United States District Court, N.D. Illinois, Eastern Division
OPINION AND ORDER
CHARLES RONALD NORGLE Judge
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") 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.
The State Court Proceedings
is the surviving spouse of her deceased husband George
Paraskevas ("George").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
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.")
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.
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.
The Administrative Process
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.
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
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.
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.
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
Standard of Review
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).
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.
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)).
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).
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 ...