Hadden v. United States

• Citation: 661 F.3d 298
• Decision Date: 04 January 2012
• Docket Number: No. 09–6072.,09–6072.
• Parties: Vernon HADDEN, Plaintiff–Appellant, v. UNITED STATES of America, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

661 F.3d 298

Vernon HADDEN, Plaintiff–Appellant,

v.UNITED STATES of America, Defendant–Appellee.

No. 09–6072.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 13, 2010.Decided and Filed: Nov. 21, 2011.Rehearing and Rehearing En Banc Denied Jan. 4, 2012.*

ARGUED: David J. Farber, Patton Boggs LLP, Washington, D.C., for Appellant. Daniel Tenny, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF: David J. Farber, Patton Boggs LLP, Washington, D.C., for Appellant. Daniel Tenny, United States Department of Justice, Washington, D.C., Audrey B. Williams, Social Security Administration, Office of General Counsel, Atlanta, Georgia, for Appellee. Paul Caleo, Kevin M. Larson, Burnham Brown, Oakland, California, John L. Tate, Stites & Harbison PLLC, Louisville, Kentucky, for Amicus Curiae.Before KETHLEDGE and WHITE, Circuit Judges; BECKWITH, District Judge.^**KETHLEDGE, J., delivered the opinion of the court, in which BECKWITH, D.J., joined. WHITE, J. (pp. 305–09), delivered a separate dissenting opinion.

OPINION

KETHLEDGE, Circuit Judge.

The statute that governs an issue is usually the one to rely upon in arguing it. Here, the parties agree that the Medicare statute governs the extent to which Vernon Hadden is obligated to reimburse Medicare for certain expenses that it paid on his behalf. Most of Hadden's arguments, however, concern different statutes with different language than the Medicare provision that applies here. The district court thought those arguments were beside the point. So do we; and we otherwise think that the Medicare statute itself requires Hadden to reimburse Medicare to the full extent that the government advocates. We therefore affirm the judgment of the district court.

I.

In August 2004, Hadden was standing near a traffic circle in Kentucky when he was struck by a vehicle owned by Pennyrile Rural Electric Cooperative Corporation. His medical bills totaled $82,036.17. Medicare paid his bills in full, because Hadden is a Medicare beneficiary. Hadden later sued Pennyrile, demanding compensation for all of his medical expenses, among other damages. Pennyrile eventually paid Hadden $125,000 in exchange for a full release of his claims against it.

What happened next is the subject of this appeal. Federal law aims to make Medicare only a “secondary payer” as to medical expenses for which some other entity (e.g., a tortfeasor) bears responsibility. See 42 U.S.C. § 1395y(b)(2). Medicare paid Hadden's expenses nonetheless, pursuant to a provision that allows it to do so if the responsible entity might not pay the expenses “promptly[.]” Id. § 1395y(b)(2)(B)(i). But that same provision gives Medicare the right to seek “reimbursement” from the responsible entity or the beneficiary, if the beneficiary himself later receives a payment directly from the responsible entity. Id. § 1395y(b)(2)(B)(ii), (iii). That is what happened here: Pennyrile made a $125,000 settlement payment to Hadden, so Medicare circled back to him and demanded reimbursement for its earlier payment of his medical expenses. After subtracting a portion of the attorneys' fees that Hadden himself had paid to obtain the settlement, see 42 C.F.R. § 411.37, Medicare determined that Hadden owed it $62,338.07.

That amount was likely no surprise to Hadden, since he had escrowed exactly $62,000 of his settlement money for the specific purpose of reimbursing Medicare. But he paid the $62,338.07 (plus some interest) under protest nonetheless, arguing that he should be required to reimburse Medicare for only 10%—or about $8,000—of the more than $80,000 of expenses that Medicare paid on his behalf. According to Hadden, the accident in which he was injured was primarily the fault of an unidentified motorist who had caused the Pennyrile truck to swerve into him; that motorist was responsible for 90% of Hadden's damages, with Pennyrile responsible for only 10%; and thus Pennyrile's payment of $125,000 represented only 10% of Hadden's total damages, meaning that it only compensated him for 10% of his medical expenses, or about $8,000. The remaining $117,000 or so of the settlement, Hadden says, compensated him for damages other than medical expenses (e.g., pain and suffering)—and was therefore off-limits to Medicare.

An administrative law judge took a dim view of this theory, finding that the plain language of the Medicare statute required Hadden to reimburse Medicare the full amount that Medicare had demanded. The ALJ also found that the reimbursement was not against “equity and good conscience.” See 42 U.S.C. § 1395gg(c). The Medicare Appeals Council agreed with each of those findings. Hadden appealed this decision to the district court, which remanded the case back to the Appeals Council. The Appeals Council issued an amended decision in which it again agreed with the ALJ's findings. The district court agreed with them as well.

This appeal followed.

II.

We review de novo the district court's dismissal of Hadden's petition. Ealy v. Comm'r of Soc. Sec., 594 F.3d 504, 512 (6th Cir.2010). In addition, because our decision here involves interpretation of a statute administered by a federal agency, we review the agency's interpretation under the Chevron standard. Under that standard, if “Congress has directly spoken to the precise question at issue” in the text of the statute, we give effect to Congress's answer without regard to any divergent answers offered by the agency or anyone else. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). But “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.” Id. at 843, 104 S.Ct. 2778.

The parties agree that Pennyrile's settlement payment to Hadden gives rise to an obligation on his part to reimburse Medicare. But they dispute whether that obligation is limited to the $8,000 that Hadden says represented payment for his medical expenses.

The relevant section of the Medicare statute provides:

(2) Medicare secondary payer

(B) Repayment required

(ii) Primary plans

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service....

42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added).

This subsection has additional relevant language, but we consider the quoted portion first. It is undisputed that Pennyrile is a “primary plan” and that Hadden is an “entity that receive[d] payment from a primary plan” within the meaning of this provision. It is also undisputed that Medicare paid for $82,036.17 of medical services rendered to Hadden. Thus, under the quoted language, Hadden “shall reimburse” Medicare to the same extent that Pennyrile “had a responsibility to make payment” with respect to those services.

The key term here is “responsibility,” since Hadden's obligation to reimburse Medicare for its payment of his medical expenses is coextensive with Pennyrile's responsibility to pay them. Hadden's argument, of course, is that (according to him) Pennyrile “had a responsibility to make payment” for only 10% of his medical expenses—i.e., only $8,000 of them—and that his reimbursement obligation is thus limited to the same extent. The Ninth Circuit encountered an identical argument back in 1995 and concluded that § 1395y(b)(2)(B) was silent as to whether the argument was correct. See Zinman v. Shalala, 67 F.3d 841, 845 (9th Cir.1995). Hence the court turned to the agency's interpretation of the statute, under which Medicare was “entitled to full reimbursement of conditional Medicare payments when a beneficiary receives a discounted settlement from a third party.” Id. at 846. The court easily found this interpretation to be reasonable, and thus deferred to it under Chevron. Id.

In the meantime, Congress has directly spoken to this issue—in a way highly unfavorable to Hadden. In 2003, Congress amended § 1395y(b)(2)(B)(ii) to add the language in italics below:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.

Id. (emphasis added).

The italicized language leaves no room for Hadden's argument in this appeal. As used in § 1395y(b)(2)(B)(ii), “responsibility” is no longer an undefined term into which courts might funnel their own notions (or Hadden's) of equitable apportionment. It is instead a term of art, which defines several ways in which a primary plan's “responsibility” can be demonstrated for purposes of this section. We address only one of them here: specifically, under § 1395y(b)(2)(B)(ii) as amended, if a beneficiary makes a “claim against [a] primary plan[,]” and later receives a “payment” from the plan in return for a “release” as to that claim, then the plan is deemed “responsib [le]” for payment of the “items or services included in” the claim. Id. Consequently, the scope of the plan's “responsibility” for the beneficiary's medical expenses—and thus of his own obligation to reimburse Medicare—is ultimately defined by the scope of his own claim against the third party. That...