April 2013: Howell Analysis applied to Medicare Reimbursement

By Robert M. Tessier

The First Appellate District, Division Five filed the Luttrell v. Island Pacific Supermarkets decision April 8, 2013. The court followed Howell, and for the first time we have a published decision expressly expanding the Howell analysis to Medicare liens. Moreover, the court held that if plaintiff fails to mitigate, and incurs medical bills as a result, any percentage reduction for plaintiffs failure to mitigate is deducted from paid medical expenses, rather than billed medical expenses.

This decision is probably no surprise to followers of this area of the law. The application of the reduction for failure to mitigate when Medicare is involved is going to be very concerning to plaintiffs and their counsel going forward for settled cases, as will be discussed below.

Luttrell v. Island Pacific Supermarkets 

Plaintiff fell and broke his hip. He sued defendant claiming his injuries were caused by the defendant failing to properly maintain an automatic door on the its premises. His injuries necessitated surgery. Following surgery, defendant alleges plaintiff failed to mitigate his damages by refusing to follow his doctor's advice, and as a result of this failure, plaintiff developed a State IV decubitus ulcer (bedsore). 

The case went to trial. At trial, (which occurred before the supreme court decision inHowell was published) plaintiff introduced the full amount of all billed medical expenses ($176,443.72 billed for hip injury and $511,105.21 billed for decubitus ulcer care). Defendant was found 95% responsible and plaintiff 5% comparatively liable. However, the jury's verdict included only $76,665.78 for past medical care related to the decubitus ulcer (15% of the billed amount submitted into evidence). 

In post trial motions, the parties stipulated that Medicare paid $138,082.25 for the medical care plaintiff received. The court concluded that the evidence supported only a 50% reduction for the decubitus ulcer care rather than the 85% the jury assigned and entered judgment accordingly. 

On appeal, the issues that concern us were 1) Does Howell apply to medical bills paid by Medicare; and 2) What is the proper way to calculate the reduction of the verdict when the plaintiff fails to mitigate his damages and such failure causes medical expenses to be incurred? 

As to the first question, the court concludes Howell does apply to Medicare cases because the plaintiff, under federal law, is not financially responsible to pay the providers for the difference between the amount billed versus the amount Medicare paid. (Slip op. p. 14) 

As to the second question, the court ruled that when the plaintiff has failed to mitigate, the reduction (in this case 50%) is taken from the amount paid, not the amount billed. As will be discussed in the next section, when Medicare is the payee, the practitioner needs to be aware of the how Medicare calculates the amount it can recover on its lien and from where it can seek reimbursement. 

Medicare's Reimbursement Right 
There is still a great deal of confusion regarding Medicare liens. In California, with the Medi-Cal program (which is part of the federal Medicaid program) the similar sounding names alone can account for half the problem. Let's use the Luttrellholding as a example for calculating the amount Medicare will seek for reimbursement. 

Medicare is part of an overarching federal statute. Medicare is the payor of last resort under the statute and can make "conditional payments" for healthcare services for Medicare members. Medicare's claim for reimbursement derives from the Medicare Secondary Payor ("MSP") provision found at 42 U.S.C. 1395y(b) when there is a potential third party payee (tortfeasor). 

Medicare has taken the position that its lien rights, when there is a settlement, extend to the entire amount of the settlement proceeds. Zinman v. Shahala (9th Cir 1995) 67F.3d 841, 843; 42 C.F.R. 411.24(c). However if there is a judgment or arbitration award, Medicare will limit its recovery rights to the amount of past medical expenses determined by the judgment or award. Zinman v. Shahala (N.D. Cal 1993) 835 F.Supp 1163, 1167, aff'd 67 F.3d 841 (9th Cir. 1995); 

The plaintiff in Luttrell, because he has a judgment or arbitration award is fortunate when it comes to Medicare's reimbursement claim. In all likelihood, Medicare will seek its recovery only from that portion of the judgment for past medical expenses pursuant to the cases cited above. 

When it comes to settlements, however, Medicare can and does claim it can assert its reimbursement rights as against the entire settlement. What to do in response is beyond the purview of this article, but suffice it to say that there are a number of third party vendors in the marketplace who make it their business to negotiate with Medicare. A simple google search will find several. Their websites are loaded with relevant content on this issue. 

In the future, there may be cases where it will be appropriate to conduct a binding arbitration in order to get an award fixing the apportionment of monies as between plaintiff's various claims, in order to provide clarification to Medicare as to the amount upon which it may assert its reimbursement rights. One can imagine many possibilities that would be of mutual benefit to all sides of a dispute when a looming Medicare lien is an impediment to settlement. 

Medicare's Rights are Different that Medi-cal's Rights 
DO NOT CONFUSE MEDICARE AND MEDI-CAL REIMBURSEMENT RIGHTS! California's reimbursement rights under the Medi-cal program are codified atWelfare & Institutions Code 14124.76. The statute specifically mentions the United State Supreme Court case of Arkansas Dept. of Health and Human Services v. Ahlborn (2006) 547 U.S. 268. The code and the Ahlborn decision are must reads if you are dealing with Medi-cal reimbursement claims, as this decision gives plaintiff's lawyers far greater creative license to minimize the amounts to be reimbursed to Medi-cal in the appropriate case. 

Recap of Appellate Court Decisions Addressing Howell 
Here is a brief synopsis of the cases related to the Howell issue for quick reference:

1. Katiuzhinsky v. Perry (2007) 152 Cal. App. 4th 1288 [If medical expenses purchased or paid by factoring company, full amount of factoring company's lien may be awarded if reasonable and if plaintiff remains responsible for payment of full amount];

2. Sanchez v. Strickland (2011) 200 Cal. App. 4th 758 [Amount of medical expenses gratuitously written off by provider may be recovered by plaintiff];

3. Sanchez v. Brooke (2012) 204 Cal. App. 4th 126 [Amount paid by worker's compensation, if according to statutory fee schedule, is the total amount recoverable for past medical expenses by injured plaintiff];

4. Luttrell v. Island Pacific Supermarkets (2013) ___ Cal. App. 4th ___ (A134089, Filed April 8, 2013) [Howell applies to Medicare, reduction for plaintiff's failure to mitigate taken against the paid medical amounts].

Conclusion

I hope you find this summary helpful. The dust is settling on the Howell issue, but I will keep you posted on any new cases or Legislative developments of significance.