Individually v. Sebelius

Decision Date29 September 2010
Docket NumberNo. 09-13765.,09-13765.
Citation621 F.3d 1330
PartiesCarvondella BRADLEY, Joyce Elaine Nieves, Larhonda Williams, Chris Crowley, Derrick Burke, Charles E. Burke, Jr., Greg Burke, Cynthia Burke, Beatrice Wells, Karl Crowley, individually, Plaintiffs-Appellants, v. Kathleen SEBELIUS, Secretary, U.S. Department of Health and Human Services, Defendant-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

OPINION TEXT STARTS HERE

Robert S. Peck, Ctr. for Const. Lit., PC, Washington, DC, Eric Harald Faddis, Faddis & Faddis, P.A., Casselberry, FL, for Plaintiffs-Appellants.

Daniel Tenny, Mark B. Stern, U.S. Dept. of Justice, Civ. DIv., Washington, DC, for Sebelius.

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

Before DUBINA, Chief Judge, and MARTIN and HILL, Circuit Judges.

HILL, Circuit Judge:

The facts of this claim against a Florida nursing home for neglect and abuse are simple and not in dispute. However, the question of law as to the interplay between the Florida Wrongful Death Act (FWDA) and the federal Medicare Secondary Payer statute (MSP) is an issue of first impression in this court.

I.

Charles Burke (Burke or Decedent) resided in a Gainesville nursing home for approximately eighteen (18) months. In November 2004, Burke was removed from the nursing home and admitted to a Gainesville medical hospital. On January 30, 2005, he died in the hospital as a result of multi-organ failure, secondary to sepsis and wound infection. During Burke's approximate three (3) month hospital stay, the Secretary of the Department of Health and Human Services (Secretary or HHS), on behalf of Medicare, paid $38,875.08 for Burke's medical care. 1

One of Burke's surviving children, Carvondella Bradley (Bradley), was named as personal representative of Burke's estate. Bradley, on behalf of the estate and the ten surviving Burke children, presented a wrongful death claim in a demand letter to Burke's nursing home and its liability insurance carrier, asserting nursing home abuse and neglect under Florida law. 2

Bradley settled the wrongful death tort claims for $52,500, the full amount of the nursing home's liability insurance policy limits. 3 Settlement was made without filing suit. Burke's nursing home tendered the settlement amount and Bradley executed a release of all claims of the estate and the surviving children against the nursing home and its liability insurance carrier. 4

Bradley notified the Secretary of the settlement proceeds and associated legal fees and costs. The Secretary refused to recognize that the medical expense claim had been settled for less than 100%. She asserted that under the MSP, 42 U.S.C. § 1395y(b)(2)(B)(ii), and its attendant regulations, 42 C.F.R. § 411.37(c), the Secretary had the authority to claim the total amount of medical expenses, $38,875.08, less procurement costs, or a net amount of $22,480.89. The Secretary gave the estate sixty (60) days to pay Medicare. 5

Counsel for the children and the estate filed with the probate court an application for the court to adjudicate the rights of the estate and the rights of the children in regard to the compromised sum received in settlement of their claims. 6 See Thompson v. Hodson, 825 So.2d 941, 950 (Fla.Dist.Ct.App.2002) (where the personal representative receives a nonspecific settlement offer in a wrongful death action, he or she is obligated to apportion the proceeds between the estate and the survivors in a reasonable and equitable manner or to seek court approval of an apportionment); Hess v. Hess, 758 So.2d 1203 (Fla.Dist.Ct.App.2000).

Counsel for the children and the estate gave adequate notice to Medicare of the probate court proceedings and invited the Secretary's participation. The Secretary declined to appear or to participate. 7

The state probate court ordered:

(c) ... The Court after having heard sworn testimony on the potential value of each child/survivors' independent claim, and after calling on its own experience in the range of values each child's claim potentially carried, finds that the values asserted by the Personal Representative's counsel in this motion are reasonable, and the Court adopts and specifically finds that each of the respective ten (10) survivors' claims holds a value of at least 0,000.00. The Court notes that Medicare has asserted a claim of lien based upon payments of ,875.08. Therefore, the Court finds that the total, full value of this case had the total, full value been collectible, was/is ,538,875.08.

(d) Based upon principles of equity, the Court determines the medical expense recovery in the instant cause is 7.50. The Court has calculated such figure based on such component's contribution to the total full value, if such value were collectible. The Court has not prioritized the recovery of medical expenses over the recovery on each of the respective survivors' claims. Further, the Court determines the independent survivors' claims recovery in the instant cause is ,712.50. The Court has likewise calculated such figure based on all survivors' claims contributions to the total, full value. The Court has likewise not prioritized the recovery on each of the respective survivors' claims over the recovery of medical expenses.

(Emphasis added).

The Secretary refused to accept the probate court's determination that she would only recover $787.50. Relying upon language contained in a document entitled “Medicare Secondary Payer Manual”, the Secretary responded that she would not recognize the probate court's allocation of liability payments to non-medical losses unless and until payment was based on a court order issued on the merits of the controversy. See MSP Manual (CMS Pub. 100-05) Chapter 7, § 50.4.4 (where [t]he only situation in which Medicare recognizes allocations of liability payments to non-medical losses is when payment is based on a court order on the merits of the case). 8

The Secretary contended that the probate court's decision was merely advisory in nature or superceded by federal law. The estate paid Medicare under protest, perfected its administrative appeal, and exhausted its administrative remedies. 9

II.

The case proceeded as an appeal to the district court from a final decision of the Secretary, wherein the surviving children filed their brief in opposition to the Secretary's decision, the Secretary filed her brief in support of her final decision, and the case became ripe for district court review.

The district court, adopting the report and recommendation of the magistrate judge, held that the Secretary's interpretation of the MSP, 42 U.S.C. § 1395y(b)(2)(B)(ii)(2006), and its attending regulations, 42 C.F.R. §§ 411.37(c)(1), (c)(2), (c)(3)(2004), was reasonable. The district court also relied heavily upon the language contained in the Medicare field manual. Accordingly, the district court held that Medicare was entitled to reimbursement in the amount of $22,480.89, not $787.50, for conditional medical expense payments paid on behalf of the Decedent. This appeal follows.

III.

We review de novo the district court's interpretation of the MSP federal statute in relation to the FWDA as a question of law over which this court's review is plenary. See United States v. Endotec, Inc., 563 F.3d 1187, 1194 (11th Cir.2009). In reviewing the district court's analysis of the Secretary's decision, we may reverse the district court if its decision is “arbitrary, capricious, an abuse of discretion, not in accordance with law, or unsupported by substantial evidence in the record taken as a whole.” Univ. Health Servs., Inc. v. Health & Human Servs., 120 F.3d 1145, 1148 (11th Cir.1997) (citations omitted).

IV.

The Burke surviving children contend that the FWDA controls. As previously stated, under Florida law, in a recovery for wrongful death action, children of the decedent may recover for lost parental companionship, instruction, and guidance and for mental pain and suffering from the date of injury. Fla. Stat. § 768.21(3). The FWDA contemplates that damages allowed an estate are separate and distinct from damages recoverable by the deceased's survivors. See Hartford Ins. Co. v. Goff, 4 So.3d 770, 773 (Fla.Dist.Ct.App.2009); South Shore Hosp. v. Easton, 441 So.2d 161, 163 (Fla.Dist.Ct.App.1983). Florida courts have repeatedly held that proceeds from a wrongful death action are not for the benefit of the estate, rather, that they are the property of the survivors and compensation for their loss. See Scott v. Estate of Myers, 871 So.2d 947, 949 (Fla.Dist.Ct.App.2004); Continental Nat. Bank v. Brill, 636 So.2d 782, 784 (Fla.Dist.Ct.App.1994). Here the children's right of action under the FWDA is an individual's property right, not derived from the estate. 10

V.

The Secretary relies upon the MSP, enacted in 1980 to reduce federal health care costs by transforming Medicare from the primary payer to the secondary payer, with a right of reimbursement. See United States v. Baxter Int'l, Inc., 345 F.3d 866, 874 (11th Cir.2003). The MSP “makes Medicare the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer.” Cochran v. U.S. Health Care Financing Admin., 291 F.3d 775, 777 (11th Cir.2002). “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 ....” Id.; see 42 U.S.C. § 1395y(b)(2)(A)(i) (2006). 11 Such payment is conditioned on Medicare's right to reimbursement if a primary plan later pays or is found to be responsible for payment of the item or service. Id. Nowhere in the definition of primary plan are listed “surviving children with tort property beneficiary rights.” 12 Id.

VI.

In this case, Bradley, as personal representative, on behalf of the estate and the ten surviving Burke children, settled wrongful death claims for abuse and neglect brought under the FWDA with the nursing home and its liability insurance...

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