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Paraskevas v. Price

United States District Court, N.D. Illinois, Eastern Division

November 27, 2017

THOMAS E. PRICE. [1] as Secretary of the United States Department of Health and Human Services. Defendant.



         Plaintiff Toula Paraskevas ("Plaintiff") sues Defendant Thomas E. Price as the Secretary of the United States Department of Health and Human Services ("Defendant, " "Medicare, " or the "Secretary"). Plaintiff seeks a declaratory judgment that the Medicare Appeals Council ("MAC")[2] erred in holding that Medicare was entitled proceeds from Plaintiffs state court settlement of a lawsuit regarding the medical treatment of her deceased husband's prostate cancer. Before the Court are the parties' cross motions for summary judgment. For the reasons set forth below; Defendant's motion is granted, and Plaintiffs motion is denied.

         I. BACKGROUND

         A. The State Court Proceedings

         Plaintiff is the surviving spouse of her deceased husband George Paraskevas ("George").[3]George was diagnosed with prostate cancer in April 2007 and passed away on January 2. 2012. Medicare is a federal program administered by the Centers for Medicare and Medicare Services, which is a part of the Department of Health and Human Services. The program provides health insurance to elderly and disabled individuals. Medicare is considered a Secondary Payer, which renders payments made on behalf of a Medicare beneficiary conditional and subject to reimbursement. Under the Medicare Secondary Payer ("MSP") statute, Medicare may seek such reimbursement from the beneficiary if it has not received payment for medical expenses from a primary plan such as group health insurance or liability insurance. Third-party tortfeasors are also considered a primary plan from which Medicare may obtain reimbursements. From George's diagnosis until his death. Medicare conditionally paid medical bills totaling $253, 546.73 on George's behalf In 2009. Plaintiff and her husband George filed a medical malpractice lawsuit in the Circuit Court of Cook County, Illinois against George's primary care physician, his urologist, and their respective practice groups. Plaintiff and George sought to recover for failure to diagnose George's prostate cancer at an earlier time. After George's passing, Plaintiff was appointed as the Special Administrator for George's estate. Plaintiff then filed a first amended complaint in the state court, alleging the estate's survival claims pursuant to the Illinois Survival Act ("ISA") and claims on behalf of the beneficiary's next of kin. Plaintiff and George's three adult children, under the Illinois Wrongful Death Act ("IWDA").

         In fall of 2012, Plaintiff tentatively settled the case with George's primary care physician and his practice group for $250, 000 plus costs. Those defendants were dismissed from the case. However, they were again added to the case on September 11, 2013 after the tentative settlement broke down. On September 23, 2013, the state court granted the urologist and his practice group's motion to dismiss for failure to state a claim. The primary care physician and his practice group remained in the case. The state court also granted Plaintiff leave to file a second amended complaint; however, counsel failed to file the second amended complaint on account of what counsel called a "ministerial oversight." Administrative Record ("'R.") at 9.

         Plaintiff and the primary care physician continued to explore the possibility of settling the case, and in December 2013, they arrived at an agreement that the primary care physician and his practice group would pay $258, 664.10. From this sum. $175, 000.00 was to be distributed to the next of kin, with the remainder going towards attorneys' fees and other expenses. Notably, the settlement figure was the same amount as in the preliminary tentative settlement that eventually fell through. Plaintiffs counsel prepared the required documents for filing the settlement in the state court and requesting distribution of the settlement proceeds to the next of kin. Weeks later, Plaintiff realized her failure to file the second amended complaint. She obtained leave for a second time to file a second amended complaint. Plaintiff then filed the second amended complaint in order to eliminate the claims pursuant to the ISA, leaving only the IWDA claim remaining. In conjunction with the second amended complaint. Plaintiff filed what she called a "Motion to Approve Settlement and Distribution, to Confirm that Settlement is Made Exclusively Pursuant to the Wrongful Death Act, and To Dismiss." Id. at 10. The motion stated that the "settlement should be ascribed wholly to damages in the wrongful death action." Id.

         Prior to finalizing the settlement. Plaintiff alerted Medicare's counsel as to the settlement proceedings. Plaintiff and Medicare also engaged in discussions about Medicare's potential entitlement to reimbursement from a settlement if the state court settlement negotiations indeed resulted in a finalized settlement. On February 3. 2014, the state court approved Plaintiffs settlement for $250, 000 plus $8, 664.10 in costs. The state court also approved the distribution of the proceeds. Although Plaintiff asserts that the state court made an express finding apportioning the settlement proceeds exclusively under the IWDA claim, that court simply signed the order verbatim as prepared by counsel and did so without any substantive hearing or consideration of the parties' filings.

         B. The Administrative Process

         The Court first provides a brief overview of the statutory framework for context. 'Title XVIII of the Social Security Act, 79 Stat. 291, as amended, 42 U.S.C. § 1395 el seq., commonly known as the Medicare Act, establishes a federally subsidized health insurance program to be administered by the Secretary." Heckler v. Ringer, 466 U.S. 602, 605 (1984). After a beneficiary receives payment from a primary plan, the Secretary determines the reimbursement amount due from the beneficiary to be paid to Medicare. The Medicare Statute follows the administrative review process set forth in 42 U.S.C. § 405(b), after which judicial review is permitted in accordance with 42 U.S.C. § 405(g). See 42 U.S.C. § 1395ff(b)(1)(A). Beneficiaries may challenge the amount of reimbursement or seek waiver of any reimbursement amount. First, the beneficiary is required to ask that a Medicare Secondary Payer Recovery Contractor ("MSPRC") make a redetermination of the reimbursement demand. 42 U.S.C. § 1395ff(a)(3)(B)(i). Second, the beneficiary may seek another reconsideration; however, this reconsideration is conducted by a qualified independent contractor ("QIC")- 42 U.S.C. § 1395ff(c)(1)-(2); 42 C.F.R. § 405.960. Third, if the beneficiary remains unsatisfied with the determination, she may seek a hearing before an administrative law judge ("AL.T). 42 U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. § 405.1002. At the last step of the administrative process, the beneficiary may seek review of the ALJ's decision by the MAC. 42 C.F.R. §405.1100. That decision is binding absent modification or reversal by a federal court. 42 C.F.R. § 405.1130.

         On January 27, 2014, the MSPRC issued a final demand letter, seeking reimbursement in the amount of $171, 537.04 in the event that Plaintiff settled her state court case. On February 10, 2014, Plaintiff appealed the MSPRC's final demand letter. There was a delay. The redetermination decision was not issued within the requisite sixty-day period. Due to that delay, Plaintiff filed a federal claim for declaratory relief. Another court in this District heard the case and dismissed the case for failure to exhaust administrative remedies.

         Plaintiff proceeded through the administrative process and lost at every stage. On April 6, 2015, the MSPRC issued its redetermination decision upholding the original determination that Medicare was entitled to a $171, 537.04 reimbursement. On September 16, 2015, Plaintiff exercised her right to again appeal the determination, this time by a QIC. On October 23, 2015, the QIC affirmed the reimbursement determination.

         On November 19, 2015. Plaintiff requested that an ALJ hear her case. On January 6, 2016, the ALJ held a telephonic hearing. Plaintiffs counsel appeared on her behalf. The ALJ directly inquired as to the existence of a formal written agreement memorializing Plaintiffs state court settlement. Plaintiffs counsel represented that he believed there was a general release and that he would provide that release for the record. To the contrary, he could not do so. Rather, after the hearing concluded. Plaintiff submitted two affidavits obtained from her attorneys. The affidavits explicitly stated that Plaintiffs counsel and opposing counsel could not locate any written settlement agreement, despite the fact that the settlement totaled roughly a quarter of a million dollars.

         Finally, on March 30, 2016, Plaintiff requested that the MAC review the ALJ's decision. The MAC determined that Plaintiff attempted to convert her lawsuit containing survival and medical malpractice claims into a suit exclusively under the IWDA in order to shield herself from having to reimburse Medicare. The MAC also found that Plaintiffs counsel "'did not document, in any way, [the] assertions that the matter was settled exclusively under the [IWDA]." R. 10 (internal quotation omitted). Moreover, Plaintiff made no mention and provided no explanation for the fact that the settlement recovery was identical to the amount of the preliminary settlement that fell apart. The MAC rejected Plaintiffs position that the state court made a determination on the merits when it signed the order stating that the lawsuit and settlement were pursuant to only the IWDA. Notably, the MAC found that there was nothing in the record that reflected whether the Illinois court ever held a hearing on this matter. On August 16, 2016, the MAC ultimately affirmed Medicare's entitlement to reimbursement but reduced the total dollar amount to $105, 000.00 plus interest. Plaintiff now seeks for this Court to declare that the Secretary's final decision was error, so that she need not pay Medicare the $105, 000.00 reimbursement amount.


         A. Standard of Review

         "Summary judgment is appropriate when 'the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Northfield Ins. Co. v. City of Waukegan, 701 F.3d 1124, 1128 (7th Cir. 2012) (quoting Fed.R.Civ.P. 56(a)); see also Celotex Corp. v. Catrett, 477 U.S. 317. 322 (1986). "A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Wells v. Coker, 707 F.3d 756, 760 (7th Cir. 2013) (internal quotation marks and citation omitted). "On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder.'" Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003) (citing Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 255 (1986)). The general standards for summary judgment are unaltered by cross summary judgment motions: the Court "construe[s] all facts and inferences therefrom in favor of the party against whom the motion under consideration is made." Selective Ins. Co. of S.C. v. Target Corp., No. 16-1669, 2016 WL 7473786, at *2 (7th Cir. Dec. 29, 2016) (citation and quotation marks omitted).

         As set forth above, the decision of the MAC is the final decision of the administrative review process. Wood v. Thompson, 246 F.3d 1026, 1029 (7th Cir. 2001) ("[T]he Medicare Appeals Council adopted the decision of the ALJ, that decision stands as the final decision of the Secretary."). This Court has the authority to review the MAC's decision under 42 U.S.C. § 405(g). Id. Where the Secretary's findings are supported by substantial evidence, those findings shall be conclusive. Id. If the Secretary denies a claim, "the [C]ourt shall review only the question of conformity with [the Secretary's] regulations and the validity of such regulations." Id. (citation and quotation marks omitted) (alteration in original). "'Substantial evidence' is 'more than a scintilla' but less than a preponderance of the evidence, and is 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" hi (quoting Kapusta v. Sullivan, 900 F.2d 94, 96 (7th Cir. 1989)).

         In other words, the Seventh Circuit has explained that 42 U.S.C. § 1395 incorporates the familiar standard of review under the Administrative Procedure Act. Abraham Lincoln Mem'l Hosp. v. Sebelius, 698 F.3d 536, 547 (7th Cir. 2012) C'Our review of the Secretary's decision on reimbursement matters... incorporates the standard of review from the APA"). Under that standard, reviewing courts only set aside agency decisions where they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;...[or] unsupported by substantial evidence...'" Id. (quoting 5 U.S.C. § 706(2)) (alteration in original). Both the arbitrary and capricious and substantial evidence standards require a narrow or limited scope of review, and the Court is prohibited from substituting its own judgment for the agency's judgment, Id. (citing Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).

         Furthermore, the Court owes deference to the agency, and the degree of deference is particularly warranted "when, as here, the Secretary is interpreting regulations issued pursuant to the complex and reticulated Medicare Act." Id. at 547-48 (citations, quotation marks, and brackets omitted).

         There are genuine no issues of material fact in this case. The case turns solely on a legal determination as to whether the MAC's decision is supported by substantial evidence. Because this matter of law is outcome determinative for both motions for ...

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