Cox Ex Rel. Estate of Cox v. Shalala ( 1997 )


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  • PUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    MARGIE O. COX, Individually and as
    Administratrix of the Estate of Jack
    Cox; JACQUELINE DIANE COX
    FLOWERS,
    Plaintiffs-Appellants,
    v.
    DONNA E. SHALALA, SECRETARY OF
    HEALTH AND HUMAN SERVICES,
    Defendant-Appellee,
    No. 95-2915
    and
    NORTH CAROLINA BAPTIST HOSPITAL,
    INCORPORATED; WAKE FOREST
    UNIVERSITY PHYSICIANS; BLUE CROSS
    AND BLUE SHIELD OF NORTH
    CAROLINA, INC., a Federal Medicare
    Intermediary; CONNECTICUT GENERAL
    LIFE INSURANCE COMPANY,
    Defendants.
    Appeal from the United States District Court
    for the Middle District of North Carolina, at Winston-Salem.
    N. Carlton Tilley, Jr., District Judge.
    (CA-93-436-6)
    Argued: March 5, 1997
    Decided: April 22, 1997
    Before WILKINS, NIEMEYER, and HAMILTON, Circuit Judges.
    _________________________________________________________________
    Affirmed by published opinion. Judge Hamilton wrote the opinion, in
    which Judge Wilkins and Judge Niemeyer joined.
    _________________________________________________________________
    COUNSEL
    ARGUED: Timothy D. Welborn, North Wilkesboro, North Carolina,
    for Appellants. Matthew Miles Collette, Appellate Staff, Civil Divi-
    sion, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
    D.C., for Appellee. ON BRIEF: Franklin D. Smith, LAW OFFICES
    OF FRANKLIN SMITH, Elkin, North Carolina, for Appellant. Frank
    W. Hunger, Assistant Attorney General, Walter Clinton Holton, Jr.,
    United States Attorney, Barbara C. Biddle, Appellate Staff, Civil
    Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-
    ington, D.C., for Appellee.
    _________________________________________________________________
    OPINION
    HAMILTON, Circuit Judge:
    North Carolina's Wrongful Death Act (NC Wrongful Death Act)
    places a $1,500 limitation on a health care provider's right to recover
    a decedent's medical expenses. See N.C. Gen. Stat. § 28A-18-2(a)
    (1981). The central question presented in this appeal is whether this
    provision of North Carolina law is preempted by Medicare's second-
    ary payer provisions. See 42 U.S.C. § 1395y(b) (1990). The district
    court held that Medicare's secondary payer provisions preempted the
    NC Wrongful Death Act's $1,500 limitation. We agree and affirm.
    I.
    The facts of this case are undisputed. On July 18, 1991, Jack Cox
    suffered severe injuries as a result of a motorcycle accident. He was
    hospitalized at North Carolina Baptist Hospital (NCBH) and died on
    November 1, 1991. At the time of his accident, Jack Cox was a Medi-
    care beneficiary.1 On behalf of Medicare, Blue Cross and Blue Shield
    _________________________________________________________________
    1 A "Medicare beneficiary" is an individual who is entitled to receive
    hospital benefits paid by Medicare because his/her supplemental security
    income, when combined with other available resources, falls below a cer-
    tain established level. See 42 U.S.C.§ 1395d(p)(1).
    2
    of North Carolina and Connecticut General Life Insurance Company
    (the insurance companies) paid $181,187.75 in conditional benefits
    for Jack Cox's medical care and treatment.
    Pursuant to the NC Wrongful Death Act, Jack Cox's personal rep-
    resentative brought an action in North Carolina state court seeking
    damages, including Jack Cox's medical expenses, against the individ-
    ual who allegedly caused the motorcycle accident. The appellants set-
    tled their suit for $800,000 which satisfied all claims under the NC
    Wrongful Death Act.
    Appellants, Margie O. Cox, Jack Cox's surviving spouse, and Jac-
    queline Diane Cox Flowers, the other intestate heir of Jack Cox, filed
    a declaratory judgment action against the insurance companies on
    July 23, 1993, in the Middle District of North Carolina. The action
    sought a declaration that neither the insurance companies, nor the
    government in its own right, could claim any portion of the $800,000
    settlement above the NC Wrongful Death Act's $1,500 cap on a
    health care provider's right to recover damages. The Secretary of
    Health and Human Services, Donna Shalala (Secretary Shalala), was
    substituted for the insurance companies. Secretary Shalala filed a
    counter-claim on September 23, 1993, seeking recovery of the
    amount the government paid in Medicare benefits from the settlement
    proceeds received by the appellants.
    On February 28, 1994, Secretary Shalala moved for summary judg-
    ment on her counter-claim, contending that Medicare's secondary
    payer provisions preempted the NC Wrongful Death Act's $1,500 cap
    on a health care provider's right to recover damages and that the
    $181,187.75 conditionally paid by Medicare on Jack Cox's behalf
    must be paid to Medicare from the settlement proceeds received by
    the appellants. Agreeing with Secretary Shalala's position, the district
    court granted summary judgment on Secretary Shalala's counter-
    claim.
    Four months later, the district court determined that prejudgment
    interest should run on the amount owed by the appellants from Febru-
    ary 28, 1994, the date Secretary Shalala filed her memorandum in
    support of the government's motion for summary judgment. In that
    memorandum, the government argued that the appellants would be
    3
    liable for interest on the money due the government if the district
    court decided the preemption issue in the government's favor. Fol-
    lowing the district court's entry of judgment in favor of Secretary
    Shalala, the appellants noted a timely appeal.2
    II.
    The district court granted summary judgment to Secretary Shalala
    on her counter-claim because it concluded that Medicare preempted
    the NC Wrongful Death Act. Whether Medicare preempts the NC
    Wrongful Death Act is a question of law we review de novo. See Tri-
    State Machine, Inc. v. Nationwide Life Ins. Co., 
    33 F.3d 309
    , 311 (4th
    Cir. 1994), cert. denied, 
    115 S. Ct. 1175
     (1995).
    Under the Supremacy Clause of the Constitution, U.S. CONST. art.
    VI, cl. 2, a state law which conflicts with federal law is preempted.
    See Wisconsin Pub. Intervenor v. Mortier, 
    501 U.S. 597
    , 604 (1991)
    (Supremacy Clause invalidates "state laws that`interfere with, or are
    contrary to the laws of [C]ongress, made in pursuance of the
    [C]onstitution.'") (quoting Gibbons v. Ogden, 22 U.S. (9 Wheat) 1,
    211 (1824)). Federal law preempts state law in three different situa-
    tions. First, Congress can expressly preempt state law by directly stat-
    ing its intention to do so. See Jones v. Rath Packing Co., 
    430 U.S. 519
    , 525 (1977). Second, absent explicit preemptive language, Con-
    gress can "occupy the field" by regulating so pervasively that there is
    no room left for the states to supplement federal law. See Fidelity
    _________________________________________________________________
    2 Balances of $10,676 and $2,731.45 are still owed to NCBH and the
    Wake Forest University Physicians (WFUP), respectively. Both NCBH
    and WFUP were parties to this action at the district court level. However,
    both NCBH and WFUP were dismissed from this appeal because: (1) the
    preemption question argued by Secretary Shalala is determinative of
    NCBH's and WFUP's right to recover from the appellants under Medi-
    care's secondary payer provisions; and (2) Margie O. Cox does not
    appeal the district court's ruling that she is personally responsible for the
    amounts owed NCBH and WFUP even if Medicare did not preempt the
    NC Wrongful Death Act. See North Carolina Baptist Hosp., Inc. v.
    Harris, 
    354 S.E.2d 471
    , 474-75 (N.C. 1987) (extended doctrine of neces-
    saries to require wife of deceased to be personally responsible to pay for
    medical expenses husband incurred while alive).
    4
    Fed. Sav. & Loan Ass'n v. De la Cuesta, 
    458 U.S. 141
    , 153 (1982).
    Third, even when Congress has neither expressly preempted state law
    nor "occupied the field," a state law is per se preempted to the extent
    that it actually conflicts with federal law. See Pacific Gas & Elec. Co.
    v. State Energy Resources Conservation & Dev. Comm'n , 
    461 U.S. 190
    , 204 (1983).
    This third type of preemption, commonly referred to as "conflict
    preemption," can arise in two situations. First, a conflict between state
    and federal law can arise when "compliance with both federal and
    state regulations is a physical impossibility." Florida Lime & Avo-
    cado Growers, Inc. v. Paul, 
    373 U.S. 132
    , 142-43 (1963); see also
    Pacific Gas, 
    461 U.S. at 204
    . Put another way, if the federal statute
    dictates one result and the state statute another, the state statute is pre-
    empted to the extent that it directly conflicts with federal law. See 
    id.
    Further, even though the NC Wrongful Death Act is a probate statute,
    and thus of particular state concern, when a state probate statute
    "sharply" interferes with, or is directly contrary to a federal law, the
    state statute must yield. See English v. General Elec. Co., 
    496 U.S. 72
    , 79 (1990). In this case, however, we are faced with a clear "con-
    flict preemption" situation because compliance with the NC Wrongful
    Death Act's $1,500 limitation on a health care provider's right to
    recover a decedent's medical expenses and Medicare's secondary
    payer provisions is a "physical impossibility" and because the NC
    Wrongful Death Act is directly contrary to Medicare's secondary
    payer provisions.
    Medicare pays for certain costs associated with the health care of
    qualified individuals, but does not pay for the costs of health care ser-
    vices for which, "payment has been made or can reasonably be . . .
    made . . . under an automobile or liability insurance policy or plan."
    42 U.S.C. § 1395y(b)(2)(A)(ii). Further, when the government has
    information that medical care is needed because of an injury or illness
    that was caused by another party, a "conditional payment" can be
    made. See 
    42 U.S.C. § 1395
    (b)(2)(B)(i); 
    42 C.F.R. § 411.52
     (1993).
    When such a conditional payment is made for medical care, the gov-
    ernment has a direct right of recovery for the entire amount condition-
    ally paid from any entity responsible for making primary payment.
    See 42 U.S.C. § 1395y(b)(2)(B)(ii); 
    42 C.F.R. § 411.24
    (e). In the
    alternative, the government's right of recovery is subrogated to the
    5
    rights of an individual or entity which has received a payment from
    the responsible party. See 42 U.S.C. § 1395y(b)(2)(B)(iii).
    In this case, Medicare is entitled to reimbursement for Jack Cox's
    medical expenses out of the $800,000 settlement. First, Medicare con-
    ditionally paid Jack Cox's medical expenses pursuant to 
    42 U.S.C. § 1395
    (b)(2)(B)(i). Second, the $800,000 settlement was paid by a
    responsible party--the insurance company of the individual who was
    responsible for Jack Cox's motorcycle accident--pursuant to a work-
    er's compensation law or plan, an automobile or liability insurance
    policy or plan (including a self insured plan), or a no-fault insurance
    law. See 42 U.S.C. § 1395y(b)(2)(A)(ii). Third, the NC Wrongful
    Death Act settlement received by the appellants included the recovery
    for Jack Cox's medical expenses which Medicare had conditionally
    paid. See N.C. Gen. Stat. § 28A-18-2(b)(1).
    The NC Wrongful Death Act, N.C. Gen. Stat. § 28A-18-2, how-
    ever, precludes the reimbursement of Jack Cox's medical expenses
    provided for under Medicare's secondary payer provisions. The NC
    Wrongful Death Act provides in pertinent part:
    (a) When the death of a person is caused by a wrongful act
    . . . [the tortfeasor] shall be liable . . . for damages. . . . The
    amount recovered in such action is not liable to be applied
    as assets . . . of the deceased [except for] reasonable hospital
    and medical expenses not exceeding one thousand five hun-
    dred dollars ($1500) incident to the injury resulting in death
    . . . [instead, those funds] shall be disposed of as provided
    in the Intestate Succession Act.
    (b) Damages recoverable for death by wrongful act
    include:
    (1) Expenses for care, treatment and hospitaliza-
    tion incident to the injury resulting in death . . ..3
    _________________________________________________________________
    3 We have recently held that it is obvious from the damages recoverable
    under the NC Wrongful Death Act, that the Act is both a survivorship
    action and a traditional "wrongful death" action. See McInnis v. Provi-
    6
    Under this provision, the appellants, as Jack Cox's intestate heirs, are
    allowed to recover for Jack Cox's medical expenses, and Medicare's
    subrogated right to recover those medical expenses is limited to
    $1,500 of the $181,187.75 which Medicare conditionally paid on Jack
    Cox's behalf. See Forsyth County v. Barneycastle , 
    197 S.E.2d 576
    ,
    579 (N.C. Ct. App.) ($1,500 limit on creditor's right to recover
    strictly construed), cert. denied, 
    198 S.E.2d 722
     (N.C. 1973). Thus,
    compliance with Medicare's secondary payer provisions, which man-
    dates full payment for Jack Cox's medical expenses from the
    $800,000 settlement, is impossible because of the NC Wrongful
    Death Act's $1,500 limitation on the recovery of medical expenses.
    As stated above, federal law preempts the NC Wrongful Death Act
    to the extent that the NC Wrongful Death Act is in direct conflict with
    Medicare's secondary payer provisions, 42 U.S.C.§ 1395y(b). In this
    case, the NC Wrongful Death Act's $1,500 limit on Medicare's right
    to receive payment for services from a NC Wrongful Death Act set-
    tlement is in direct conflict with Medicare's secondary payer provi-
    sions which mandates full reimbursement. Consequently, to the extent
    the NC Wrongful Death Act limits Medicare's right of recovery under
    the circumstances of this case to $1,500, the NC Wrongful Death Act
    is preempted. Accordingly, the district court correctly granted sum-
    mary judgment to Secretary Shalala on her counter-claim.
    III.
    Next, the appellants claim that the district court abused its discre-
    tion when it calculated prejudgment interest beginning on February
    _________________________________________________________________
    dent Life & Accident Ins. Co., 
    21 F.3d 586
    , 589-90 (4th Cir. 1994); see
    also Barneycastle, 
    197 S.E.2d at 578
     ("Under . . . [§ 28A-18-2] . . . all
    . . . damage[s] which might conceivably have been set out in a claim for
    personal injuries prior to death are now includable in an action for dam-
    ages for death by wrongful act."). Traditionally, claims such as medical
    expenses, have been considered "survivorship" actions and thus, are the
    property of the estate, because they are claims the decedent possessed
    when he died. See McInnis, 
    21 F.3d at 589-90
    . However, by statute,
    North Carolina has incorporated that sort of traditional "survivorship"
    action into its action for wrongful death--an action for the benefit of the
    decedent's intestate heirs, not the decedent's estate. See N.C. Gen. Stat.
    § 29A-18-2; Hoke v. Atlantic Greyhound Corp., 
    38 S.E.2d 105
    , 109-110
    (N.C. 1946).
    7
    28, 1994. The decision to award prejudgment interest is a matter
    within the district court's discretion. See United States v. Gregory,
    
    818 F.2d 1114
    , 1118 (4th Cir.), cert. denied, 
    484 U.S. 847
     (1987).
    The district court chose February 28, 1994, because that date coin-
    cided with the filing of Secretary Shalala's memorandum in support
    of her motion for summary judgment on her counter-claim. That
    memorandum unequivocally notified the appellants that a debt was
    due and that interest could run on the debt from the date the notice
    was received. See 
    45 C.F.R. § 30.12
    . The Code of Federal Regula-
    tions sets forth the general principles governing the assessment of
    interest against a debt owed to the government. The"notices to
    debtor" regulation requires that the government inform the debtor of:
    (1) the amount and nature of debt; (2) the date payment is due; and
    (3) the assessment of interest from the date notice was mailed. See 
    id.
    Because Secretary Shalala's February 28, 1994 memorandum in sup-
    port of her motion for summary judgment on her counter-claim
    directly stated that interest would begin accruing sixty days from the
    date the appellants received the settlement proceeds, the district court
    did not abuse its discretion when it concluded that interest on the debt
    owed to Medicare began running on February 28, 1994.
    IV.
    For the reasons stated herein, the judgment of the district court is
    affirmed.
    AFFIRMED
    8