Constitutional Challenge to Treasury Offsets in Conditional Payments Falls Flat: Massachusetts Man’s Moon Shot Lands with a Thud
Tuesday, October 16, 2018
By Marty Cassavoy
A Federal Magistrate in a Massachusetts Federal Court dismissed a Navy veteran’s attempt to have the reliance upon Treasury offsets to collect Medicare conditional payments declared unconstitutional. The decision to dismiss the case, predictably relies upon the exhaustion of administrative remedies. It is the unique facts of the case that highlight the pitfalls of dealing with an increasingly aggressive Treasury offset process. The case is cited as Mouradian v. United States Government, 2018 U.S. Dist. LEXIS 161863 (D. Mass.).
Facts of the Case
In June 2015 Raymond Mouradian, a 34 year Navy veteran and Medicare beneficiary, was seriously injured in a head-on car crash in Bridgewater, Massachusetts. The driver who hit Mouradian’s car had crossed the center lane and police charged that driver – whose car was littered with nips of liquor, marijuana, and an open container of alcohol – with a laundry list of offenses. A bad day for Mouradian got worse when he was taken to the hospital and diagnosed with a fractured femur and broken ribs. In all, Medicare alleged that it paid nearly $40,000 for treatment attributable to Mouradian’s accident.
A little over a year later in August 2016 Mouradian’s attorney notified Medicare that Mouradian was anticipating a settlement of $25,000. Medicare promptly issued a demand for the entire amount, not even reducing the demand for procurement costs associated with the attorney’s role in procuring the settlement. Rather than file a formal appeal, Mouradian’s attorney sought a waiver from Medicare, an informal request for Medicare to reduce the demand amount for reasons of equity, good conscience or the financial condition of the beneficiary. In mid-October Medicare agreed to a partial waiver and reduced the amount of its demand do $12,500. The clock was ticking, however, and Medicare’s waiver determination came with an admonition to quickly pay or it would refer the matter to the Department of Treasury for direct collection and offset.
There was a basic problem, however. Medicare’s demand was premature. Mouradian had never actually received a settlement or, as he described in a December 2016 letter to Medicare’s Benefits Coordination and Recovery Contractor (BCRC) “I have not received a cent from my insurance company.” Medicare’s contractor replied in January 2017 asking for additional information to support Mouradian’s claim that “settlement proceeds have not been disbursed to date.” In March the IRS notified Mouradian that it had reduced his tax refund by roughly $400. Roughly two weeks later the IRS informed him that it would begin reducing his Social Security check by 15% per month until the full amount of the debt was reclaimed.
As a side note it’s worth noting that a 15% reduction in a beneficiary’s Social Security check barely covers the interest accruing on $12,500 at a rate of 9-10%. This debt could result in a near permanent 15% reduction of his Social Security check. Not one to take things lying down, Mouradian sued the government.
Mouradian’s lawsuit alleged a variety of constitutional defects in the offset process. During the discovery process the government concluded that Mouradian’s settlement had not been consummated and it refunded him $1,331.50 that it been offset. The court rejected the government’s claim that it had mooted the lawsuit by refunding the money, but it accepted the argument that Mouradian failed to exhaust administrative remedies. At the end of the day, the court ruled that the constitutional argument proffered by Mouradian is something that could have been argued during the formal appeals process.
The facts of this case give rise to a relatively common situation. Beginning in late 2016, the government became far more aggressive to offset debtors, perhaps too aggressively. Medicare’s FY 2017 annual report on the Commercial Repayment Center’s recovery indicated $22.7M in refunds had been processed by the CRC.
We have no doubt that the Treasury Department and Medicare are aiming to make the recovery and collection process more efficient. As the government becomes more aggressive, offsets occur in many unpredictable and occasionally unnecessary ways. Care must be employed in situations, as here, where the government reduces a beneficiary’s Social Security check and tax refund despite their protest that they had not received any settlement proceeds.
A few practice pointers worth considering before you engage with Medicare on conditional payment matters include:
Understand the appeals process inside and out.
Cases will be referred quickly and aggressively to the Treasury Department. To avoid a Treasury referral, understand exactly where your claim stands in the appeals process and quickly pursue options to have your claim addressed.
Keep the line moving.
Medicare and its contractors feast on delay and ambiguity. Arguments need to be clear, based in fact, supported by written documentation and filed in time. Ambiguity and confusion over whether Mouradian received a settlement led to a Treasury offset. Make sure that doesn’t happen to you.
Consult with an expert.
The conditional payment appeals process has become more complicated, and at the same time Medicare and its contractors have become more aggressive. The safest way to address Medicare is often through an expert who understand the intricacies of Medicare’s conditional payment program.
Our team of Conditional Payment experts can help. For assistance on Treasury matters, contact Marty Cassavoy at 781-517-8085 or firstname.lastname@example.org.
About Marty Cassavoy
Marty Cassavoy is the Vice President of MSP Compliance at ExamWorks Clinical Solutions. Marty and his team develop solutions to challenges in all areas of Medicare Secondary Payer compliance and across all insurance types. An attorney licensed to practice law in Massachusetts, Marty works in ExamWorks’ Woburn, Massachusetts office and can be reached at 781-517-8085 or email@example.com.