The Third Circuit Court ruled that New Jersey’s Collateral Source Statute N.J.S.A. § 2A:15-97 (NJCSS), does not abrogate the federal government’s entitlement to reimbursement of conditional medical expenses extended to a Medicare beneficiary who initiated a lawsuit for personal injuries and recovery of medical expenses. The July 29th ruling also stated that the Medicare beneficiary cannot circumvent the federal government’s right of reimbursement by entering into a written settlement agreement and then obtaining a court order specifically excluding Medicare expenses without the Court having considered the merits of the case.
The plaintiff, Cecilia Taransky, filed a personal injury lawsuit for, among other things, bodily injury and medical expenses for a trip-and-fall accident at the defendant shopping center. Taransky’s medical expenses were paid by Medicare, and early on in that litigation, her attorney contacted her Medicare contractor repeatedly, requesting the exact amount of Medicare’s claim, for settlement purposes. The Medicare contractor did provide information about Medicare’s conditional payments, which continued to accumulate as the lawsuit proceeded.
The parties ultimately entered into a written settlement agreement. Thereafter, Taransky moved in Superior Court for an order apportioning the proceeds of settlement so that no portion of recovery was attributable to medical expenses or other benefits compensated by a collateral source. The Court granted the motion and entered an order specifically stating that the settlement amount was “allocated solely to recovery for bodily injury, disability, pain and suffering, emotional distress and such non-economic and otherwise-uncompensated loss as plaintiff may have suffered.”
Medicare subsequently sought reimbursement from Taransky. She refused and eventually filed suit in the United States District Court for the District of New Jersey. The case was ultimately under review by the Third Circuit Appellate Court, which held that the Medicare Secondary Payor Act (MSP), 42 U.S.C. § 1935y(b)(2), authorized the government to seek reimbursement from Taransky’s settlement, as she received funds from a primary plan (i.e., the tortfeasor) under the statute that has demonstrated a responsibility for her medical expenses. It was further held that Taransky could neither invoke the NJCSS nor the Superior Court’s allocation order to avoid her reimbursement obligation because the NJCSS did not prevent her from obtaining damages for medical expenses from the defendant, and the allocation order had no preclusive effect because it was not on the merits.
Although the New Jersey Supreme Court has yet to decide the issue, the Third Circuit’s ruling is significant because it has held that Medicare is not considered a collateral source under the NJCSS and, therefore, Medicare may demand proceeds from a settlement to satisfy payments made by Medicare on a plaintiff’s behalf. In addition, the decision demonstrates that Medicare will still likely be entitled to reimbursement where there are efforts to carve Medicare out of a settlement agreement, even if endorsed by a Court order.
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Sara L. De Long