Taransky v. Sec'y of the U.S. Dep't of Health & Human Servs.

Decision Date29 July 2014
Docket NumberNo. 13–3483.,13–3483.
Citation760 F.3d 307
PartiesCecelia A. TARANSKY, Individually and on behalf of all persons similarly situated, Appellant v. SECRETARY OF the UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; United States Department of Health and Human Services; United States of America.
CourtU.S. Court of Appeals — Third Circuit


Franklin P. Solomon, [Argued], Alan H. Sklarsky, Williams Cuker Berezofsky, Cherry Hill, NJ, Joseph A. Venti, Williams, Cuker & Berezofsky, Philadelphia, PA, Attorneys for PlaintiffAppellant.

Daniel Tenny, [Argued], United States Department of Justice, Washington, DC, Karen D. Stringer, Office of United States Attorney, Newark, NJ, Attorneys for DefendantAppellees.

Before: HARDIMAN, SLOVITER and BARRY, Circuit Judges.


HARDIMAN, Circuit Judge.

This appeal arises under the Medicare as a Secondary Payer Act (MSP Act), 42 U.S.C. § 1395y(b)(2). Appellant Cecelia A. Taransky, a Medicare beneficiary, contends that she is not required to reimburse the Government 1 for conditional medical expenses that it advanced on her behalf. We disagree.


Medicare is a federal entitlement program that provides health insurance benefits to qualified elderly and disabled individuals. See42 U.S.C. § 1395y(b)(2). When first enacted, Medicare paid its beneficiaries' medical expenses, even if beneficiaries could recoup them from other sources, such as private health insurance. See, e.g., Zinman v. Shalala, 67 F.3d 841, 843 (9th Cir.1995).

In 1980, Congress enacted the MSP Act in an effort to reduce escalating costs. As its title suggests, the statute designates Medicare as a “secondary payer” of medical benefits, and thus precludes the program from providing such benefits when a “primary plan” could be expected to pay. 42 U.S.C. § 1395y(b)(2)(A). When the primary plan cannot promptly pay a beneficiary's medical expenses, however, Medicare makes conditional payments to ensure that the beneficiary receives timely care. Id. § 1395y(b)(2)(B). Once “the beneficiary gets the health care she needs ... Medicare is entitled to reimbursement if and when the primary payer pays her.” Cochran v. U.S. Health Care Fin. Admin., 291 F.3d 775, 777 (11th Cir.2002).

This appeal involves, inter alia, the interaction of the MSP Act with a state law, the New Jersey Collateral Source Statute (NJCSS), N.J. Stat. Ann. § 2A:15–97. Under the NJCSS, a tort plaintiff cannot recover damages from a defendant when she has already received funding from a different source. The statute provides:

In any civil action brought for personal injury or death ... if a plaintiff receives or is entitled to receive benefits for the injuries allegedly incurred from any other source other than a joint tortfeasor, the benefits, other than workers' compensation benefits or the proceeds from a life insurance policy, shall be disclosed to the court and the amount thereof which duplicates any benefit contained in the award shall be deducted from any award recovered by the plaintiff, less any premium paid to an insurer directly by the plaintiff or by any member of the plaintiff's family on behalf of the plaintiff for the policy period during which the benefits are payable.

N.J. Stat. Ann. § 2A:15–97 (emphasis added).

The NJCSS has two purposes. First, it prevents a tort plaintiff from recovering damages from both a collateral source of benefits ( i.e., a health insurer) and a tortfeasor. Parker v. Esposito, 291 N.J.Super. 560, 677 A.2d 1159, 1162 (App.Div.1996). Second, it aims to shift the burden of medical costs related to tort injuries, whenever possible, from liability insurers to health insurers, and thereby keep liability insurance premiums down. Lusby v. Hitchner, 273 N.J.Super. 578, 642 A.2d 1055, 1061 (App.Div.1994). In this appeal, Taransky contends that because the NJCSS barred her from recovering medical costs from her tortfeasor, it would be inappropriate for her to reimburse the Government for its conditional medical payments.


Taransky was injured on November 7, 2005, when she tripped and fell at the Larchmont Shopping Center in Mt. Laurel, New Jersey. The Medicare program conditionally paid $18,401.41 for her medical care.

Almost two years later, Taransky filed suit against the owners and operators of the shopping center (collectively, Larchmont) in the Superior Court of New Jersey, Burlington County, seeking damages for bodily injury, disability, pain and suffering, emotional distress, economic loss, and medical expenses. Shortly after filing suit, Taransky's lawyer contacted her designated Medicare contractor repeatedly, requesting the exact amount of Medicare's claim. In one letter, counsel complained: “I cannot negotiate the case unless I know the full amount of Medicare's claim.” JA at 295. In another, he stated: “I would like to try to resolve Ms. Taransky's claim, but will have difficulty doing so without knowledge of Medicare's lien and its benefit payments in this matter.” JA at 307. On several occasions, the Medicare contractor provided Taransky's counsel with information about Medicare's conditional payments, which continued to accumulate as Taransky's lawsuit proceeded.

After two years of litigation, Taransky settled her claims against Larchmont for $90,000. In the settlement agreement, she granted Larchmont a full release of “all past, present and future claims,” including for “medical treatment” and for “medical expense benefits” in connection with the accident. JA at 271. The agreement also provided that any liens or subrogation claims would be “satisfied and discharged from the settlement proceeds,” and that Taransky would indemnify Larchmont with respect to such claims. Id. Relevant to this case, the agreement provided that the indemnified liens “specifically include [ ], but [are] not limited to, Medicare, Medicaid, workers compensation liens and/or claims.” Id.

On the heels of the settlement, Taransky filed a motion in the New Jersey Superior Court requesting an order “apportioning the proceeds of the settlement between various elements of damages, but only to the extent necessary to obtain specified documentation relevant to anticipated administrative proceedings with the federal Centers for Medicare and Medicaid Services.” JA at 267. Taransky acknowledged that her lawsuit had sought damages for “certain expenses for medical treatment,” and that some of her treatment “was paid for through the federal government's Medicare program.” Id. In spite of these facts, Taransky argued that the NJCSS precluded tort plaintiffs like herself from recovering losses such as medical expenses that were already paid by another source. Based on that premise, she claimed that her Medicare expenses were not considered in the settlement negotiations and were not included in the settlement amount. JA at 268. Taransky's counsel notified her Medicare contractor of the motion, but did not make the contractor or the Government a party to her state court case. Neither Larchmont nor the Government responded to Taransky's motion.

On November 20, 2009, the Superior Court granted Taransky's motion and entered an order for “good cause shown,” stating that the settlement did not include any Medicare expenses: [N]o portion of the recovery obtained by [Taransky] in this matter is attributable to medical expenses or other benefits compensated by way of a collateral source.” JA at 260, 261. The order specified that the settlement amount was “allocated solely to recovery for bodily injury, disability, pain and suffering, emotional distress, and such non-economic and otherwise-uncompensated loss as plaintiff may have suffered.” JA at 261.


After Taransky settled her case, a Medicare contractor demanded reimbursement of the $10,121.15 that the Medicare program had paid on her behalf.2 Taransky refused to pay, citing the NJCSS and the allocation order she had received from the Superior Court. She also contended that the Government could not demand reimbursementfrom a tortfeasor's liability settlement under the MSP Act because a tortfeasor was not a “primary plan” under the meaning of the statute, and that reimbursement would be inequitable because she had not recovered any of her medical expenses.

The Administrative Law Judge (ALJ) found against Taransky on all claims. 3 The ALJ ruled that the Government could be reimbursed from the proceeds of a tort settlement, and refused to recognize the state court's allocation order because it was not made “on the merits.” He also rejected Taransky's contention that the NJCSS precluded the Government from reimbursement, reasoning that the NJCSS did not apply to Medicare's conditional payments. Finally, the ALJ found that reimbursement would not be inequitable, as he was unconvinced that the settlement truly did not include damages for medical expenses.

The Medicare Appeals Council affirmed the ALJ's opinion in its entirety, writing separately only to expound on two points. First, it determined that the settlement in fact included damages for Taransky's medical expenses, finding that Taransky's counsel—who repeatedly demanded confirmation of the amount of Medicare's lien—had used Medicare's payments as a basis for the settlement. Second, citing Mason v. Sebelius, 2012 WL 1019131 (D.N.J. Mar. 23, 2012), the Appeals Council ruled that the NJCSS did not preclude tort victims from obtaining damages for Medicare benefits in tort liability settlements.

On July 16, 2012, Taransky filed suit in the United States District Court for the District of New Jersey, reiterating her claim that she was not responsible for reimbursing the Medicare program from the proceeds of her settlement. As she had argued during the administrative process, Taransky contended that reimbursement was unauthorized by the MSP Act and barred by the NJCSS. She also proffered two new arguments: (1) that Medicare's recovery should be limited to a proportionate share of her settlement that reflected her medical...

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