC, CMSP-F

The interplay between the Medicare Secondary Payer Act (MSPA) and Florida’s medical malpractice statute, Fla. Stat §§ 766.207 and 766.209 was addressed in the recent case of Gordon v. Azar, 2021 U.S. Dist.LEXIS 28314, (S. D. Fla. 2021).  The issue came before the Court in the context of the parties’ motions for summary judgment.

The motions stemmed from Plaintiff’s medical malpractice claim against Northwest Medical Center (Northwest) involving his leg amputation on or about March 17, 2014. Plaintiff’s injury-related medical treatment was paid for by Medicare. The Medicare Secondary Payer Recovery Contractor (MSPRC) sent a letter to Plaintiff on December 17, 2014, advising him of Medicare’s right to recover the “conditional payments” made by Medicare from any subsequent “settlement, judgment, award or other payment.” The MSPRC sent a follow-up letter to Plaintiff in January of 2015 advising that Medicare had identified $116,319.72 in conditional payments associated with his claim. The letter also requested a copy of the settlement agreement and the closing statement reflecting the actual amount of attorney’s fees and costs if the case settled.

On April 17, 2015, Northwest offered to enter into a voluntary, binding arbitration on the issue of damages. Plaintiff subsequently settled his medical malpractice claim against Northwest for $1,000,000 without filing suit. He gave the MSPRC notice of the settlement on July 2, 2015, and provided a one-page Final Settlement Detail document. It identified the settlement amount, the attorney’s fees, and procurement costs. Plaintiff also asked Medicare to waive its right to reimbursement arguing that Medicare was the primary payer for the treatment regardless of the malpractice. No other arguments were raised.

The MSPRC did not agree to the waiver request. On July 14, 2015, the MSPRC sent Plaintiff a final conditional payment demand for the sum of $75,701.81 after a reduction in procurement costs. Plaintiff unsuccessfully appealed the denial through Medicare’s administrative review process. At the reconsideration request level, Plaintiff argued for the first time that Northwest’s offer to enter into binding arbitration “extinguished” Plaintiff’s ability to seek medical damages from Northwest as a matter of law. Since the damages could not be claimed in connection with the medical malpractice, Medicare was the primary payer for the services. Plaintiff also argued that the settlement did not include any funds for past medical expenses. The Administrative Law Judge (ALJ) rejected these arguments and the  Medicare Appeals Council (Appeals Council) subsequently affirmed the ALJ decision. This final decision of the Secretary of the U.S. Department of Health and Human Services was the subject of the Court’s review.

The Court advised that its review of the Secretary’s final decision was limited to whether the correct legal standards were applied by the Secretary in evaluating Plaintiff’s claim and whether the decision was supported by substantial evidence. 42 U.S.C. § 1395ff(b)(1), incorporating 42 U.S.C. §405 (g); 42 C.F.R. §405.1136(f).  In examining the evidence, the Court affirmed the Appeals Council decision, denied Plaintiff’s motion for summary judgment, and granted Defendant’s motion for summary judgment.

The Court noted that Florida’s medical malpractice statutes, Fla. Stat §§ 766.207 and 766.209, allow either party to request that an arbitration panel determine the amount of damages in the claim. Regardless of whether the offer to arbitrate is accepted, collateral sources are offset from the recovery, and damages are capped.  The Florida statutes define collateral sources as “any payments made to the claimant, or made on his or her behalf, by or pursuant to (a) The United States Social Security Act; any federal, state, or local income disability act; or any other public programs providing medical expenses, disability payments, or other similar benefits, except as prohibited by federal law.” Fla. Stat §§ 766.202.

The relevant federal law, in this case, is the Medicare Secondary Payer Act (MSPA) that prohibits Medicare from making payment for medical services when payment “has been made or can reasonably be expected to be made” by a “primary plan”. 42 U.S.C.§ 1395y(b)(2)(B)(i); 42 C.F.R.§411.52. If the primary payer is unable to pay the bills promptly, Medicare may make payment for the services. The payments are conditioned upon reimbursement to the appropriate Medicare Trust Fund 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.” 42 U.S.C.§ 1395y(b)(2).

After outlining the relevant statutes, the Court considered Plaintiff’s argument that Northwest’s offer to enter binding arbitration “extinguished” Plaintiff’s ability to seek medical damages from Northwest as a matter of law since collateral sources were offset from the recovery. In describing this argument as convoluted, the Court next considered Defendant’s argument that because conditional payments must be reimbursed to Medicare after Plaintiff receives a settlement or award, they could not be considered “collateral source payments” that Plaintiff was entitled to keep. Conditional payments are unlike private medical insurance benefits that can be retained by Plaintiff.

Since the Florida Supreme Court had not specifically addressed the relationship between the MSPA and Florida’s medical malpractice statutes, the Court looked to the cases that were cited by the defense in support of its position. The Court found the reasoning in Joerg v. State Farm Mut. Auto. Ins. Co. 176 So.3d 1247 (2015) and Pollo Operations, Inc. v. Tripp. 906 So.2d 1101 (FLA.3d DCA 2005) persuasive. These cases had recognized Medicare’s priority of reimbursement from settlements or awards and determined that conditional payments were not a “collateral source” subject to the Florida common law evidentiary collateral source rule.  The instant Court also noted that Florida’s medical malpractice statute specifically excluded consideration of collateral source payments that are “prohibited by federal law.” Furthermore, the MSPA regulations provide that “Medicare benefits are secondary to benefits payable by a primary payer even if State law or the primary payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries.” 42 U.S.C.§411.32.

The Court next turned to Plaintiff’s argument that the $1,000,000.00 liability settlement did not include funds for medical expenses. Since Plaintiff failed to provide any evidence in support of this position, despite Medicare’s repeated requests for support for this position, the Court found the Appeals Council’s assessment was supported by substantial evidence.

Plaintiff’s argument that Northwest is not a primary plan with a demonstrated responsibility to pay for Medicare-covered services was also rejected by the Court. The parties’ settlement in and of itself established the requirement of a demonstrated responsibility under the MSPA.

In affirming the Appeals’ Council decision, the Court found the Appeals Council decision was supported by substantial evidence and applied the correct legal standards.


The Gordon decision contains numerous references to Plaintiff’s failure to provide Medicare with evidence to support the position that the settlement did not include past medical expenses as a damaged element. Had credible evidence been provided, it is possible that Medicare may have agreed to a waiver of its payments. While it is clear that Medicare’s conditional payment recovery rights are unlike those of other insurance plans, a credible apportionment of damages in a settlement may help limit issues with Medicare post-settlement.  Proper framing of arguments by Medicare conditional payment experts like Synergy can increase the likelihood of getting a compromise or waiver granted by Medicare.

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