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Silva v. Burwell

United States District Court, D. New Mexico

November 28, 2017

FABIAN SILVA through THERESA ABEYTA, his Legal Guardian and Conservator, Plaintiff,


         On September 6, 2016, Defendants filed a Motion to Dismiss and Memorandum in Support (ECF No. 8), arguing that the Court lacks subject matter jurisdiction and the case must be dismissed under Federal Rule of Civil Procedure 12(b)(1). The Court, having considered the motion, complaint, arguments, and relevant law, concludes the motion should be granted.


         In 2011, Plaintiff Fabian Silva was injured as a result of a medical malpractice incident, leaving him with severe, permanent brain damage and debilitating physical problems. Am. Compl. ¶ 8, ECF No. 3. Plaintiff filed suit in state court against the hospital and physicians who provided him medical treatment, and the case was settled by agreement of the parties in December 2015. Id. ¶ 9.

         Because Medicare paid for some of Plaintiff's medical expenses arising from the incident, Medicare had a claim for payment with regard to the past medical care, according to the Medicare Secondary Payer Act (“MSP”), 42 U.S.C. § 1395y(b). See Am. Compl. ¶ 10. Plaintiff paid Medicare's claim in full. Id. At the time this suit was filed, Secretary Sylvia Mathews Burwell, the Secretary of the United States Department of Health and Human Services (“the Secretary”), was responsible for implementing the Medicare program, and she administered the Medicare program through the Center for Medicare and Medicaid Services (“CMS”), an agency of the United States Department of Health and Human Services (“HHS”). Id. ¶ 2.[1]

         The defendants in the malpractice case (“Hospital Defendants”) assert that Mr. Silva must create a Medicare “set-aside” (“MSA”) from the settlement funds for future medical expenses because of a concern that Medicare could come back after the Hospital Defendants for future medical expenses. Id. ¶ 11. The concern arises because the CMS has promulgated regulations for set-aside arrangements in workers' compensation cases when “the settlement agreement allocates certain amounts for specific future medical services.” 42 C.F.R. § 411.46(d)(2). See also Am. Compl. ¶¶ 16-17. CMS issued guidelines for the use and approval of MSAs in workers' compensation cases through a series of policy memoranda. Am. Compl. ¶ 18.

         Mr. Silva asserts that there is no legal support for Medicare to request a “set-aside” in his case, because the guidelines relate to workers' compensation settlements and do not extend to liability or personal injury settlements. See Id. ¶¶ 12, 18. Plaintiff asked CMS to state its position as to whether funds must be “set-aside” from the settlement of a personal injury claim to cover unknown, unspecific future medical expenses. Id. ¶ 12. CMS has not responded and has refused to take a position regarding (1) the legal basis of their claim for repayment or future medical care, and (2) whether a “set-aside” is required with respect to Mr. Silva's future medical care. Id. ¶¶ 12-13.

         To protect all parties, the Hospital Defendants have agreed that they would release the money in trust to Mr. Silva's Trustee for his health and welfare if Plaintiff obtains a federal court order containing a finding that no federal law or CMS regulation requires the creation of a Medicare “set-aside” from Mr. Silva's personal injury settlement. Id. ¶ 14. During the state-court approval of the settlement, it was determined that a certain amount of the settlement would be kept in trust to meet any Medicare “set-aside, ” while Plaintiffs pursued the instant federal court action. Id. ¶ 15.

         Consequently, Plaintiff filed suit under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), the federal question statute, 28 U.S.C. § 1331, the Mandamus Act, 28 U.S.C. § 1361, and the MSP, 42 U.S.C. § 1395y(b), against the Defendants in this case (“Federal Defendants”), seeking a declaration that no “set-aside” is required in Plaintiff's state court settlement to pay for his future medical expenses, that Defendant CMS may not in the future decrease or refuse to pay for medical bills Mr. Silva may incur or otherwise penalize Mr. Silva or his trust, and that MSAs are not required under the law for personal injury or medical malpractice damages. See Id. ¶¶ 3-4, 16-25. The Federal Defendants filed a motion to dismiss for lack of subject matter jurisdiction arguing that (i) there is no justiciable case or controversy because the Secretary has no duty under the law to take a position on the controversy; (ii) the United States is immune from suit; and (iii) Plaintiff has failed to exhaust his administrative remedies under the Medicare Act.


         In enacting the MSP, Congress sought to reduce skyrocketing Medicare costs by making the government a secondary provider of medical insurance coverage when a beneficiary has other sources of primary insurance coverage. Thompson v. Goetzmann, 337 F.3d 489, 495 (5th Cir. 2003); Zinman v. Shalala, 67 F.3d 841, 843 (9th Cir. 1995). Under the MSP, “when a Medicare beneficiary suffers an injury covered by a group health plan or liability, workers' compensation, automobile, or no-fault insurance, Medicare conditionally pays for the beneficiary's medical expenses.” Zinman, 67 F.3d at 843 (citing 42 U.S.C. § 1395y(b)(2)(B)(i)). The MSP also provides the government a cause of action in reimbursement to recover conditional healthcare payments from primary plans. Id. (citing 42 U.S.C. § 1395y(b)(2)(B)(ii)). A tortfeasor's liability insurance company may constitute a primary plan under the MSP triggering Medicare's right to reimbursement when it pays out settlement proceeds to a Medicare beneficiary arising from a personal injury claim that includes reimbursement for medical expenses incurred from the incident and paid by Medicare. See Humana Medical Plan, Inc. v. Western Heritage Ins. Co., 832 F.3d 1229, 1234, 1239 (11th Cir. 2016).

         In workers compensation cases, the CMS promulgated regulations requiring the creation of a Medicare “set aside” account. See 42 C.F.R. § 411.46(d)(2). The MSA allocates a portion of a workers' compensation award to pay potential future medical expenses resulting from the work-related injury so that Medicare does not have to pay. Aranki v. Burwell, 151 F.Supp.3d 1038, 1040 (D. Ariz. 2015). On June 15, 2012, CMS published notice of proposed rulemaking on options to clarify how beneficiaries can meet their obligations to protect Medicare's interest under the MSP for claims involving liability insurance when future medical care may occur or the settlement or judgment releases claims for future medical care. Medicare Program; Medicare Secondary Payer and “Future Medicals, ” 77 Fed. Reg. 35917-02, 35918 (June 15, 2012). The notice stated that, unlike in certain workers' compensation situations where Medicare has an MSA review process to determine if a proposed set-aside amount is sufficient to meet obligations related to future medical expenses, to date, Medicare has not established a similar process for MSP obligations regarding future medicals in liability insurance situations. See Id. at 35919. The CMS did not create a process through any subsequent action following the Notice. See Aranki, 151 F.Supp.3d at 1040 n.1.

         III. STANDARD

         When ruling on a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), the court must accept the complaint's factual allegations as true. Wyoming v. United States, 279 F.3d 1214, 1222 (10th Cir. 2002).

         IV. ...

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