Fanning v. U.S.

• Decision Date: 10 October 2003
• Docket Number: No. 01-3366.,01-3366.
• Citation: 346 F.3d 386
• Parties: Daniel C. FANNING, Individually, and as Representative of a Class of Persons Similarly Situated v. THE UNITED STATES of America; United States Health Care Financing Administration; United States Department of Defense; United States Department of Health and Human Services; United States Department of the Army; United States Department of the Navy; United States Department of the Air Force; United States Indian Health Service; United States Department of Veterans Affairs; Michael McMullen, Mrs., as Acting Deputy Administrator of the United States Health Care Financing Administration; Donald H. Rumsfeld, as Secretary of Defense; Tommy G. Thompson, as Secretary of the Department of Health and Human Services; Gregory R. Dahlberg, the Honorable, as Acting Secretary of the Army; Robert B. Pirie, Jr., the Honorable, as Acting Secretary of the Navy; Lawrence Delaney, the Honorable Dr., as Secretary of the Air Force; Michael H. Trujillo, M.D., M.P.H., as Director of the Indian Health Service; Anthony J. Principi, the Honorable, as Secretary of the Department of Veterans Affairs; Robert E. Welsh, Jr., Esquire, as Administrator of the AcroMed Settlement Agreement; PNC Bank, N.A., as Trustee for the Acromed Settlement Agreement United States of America, the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), the United States Department of Health and Human Services, Tommy G. Thompson in his capacity as Secretary of the United States Department of Health and Human Services, and Thomas Scully in his capacity as Administrator of the Centers for Medicare and Medicaid Services (formerly Administrator of the Health Care Financing Administration), Appellants
• Court: U.S. Court of Appeals — Third Circuit

346 F.3d 386

Daniel C. FANNING, Individually, and as Representative of a Class of Persons Similarly Situated v.THE UNITED STATES of America; United States Health Care Financing Administration; United States Department of Defense; United States Department of Health and Human Services; United States Department of the Army; United States Department of the Navy; United States Department of the Air Force; United States Indian Health Service; United States Department of Veterans Affairs; Michael McMullen, Mrs., as ActingDeputyAdministrator of the United States Health Care Financing Administration; Donald H. Rumsfeld, as Secretary of Defense; Tommy G. Thompson, as Secretary of the Department of Health and Human Services; Gregory R. Dahlberg, the Honorable, as Acting Secretary of the Army; Robert B. Pirie, Jr., the Honorable, as Acting Secretary of the Navy; Lawrence Delaney, the Honorable Dr., as Secretary of the Air Force; Michael H. Trujillo, M.D., M.P.H., as Director of the Indian Health Service; Anthony J. Principi, the Honorable, as Secretary of the Department of Veterans Affairs; Robert E. Welsh, Jr., Esquire, as Administrator of the AcroMed Settlement Agreement; PNC Bank, N.A., as Trustee for the Acromed Settlement Agreement United States of America, the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), the United States

Department of Health and Human Services, Tommy G. Thompson in his capacity as Secretary of the United States Department of Health and Human Services, and Thomas Scully in his capacity as Administrator of the Centers for Medicare and Medicaid Services (formerly Administrator of the Health Care Financing Administration), Appellants

No. 01-3366.

United States Court of Appeals, Third Circuit.

Argued June 10, 2002.

Opinion Filed: October 10, 2003.

Robert D. McCallum, Jr., Esq., Assistant Attorney General, Patrick L. Meehan, Esq., United States Attorney, Mark B. Stern, Esq., Alisa B. Klein, Esq.(Argued), Attorneys, Appellate Staff, Department of Justice, Washington, D.C., for Appellants.

Arnold Levin, Esq., Michael D. Fishbein, Esq.(Argued), Zanetta Moore-Driggers, Esq., Levin, Fishbein, Sedran & Berman, Philadelphia, PA, for Appellee.

Robert E. Welsh, Jr., Esq., Welsh & Recker, Philadelphia, PA, As Administrator of the AcroMed Settlement Agreement.

Before: SLOVITER, ROTH, and McKEE, Circuit Judges.

OPINION OF THE COURT

McKEE, Circuit Judge.

This litigation is the aftermath of an attempt by the Health Care Financing Administration ("HCFA")(now known as the Centers for Medicare and Medicaid Services ("CMS")), to obtain reimbursement under the Medicare as Secondary Payer statute, 42 U.S.C. § 1395y(b)(2).HCFA attempted to collect from a settlement trust fund for Medicare payments that had been made to AcroMed settlement class members for various medical expenses arising from injuries the settlement class members allegedly suffered as a result of the use of orthopedic bone screws manufactured by AcroMed.Daniel Fanning filed an amended complaint for declaratory and injunctive relief in an attempt to prevent the HCFA from obtaining Medicare reimbursement.Fanning filed the complaint on his own behalf and on behalf of the class in an attempt to prevent the HCFA from obtaining any of the proceeds of the settlement fund.¹

The district court certified the class and granted preliminary relief enjoining the HCFA from attempting to obtain MSP reimbursement from the settlement trust fund.However, because we find that the district court did not have federal question jurisdiction, we will reverse and remand with instructions to dismiss the amended complaint.

I.BACKGROUND

A.THE MEDICARE AS SECONDARY PAYER STATUTE

Prior to 1980, Medicare generally paid for medical services whether or not the recipient was also covered by another health plan.SeeSocial Security Amendments of 1965, Pub.L. No. 89-97, § 1862(b), 79 Stat. 286.However, beginning in 1980, Congress enacted a series of cost cutting amendments to the Medicare program.These amendments are collectively known as the Medicare as Secondary Payer ("MSP")statute or the MSP provisions.SeeNew York Life Ins. Co. v. United States,190 F.3d 1372, 1374(Fed. Cir.1999).²

The MSP statute was designed to curb skyrocketing health costs and preserve the fiscal integrity of the Medicare system.SeeZinman v. Shalala,67 F.3d 841, 845(9th Cir.1995);H.R.Rep. No. 96-1167, at 352(1980).The MSP attempted to lower overall federal Medicare disbursements by requiring Medicare beneficiaries to exhaust all available insurance coverage before looking to Medicare's coverage.SeeUnited States v. Rhode Island Insurers' Insolvency Fund,80 F.3d 616, 618(1st Cir.1996).The MSP assigns primary responsibility for medical bills of Medicare recipients to private health plans when a Medicare recipient is also covered by private insurance.These private plans are therefore considered "primary" under the MSP and Medicare acts as the "secondary" payer responsible only for paying amounts not covered by the primary plan.³Blue Cross and Blue Shield of Texas v. Shalala,995 F.2d 70, 73(5th Cir.1993).

Congress established two principal directives to achieve this objective.First, the MSP bars Medicare payments where "payment has already been made or can reasonably be expected to be made promptly (as determined in accordance with regulations)" by a primary plan.42 U.S.C. § 1395y(b)(2)(A)(parenthetical in original)."Prompt" payment is defined in the applicable regulations as payment made within 120 days of either the date on which care was provided or when the claim was filed with the insurer, whichever is earlier.See42 C.F.R. §§ 411.21,411.50.The MSP defines a "primary plan" as "a workmen's compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance[.]"42 U.S.C. § 1395y(b)(2)(A)(ii)(parenthetical in original).This provision "is intended to keep the government from paying a medical bill where it is clear an insurance company will pay instead."Evanston Hosp. v. Hauck,1 F.3d 540, 544(7th Cir.1993)(citation omitted).

Second, the MSP provides that when Medicare makes a payment that a primary plan was responsible for, the payment is merely conditional and Medicare is entitled to reimbursement for it.42 U.S.C. § 1395(y)(b)(2)(B);Blue Cross and Blue Shield of Texas v. Shalala,995 F.2d 70, 73(5th Cir.1993)(2002).Section 1395y(b)(2)(B) provides:

Any payment under this subchapter with respect to any item or service to which subparagraph (A) applies shall be conditioned on reimbursement to the appropriate Trust Fund established by this subchapter when notice or other information is received that payment for such item or service has been or could be made under such subparagraph.

42 U.S.C. § 1395y(b)(2)(B)(i).Medicare payments are subject to reimbursement to the appropriate Medicare Trust Fund once the government receives notice that a third-party payment has been or could be made with respect to the same item or service.⁴Id.

B.THE ACROMED LITIGATION

As noted above, the controversy surrounding the Medicare payments at issue here arose from a class action settlement of claims pertaining to orthopedic bone screws manufactured by AcroMed.AcroMed began marketing orthopedic bone screw devices for use in spinal fusion surgery in 1983.By the early part of the 1990s, thousands of individuals who had undergone spinal fusion surgery experienced complications and infirmities that they associated with AcroMed's bonescrews.A flood of product liability suits against AcroMed followed.SeeIn re Orthopedic Bone Screw Products Liability Litigation,176 F.R.D. 158, 165(E.D.Pa.1997).In 1994, the Judicial Panel on Multidistrict Litigation transferred all of the pending cases to the United States District Court for the Eastern District of Pennsylvania for pre-trial proceedings.Id.On January 8, 1997, Daniel Fanning, acting as a class representative, reached a settlement with AcroMed on behalf of the class.Id.Pursuant to the terms of that settlement, AcroMed transferred $100 million into a trust fund for distribution to class members who qualified for payment in accordance with a procedure to be established by the court.⁵Id. at 165-166.

Since members of the settlement class had previously received Medicare payments for medical expenses allegedly stemming from injuries caused by AcroMed's bone screws, the government filed a Statement of Interest in the district court after learning of the proposed AcroMed settlement.In that Statement of Interest, the government stated that, pursuant to the "secondary payer" provisions of the MSP, it intended to recover amounts Medicare had paid for the class members' medical care.

When efforts to settle the government claims broke down, the government sent letters to the approximately 1,800 members of the settlement class demanding repayment of the amounts Medicare had paid for medical treatment.The letters gave each class member 60 days to repay the amount set forth in each letter and warned that if the amount remained unpaid after 60 days, interest would accrue at the rate of 13.75% per annum until the debt was paid, regardless of whether a waiver of recovery request or administrative appeal was pending.The letters also told the class members that if they did not pay, Medicare could recover the outstanding balance from other federal benefits the individual plaintiff might otherwise be entitled to including additional Medicare payments, Social Security benefits and Railroad Retirement benefits.The letters similarly threatened that delinquencies would be reported to the Treasury Department for offset against any other federal payments the class members might otherwise receive.On March 21, 2001, Fanning filed an amended complaint alleging that payments from the AcroMed settlement are not the type of payments...