Cochran v. U.S. Health Care Financing Admin., 01-13608.

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Citation: 291 F.3d 775
• Docket Number: No. 01-13608.,01-13608.
• Parties: Jessie D. COCHRAN, for herself and all other persons from whom Defendant has or will demand, under 42 USC 1395y (b)(2), subrogation for medical payments out of non-medical portions of their recoveries from personal injury lawsuits or settlements, Plaintiffs-Appellants, v. U.S. HEALTH CARE FINANCING ADMINISTRATION, of the U.S. Department of Health and Human Services, which operates the Medicare program (MEDICARE), Defendant-Appellee.
• Decision Date: 16 May 2002

291 F.3d 775 Jessie D. COCHRAN, for herself and all other persons from whom Defendant has or will demand, under 42 USC 1395y (b)(2), subrogation for medical

Page 776

payments out of non-medical portions of their recoveries from personal injury lawsuits or settlements, Plaintiffs-Appellants,
v.
U.S. HEALTH CARE FINANCING ADMINISTRATION, of the U.S. Department of Health and Human Services, which operates the Medicare program (MEDICARE), Defendant-Appellee. No. 01-13608. United States Court of Appeals, Eleventh Circuit. May 16, 2002.

William R. Murray, Northport, AL, for Plaintiffs-Appellants.

Kathleen A. Kane, Mark B. Stern, U.S.Dept. of Justice, App. Staff/Civil Div., Washington, DC, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Alabama.

Before CARNES and FAY, Circuit Judges, and HUNT^*, District Judge.

Page 777

CARNES, Circuit Judge:

This appeal brings us a paradoxical twist on the conventional argument that exhaustion of administrative remedies should not be required where it would be futile. We have before us a litigant who contends that she should be allowed to circumvent the administrative remedies available to her not because resort to them would be futile, but because it might well be successful. She fears that the agency she has sued would give her administratively everything to which she claims to be entitled, thus mooting her lawsuit and depriving her of the opportunity for victory through litigation. Her position is that the likelihood — she says it is a near certainty — that she would succeed in the administrative appeals process should excuse her from having to resort to it. Believing that what this litigant fears is one of the principal reasons for and benefits of the requirement that administrative remedies be exhausted, we reject her novel argument.

I. BACKGROUND

Jesse Cochran, a 70-year-old woman, was injured by an elevator door at the Tuscaloosa County Courthouse in Tuscaloosa, Alabama. She received medical treatment for those injuries, and is likely to require continued treatment for them. Her medical expenses, $ 7,659.88 at one point, have been paid by Medicare. She brought suit in state court against the company responsible for maintaining the elevator that injured her, seeking to recover for her medical expenses as well as for her pain and suffering and mental anguish. She also sued the County, but the state court dismissed that part of her case. Once Ms. Cochran brought her state court lawsuit, the United States Health Care Financing Administration (HCFA)¹ sent her a letter informing her that it was statutorily subrogated to her right of recovery against the elevator company. HCFA also later sent two letters to her lawyer asserting its subrogation rights, and telling him that he was required to send HCFA a copy of his representation agreement with Cochran.

HCFA's subrogation rights are defined by the Medicare Act, 42 U.S.C. 1395 et seq., and the regulations interpreting it. Section 1395y(b)(2), known as the Medicare Secondary Payer statute, makes Medicare the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer; primary payers include the beneficiary's private insurer or the private insurer of someone liable to the beneficiary. This means that if payment for covered services has been or is reasonably expected to be made by someone else, Medicare does not have to pay. In order to accommodate its beneficiaries, however, Medicare does make conditional payments for covered services, even when another source may be obligated to pay, if that other source is not expected to pay promptly. 42 U.S.C. § 1395y(b)(2)(A)(ii). Medicare's conditional payments are "conditioned on reimbursement [to Medicare] when notice or other information is received that payment for such item or service has been ... made." 42 U.S.C. § 1395y(b)(2)(B)(i).

The way the system is set up the beneficiary gets the health care she needs, but Medicare is entitled to reimbursement if and when the primary payer pays her. Among other avenues of reimbursement, Medicare is subrogated to the beneficiary's

Page 778

right to recover from the primary payer. 42 U.S.C. § 1395y(b)(2)(B)(iii). Medicare regulations extend that subrogation right to any judgments or settlements "related to" injuries for which Medicare paid medical costs, thereby casting the tortfeasor as the primary payer. 42 C.F.R. § 411.37 (2002). Those same regulations also provide that, when Medicare is reimbursed out of a judgment or settlement, the amount of money it takes is reduced by a pro-rata share of the "procurement costs," which include attorney's fees of the judgment or settlement. 42 C.F.R. § 411.37(c) (2002). That is why Medicare asks attorneys handling any related tort suits for its beneficiaries to supply the agency with a copy of the agreement setting out the share of the recovery they are to receive.

Once Cochran's lawyer received the letters from HCFA informing him of its statutory subrogation rights, he put Cochran's state court case, which was still in its pretrial stages, temporarily on hold.² He then brought this federal...