## Facts

- Medicare beneficiaries brought a nationwide class action against the Secretary of Health and Human Services challenging the government’s reimbursement practices under the Medicare Secondary Payer (MSP) provisions.
- Under the MSP scheme, Medicare may make “conditional” payments for medical care when another payer (including liability insurance) is responsible, and Medicare later seeks reimbursement if the beneficiary obtains payment from the primary source.
- Plaintiffs had received or expected to receive lump-sum third-party liability settlements relating to Medicare-covered injuries, sometimes in amounts less than their claimed total damages.
- HHS, relying on 42 C.F.R. § 411.24(c), sought reimbursement up to the amount of Medicare’s conditional payments, capped at the amount paid by the third party (“whichever is less”).
- Plaintiffs contended that when a settlement reflects a compromise for less than full damages, Medicare must accept only a pro rata share of its payments.
- The district court granted summary judgment for HHS, and plaintiffs appealed.

## Issues

1. Whether the MSP statute requires HHS to reduce reimbursement of conditional Medicare payments on a pro rata basis when a beneficiary’s liability settlement is less than the beneficiary’s total damages.
2. Whether 42 C.F.R. § 411.24(c), permitting recovery of the full amount of conditional payments up to the amount of the third-party payment, is a valid interpretation of the MSP provisions.

## Decision

- The Ninth Circuit affirmed summary judgment for the Secretary.
- The court held the MSP statute does not require pro rata reduction of Medicare’s reimbursement claim merely because a liability settlement is discounted.
- The court upheld 42 C.F.R. § 411.24(c) as a permissible construction of the MSP provisions.
- Medicare may recover an amount equal to its conditional payments or the amount of the third-party payment, whichever is less.

## Legal Principles

- The MSP provisions authorize Medicare to make conditional payments and to obtain reimbursement when a primary payer later pays; the statute does not mandate proportional reduction based on a beneficiary’s total damages.
- When statutory text does not compel a specific reimbursement methodology, a duly promulgated agency regulation implementing the MSP scheme receives deference if reasonable.
- Under 42 C.F.R. § 411.24(c), Medicare’s recovery is capped by the third-party payment amount, but need not be discounted pro rata because the settlement is compromised.
- MSP reimbursement rules further Congress’s objective that Medicare function as a secondary payer and reduce Medicare expenditures when other sources are available.

## Conclusion

The Ninth Circuit sustained HHS’s regulation allowing Medicare to seek reimbursement of conditional payments from liability settlement proceeds up to the full amount of those payments (limited by the settlement amount), rejecting a statutory requirement that Medicare take only a pro rata share of discounted settlements.


Zinman v. Shalala, 67 F.3d 841 (9th Cir. 1995)