In resolving a typical slip and fall injury case, plaintiff Cecilia Taransky agreed to a settlement of $90,000 for her accident at a grocery store. The settlement was intended to be inclusive of all liens which would be satisfied by the settlement proceeds. Taransky then moved for and received an order allocating the settlement proceeds to expressly exclude payment for medical expenses, arguing that New Jersey’s Collateral Source rule did not encompass benefits that she received from Medicare. With the state court order in hand, Taransky refused to reimburse Medicare over $10,000 for benefits, arguing to the federal administrative panel that a tortfeasor is not a “primary plan” under the Medicare Secondary Payer Act and that per the state court allocation order, she did not receive payment for medical expenses. The administrative law judge rejected her argument, which was affirmed by the Medicare Appeals Council.

Taransky next filed suit in the United States District Court for the District of New Jersey to avoid reimbursing Medicare. Her arguments rejected, the case went to appellate review by the Third Circuit. In affirming the lower court’s ruling and in reliance on the language of the Medicare Secondary Payer Act, the Third Circuit determined that a tortfearsor is considered a “primary plan” from which settlement proceeds can properly be distributed to Medicare for reimbursement. By extension, the Court also held that Medicare is not considered a “collateral source” under the meaning of New Jersey’s rule, and that, importantly, the state court allocation order was ineffectual where Medicare was not a party to the proceeding in which Taransky obtained the order.

This case serves as an important reminder that Medicare’s interests must be considered in resolving a personal injury action – because one way or another, they are getting paid.

Thanks to Emily Kidder for her contribution to this post.  Please write to Mike Bono for more information.