Netro v. Greater Baltimore Medical Ctr.

Panel: Kehoe, Reed, James P. Salmon (Senior Judge, Specially Assigned), JJ. Salmon, J. ⁶⁵ Most people in the United States who receive medical services have their medical costs paid, at least in part, by private health insurers or a government insurer ²⁴⁸ such as Medicare. When the health care providers send their bills to the patient's private or government health insurer, those insurers very frequently do not pay 100 percent of what the medical care providers charge; instead, they pay a reduced amount and the difference between the amount charged and the amount paid is often written off by the health care providers. Under Maryland law, assuming other conditions are met, a plaintiff who brings a negligence action is allowed to put into evidence the bill submitted by the health care provider and the defendant is prohibited from bringing to the attention of the jury the fact that a portion of the bill has been written-off.

See Lockshin v. Semsker , 412 Md. 257 , 284-85, 987 A.2d 18 (2010). Nevertheless, as a result of Maryland Code ⁶⁶ (1974, 2013 Repl. Vol.), Courts and Judicial Proceedings Article (Cts. & Jud. Proc.) § 3-2A-09 (hereinafter "the Maryland Act"), a defendant against whom a verdict for past medical expenses has been entered may file a post-trial motion to reduce the judgment by the amount of the write-offs.

Lockshin , 412 Md. at 285 -86 , 987 A.2d 18 . 1 The Maryland Act provides, in pertinent part: (d) Medical expenses ... (1) A verdict for past medical expenses shall be limited to: (i) The total amount of past medical expenses paid by or on behalf of the plaintiff; and (ii) The total amount of past medical expenses incurred but not paid by or on behalf of the plaintiff for which the plaintiff or another person on behalf of the plaintiff is obligated to pay. Cts. & Jud. Proc. § 3-2A-09(d)(1).

The obvious intent of the Maryland Act was to prevent the victim of a tort from recovering a verdict for past medical ⁶⁷ expenses that neither the plaintiff, nor anyone acting on the plaintiff's behalf, ever paid or was obligated to pay. In other words, insofar as past medical expenses are concerned, the Maryland General Assembly wanted to prevent the plaintiff from receiving a windfall by recovering for medical bills that were never actually incurred. In the case sub judice , the Circuit Court for Baltimore County applied the Maryland Act based on the following undisputed facts. Barbara Bromwell, between June 1, 2011 and June 29, 2013, received medical bills from various health care providers ²⁴⁹ that totaled $451,956.00.

At the time she received those bills, she was eligible to receive Medicare benefits as well as benefits from CareFirst BlueCross BlueShield (hereinafter "CareFirst"), her private health care insurer. Medicare made conditional payments to Ms. Bromwell of $157,730.75; CareFirst also paid part of the bills that were submitted, and Ms. Bromwell and/or her personal representative paid $47,609.00 in out-of-pocket expenses. But, taking into consideration $62,941.70 in write-offs, by Medicare and CareFirst, the total amount Ms. Bromwell, or her insurers or anyone else either paid, or were obligated to pay, was $389,014.30 ($451,956.00 - $62,941.70). After Ms. Bromwell's death, Kathy Netro, personal representative of the estate of Barbara Bromwell, filed a survival action in the Circuit Court for Baltimore County against Greater Baltimore Medical Center (hereinafter "GBMC") and others. 2 When that case was tried before a jury, the personal representative proved that $451,956.00 worth of medical bills were sent to Ms. Bromwell (or her representative) as a result of the medical malpractice committed by GBMC.

On July 22, 2016, the jury returned a verdict against GBMC and in favor of the personal representative for past medical expenses in the amount of $451,956.00. The jury found, however, that GBMC's negligence did not cause the death of Ms. Bromwell and for that reason it rejected the wrongful death claims brought ⁶⁸ against GBMC by Ms. Bromwell's three surviving adult children. Additionally, the jury awarded zero dollars in regard to the personal representative's claim for non-economic damages. After judgment was entered on July 22, 2016, in conformity with the jury verdicts, the personal representative along with Ms. Bromwell's surviving children, on August 1, 2016, filed a motion for new trial or, in the alternative, an additur .

On August 2, 2016, which was eleven days after the judgment was entered, GBMC filed a motion to "reduce verdict/judgment" pursuant to the Maryland Act. The trial court denied plaintiffs' motion for new trial or, in the alternative, an additur on August 23, 2016. Meanwhile, the personal representative of Ms. Bromwell's estate filed an opposition to GBMC's motion to reduce the verdict/judgment. The personal representative contended that provisions set forth in the Medicare Secondary Payer Act (hereinafter "the MSP"), a federal law, preempted the Maryland Act because, if the provisions of the Maryland Act did not exist, Medicare would receive approximately $18,500.00 more in repayment of the $157,730.75 conditionally paid by Medicare, than it would receive if the Maryland Act was enforced.

Her preemption argument is based on regulations that are set forth in 42 C.F.R. (Code of Federal Regulations) § 411.37, which govern how the MSP should be implemented. Section 411.37 reads, in pertinent part: (a) Recovery against the party that received payment- (1) General Rule. Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if- (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS [Centers ²⁵⁰ for Medicare and Medicaid Services] seeks to recover. * * * (c) Medicare payments are less than the judgment or settlement amount.

If Medicare payments are less than the ⁶⁹ judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment. (2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs. (3) Subtract the Medicare share of procurement costs from the Medicare payments.

The remainder is the Medicare recovery amount. To illustrate how C.F.R. § 411.37(c) operates, consider the following hypothetical: A plaintiff incurs $100,000.00 in procurement costs (legal fees, bills from experts and other costs) in order to obtain a $500,000.00 verdict for past medical expenses in a negligence case in which Medicare has made conditional payments of $250,000.00. In that hypothetical, Medicare's pro rata share of the procurement costs would be 50% of $100,000.00 or $50,000.00. But, if the total judgment is reduced from $500,000.00 to $400,000.00 for some reason, such as implementing the Maryland Act, Medicare's pro rata share of the procurement costs would be 62.5% ($250,000.00 is 62.5% of $400,000.00) and Medicare would have to pay $62,500.00 toward the procurement costs rather than $50,000.00.

If, in the case sub judice , the judgment stayed at $451,956.00, Medicare would only have to pay about 34.90% of the procurement costs because $157,730.75 is approximately 34.90% of $451,956.00. But, if the judgment were reduced pursuant to the Maryland Act, Medicare would have to pay approximately 40.55% of the fixed procurement costs inasmuch as $157,730.75 is about 40.55% of $389,014.30. That higher pro rata share means, according to appellant, that Medicare would have to pay about $18,500.00 more toward procurement costs than it would if the trial judge had not reduced the judgment pursuant to the Maryland Act. 3 ⁷⁰ In the trial court, appellant argued that the Maryland Act should not be applied because the MSP preempted it. According to appellant's trial counsel, because the reduction of the judgment meant that Medicare's share of the procurement costs would increase, the intent of Congress would be thwarted inasmuch as Congress intended, when it enacted the MSP, to increase revenues to the U.S. government "to the maximum extent possible." 4 On October 31, 2016, the trial judge granted GBMC's post-trial motion to reduce the judgment.

In doing so, the court rejected the personal representative's preemption argument and, in accordance with the Maryland Act, the judgment was reduced to $389,014.30. The personal representative filed this timely appeal and raised one question, which she phrases as follows: Do the Medicare Secondary Payer ("MSP") provisions of federal law preempt a state law that diminishes the ²⁵¹ subrogation interest of the United States? I. MOTION TO DISMISS APPEAL GBMC has filed a motion to dismiss this appeal because, purportedly, the appellant does not have standing to protect the rights of Medicare. According to GBMC, the personal representative's entire purpose in filing this appeal is to protect the interest of Medicare.

GBMC argues: This Court has made clear, as a "fundamental principle of standing to appeal," that "an appellate court will not entertain an appeal by one who does not have an interest that will be affected by prosecuting the appeal." Lopez-Sanchez v. State , 155 Md. App. 580 , 595, 843 A.2d 915 (2004), aff'd , ⁷¹ 388 Md. 214 , 879 A.2d 695 (2005). Similarly, the Court of Appeals has identified standing to appeal, i.e. "the sufficiency of an [appellant's] interest to maintain an appeal," as a question which the appellate court "can and must decide. . ." Kreatchman v. Ramsburg , 224 Md. 209 , 215, 167 A.2d 345 (1961). In Kreatchman , the Court of Appeals explained: It is firmly established, we think, that in order to maintain an appeal, the appellant must have an interest in the subject matter of the appeal.

If he does not, we think that rule 835(b)(1) [now Rule 8-602(a)(1) ] is applicable-that the appeal is not authorized by law and that this constitutes a ground for dismissal of the appeal; and, as we have said, the question of the sufficiency of interest is one to be determined by this Court and could not be tried and decided by the lower court. We conclude that this question is properly before us. Id. at 217 , 167 A.2d 345 (footnote omitted). We hold that the appellant does have standing because she has an interest that will be affected if she is successful in her appeal.

If this Court were to agree with appellant that the MSP preempts the Maryland Act, appellant would receive approximately $44,442.00 more ($62,941.70 less $18,500.00) than she would receive if the Maryland Act was applied. We therefore reject GBMC's contention that this appeal should be dismissed for lack of standing.

II

DISCUSSION As already mentioned, Medicare made a conditional payment of Ms. Bromwell's medical bills in the amount of $157,730.75. The payments were conditional because, when the need for health care arose, Ms. Bromwell was eligible to receive Medicare benefits but there existed a possibility that Ms. Bromwell (or her personal representative) might be able to recover the amount paid for medical bills in a tort suit; in ⁷² such situations, federal law provides that Medicare's responsibility to pay the cost of that health care is only "secondary" to the tortfeasor's insurance (or self-insurance). 42 U.S.C. § 1395y(b)(2). In the subject case, GBMC was self-insured. See 42 U.S.C. § 1395y(b)(2)(A)(ii) and 42 C.F.R. § 411.22 . 42 U.S.C. § 1395y(b)(2)(B)(i) provides that a conditional Medicare payment may be made if a primary plan: has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations).

Any such payment by the Secretary ²⁵² [of Health and Human Services] shall be conditioned on reimbursement to the appropriate Trust Fund in accordance with the succeeding provisions of this subsection. A "primary plan," insofar as here material, includes a self-insured plan such as the one GBMC had at the time Ms. Bromwell was injured. See 42 U.S.C. § 1395y(b)(2)(A)(ii) and 42 C.F.R. § 411.21 . 42 U.S.C. § 1395y(b)(2)(B)(ii) reads, in material part, as follows: (ii) Repayment required A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service . A primary plan's responsibility for such payment may be demonstrated by a judgment , a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.

(Emphasis added.) Under the subsection of the MSP just quoted, GBMC, as well as appellant (an entity that receives payment from the primary plan), have a duty to repay Medicare inasmuch as ⁷³ GBMC's responsibility to repay Medicare for the medical bills was "demonstrated by a judgment[.]" In other words, before deducting for procurement costs, GBMC and the personal representative who received payment from GBMC, had an obligation to repay Medicare for any "item of service" paid by Medicare. Here, health care providers (who rendered services to Ms. Bromwell) presented bills to Medicare that totaled $210,106.49, but Medicare made conditional payments only in the amount of $157,730.75. 5 As a result of Medicare paying the lower amount, medical care providers wrote-off $52,375.74 ($210,106.49 - $157,730.75) of the charges. 6 In arguing that the Maryland Act was preempted by the MSP, appellant relies on the legislative history of the MSP, beginning in 1980. Appellant points out that prior to 1980, Medicare was a "primary payer" for most health services provided to Medicare beneficiaries. Even when a beneficiary's need for services arose from an injury or an illness sustained as a result of negligence committed by a third-party whose private insurance could pay for such services, Medicare could not recover its payments.

In 1980, Congress changed the law to allow Medicare to recover from those third-party tortfeasors in order "to achieve major fiscal savings in the Medicare program." United States v. Geier , 816 F.Supp. 1332 , 1336 (W.D. Wis. 1993). To fulfill this goal, Congress passed the Medicare Secondary Payer (MSP) law and expressed its intent as follows: Under present law, [M]edicare is the primary payor ... for hospital and medical services received by beneficiaries. This is true even in cases in which a beneficiary's need for services is related to an injury or illness sustained in an auto accident and the services could have been paid for by a ⁷⁴ private insurance carrier under the terms of an automobile ²⁵³ insurance policy. As a result, Medicare has served to relieve private insurers of obligations to pay the costs of medical care in cases where there would otherwise be liability under the private insurance contract.

The original concerns that prompted inclusion of this program policy in the law ... no longer justify retaining the policy, particularly if it is understood that immediate payment may be made by Medicare with recovery attempts undertaken only subsequently when liability is established. H.R. REP. No. 1167, 96 th Cong., 2d Sess. 389 (1980) (emphasis added), reprinted in 1980 U.S.C.C.A.N. 5526, 5752. In Zinman v. Shalala , 67 F.3d 841 (9th Cir. 1995), the Court discussed the legislative purpose of the MSP stating: As first enacted, Medicare was the primary payer for medical services supplied to a beneficiary, even when such services were covered by other insurance such as an employer group health plan or liability insurance.

Responding to skyrocketing Medicare costs, Congress in 1980 enacted the Medicare Secondary Payer legislation (MSP legislation), requiring Medicare to serve as the secondary payer when a beneficiary has overlapping insurance coverage. 42 U.S.C. § 1395y(b). Id. at 843 . More recently, in 71 Fed. Reg. 9466 , 9467 (February 24, 2006), the intent of the MSP was once again summarized: Beginning in 1980, the Congress enacted a series of amendments to section 1862(b) of the Social Security Act (the Act) (hereafter referred to as the Medicare Secondary Payer (MSP) provisions) to protect the financial integrity of the Medicare program by making Medicare a secondary payer, rather than a primary payer of health care services, when certain types of other health care coverage are available. (Workers' compensation had already been primary to Medicare since the implementation of the original Medicare statute.) In enacting the MSP provisions, the Congress intended that the MSP provisions be construed to make ⁷⁵ Medicare a secondary payer to the maximum extent possible .

(Emphasis added.) Appellant's main contention in this appeal is that the Maryland Act, which allows a judgment to be reduced by a post-trial motion, conflicts with the "paramount Congressional purpose" of the MSP. Appellant argues that this "paramount [ ] purpose" was to ensure that the Medicare Program be reimbursed for its conditional payments "to the maximum extent possible." To prove that this was Congress's "paramount" goal, appellant relies solely on the excerpt from the Federal Register just quoted. That excerpt does not support appellant's argument. To reiterate, it states that "Congress intended that the MSP provisions be construed to make Medicare a secondary payer to the maximum extent possible." (emphasis added). 42 C.F.R. § 411.21 states: "Secondary payments mean payments made for Medicare covered services or portions of services that are not payable under other coverage that is primary to Medicare." Applying the Maryland Act in this case will not interfere with the goal of the MSP Act as enunciated in the Federal Register.

Here, if the Maryland Act is enforced, GBMC will be required to pay 100% of the conditional payments to appellant who, in turn, must reimburse Medicare. In other words, GBMC, and not Medicare, will be the primary payer. The fact that Medicare, based on its own regulations, has to pay a higher portion of the procurement costs than it would if the Maryland Act did not exist, does not change that result. ²⁵⁴ The case of United States v. Geier provides a clear example of how federal courts have implemented Congress's intent that Medicare be a secondary payer to "the maximum extent possible." 816 F.Supp. 1332 . The Geier case arose in 1986 when Esther Geier was injured in an automobile accident.

Id. at 1334 . As a result of injuries received in that accident, Ms. Geier needed services provided by various health care providers. Medicare made conditional payments of Ms. Geier's bills in the amount of ⁷⁶ $11,150.93 and Hartford Insurance Company ("Hartford"), Ms. Geier's private health care insurer, paid an additional $1,494.71. Id.

Ms. Geier brought a tort suit against the motorist who had caused her injuries. After a court trial, the other motorist was found negligent and Ms. Geier was awarded $1,500.00 for past medical expenses and $3,000.00 for past pain and suffering. Id. at 1335 . The liability insurer for the negligent driver, General Casualty Insurance Company ("General Casualty"), deposited $1,500.00 with the clerk of the court for the payment of the medical expenses and did so because a dispute had arisen between Hartford and the United States government (representing Medicare), as to who should receive payment of the monies deposited.

Id. The United States then filed suit against Geier, Hartford and General Casualty claiming it was entitled to the $1,500.00 at issue. The government relied on 42 U.S.C. § 1395y(b)(1) (1982 & Supp. V 1987), which at that time read: Payment under this subchapter may not be made with respect to any item or service to the extent that payment ... can reasonably be expected to be made promptly ... under an automobile or liability insurance policy or plan.... Any payment under this subchapter with respect to any item or service shall be conditioned on reimbursement to the appropriate Trust Fund ... when notice or other information is received that payment for such item or service has been or could be made under such a law, policy, plan, or insurance.

In order to recover payment made under this subchapter ... the United States may bring an action against any entity which would be responsible for payment with respect to such item or service ... or against any entity ... which has been paid with respect to such item or service.... The United States shall be subrogated ... to any right of an individual or any other entity to payment with respect to such item or service under such a law, policy, plan, or insurance. The Geier Court, referring to the statutory language just quoted, said: ⁷⁷ This statutory language, together with the accompanying regulations, legislative history for both the 1984 and 1989 amendments and the related case law, established that the Medicare payments to defendant Geier were conditional and that Congress intended for United States' claims to take priority over all other rights of recovery . According to the regulations, it