United States District Court, D. New Mexico
FABIAN SILVA through THERESA ABEYTA, his Legal Guardian and Conservator, Plaintiff,
SYLVIA MATHEWS BURWELL, in her official capacity as SECRETARY OF THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, CENTER FOR MEDICARE & MEDICAID SERVICES, and U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendants.
MEMORANDUM OPINION AND ORDER
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.
FACTUAL AND PROCEDURAL BACKGROUND
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.
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.
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.
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.
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.
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.
LAW REGARDING THE MSP AND MEDICAL SET-ASIDE
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).
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.
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).