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Medicare Set-Asides and Third-Party Liability

November 11, 2011

The following legal judgements relate to Medicare Set-Asides and Third-Party Liability

Hinsinger v. Showboat Atlantic City, 420 N.J. Super. 15, 18 A.3d 229 (N.J. Super Ct. Law Div. 2011)

In Hinsinger, the New Jersey court applied the same standard to Medicare set asides created with money obtained from third-party liability claims as it does with money obtained from workers’ compensation claims.  This rationale is premised based on the long understood policy of protecting Medicare’s interests from primary payers.

Based on a personal injury action, the parties to this case reached a settlement agreement in the amount of $600,000.00.  The claimant had become a Medicare beneficiary in 2009.  In order to protect Medicare’s interests, $180,600.00 of the $600,000.00 was allocated to a Medicare set aside account.  After this settlement was reached, the claimant’s attorney filed a petition to recover his attorney fees from the Medicare set aside account.  The trial court held that the attorney could deduct his fees from the Medicare set aside account.

The first issue was whether the same standard should apply to MSA’s created with money from third-party liability cases and MSA’s created from workers’ compensation claims.  The court held that the attorney was able to deduct his fees from the Medicare Set Aside Trust by applying the same standard as a workers’ compensation Medicare Set Aside

The second issue was whether the attorney’s fees could be deducted from the Medicare set aside account.  The court explained that the amount of money deducted from the Medicare set aside account for procurement costs was computed using the ration of the procurement costs to the total settlement or judgment.  The court in this case stated that 42 C.F.R. § 411.37 (2008) was applicable and since the ratio of procurement costs to the total settlement of $600,000.00 was 32.778%, that ratio was applied to the amount of money allocated for the procurement costs.

The court went as far as stating that “the Center for Medicare and Medicaid Services has stated multiple times that the same statutes that necessitate or otherwise apply to Medicare set asides in workers’ compensation cases apply to third-party liability situations.” Once the court determined that parties to a third-party liability action needed to consider Medicare’s interest, the court then applied the workers’ compensation
standard to arrive at the their conclusion that attorneys’ fees incurred to procure a settlement may be deducted from the money allocated to a Medicare set aside.

Zaleppa v. Siewell, 208, 9 A.3d 632 (Pa. Super. 2010)

In Zaleppa v. Siewell, a 69 year old woman was injured in a car accident and
subsequently obtained a judgment in the amount of $15,000.00 against the driver
who hit her vehicle.  The jury determined that $5,000.00 of the $15,000.00 would be allocated to provide for future medical expenses associated with her injuries.  Defendant filed a motion requesting the court to name Medicare as the payee of the $5,000.00 to ensure that Medicare would recover conditional payments. The trial court denied Defendant’s requested relief.

On appeal, the court noted that there was no evidence presented to show that Medicare had even paid any conditional payments to the Plaintiff and that the Medicare Secondary Payer Act bars private entities from essentially asserting the interests of the government by insisting that Medicare be named as payee on the settlement check.

 

Schexnayder v. Scottsdale Insurance Co., 2011 U.S. Dist. LEXIS 83687 (W.D.la. July 28, 2011)

This case involved both a workers’ compensation claim as well as a third-party liability claim.

In Schexnayder, plaintiff was injured in an automobile accident while working.  Settlement was reached in both the plaintiff’s workers’ compensation action and liability action.  The liability settlement provided a Medicare set aside allocation in order to protect Medicare’s interest under the Medicare Secondary Payer Act.  CMS approval was
sought but was however, advised that the proposed Medicare set aside would not
be reviewed or approved in the not too distant future.  The reason for that response from CMS was neither due to the fact that the plaintiff was not a Medicare beneficiary nor
within 30 months of qualifying for Medicare.

The court stated that Medicare does not currently require or approve Medicare set asides when personal injury lawsuits settle, nor do they have a current policy or procedure in effect regarding the adequacy of future medical expenses set aside in liability cases.

The court held that the amount of money allocated to future medical expenses (as evidenced in the settlement agreement), reasonably accounted for Medicare’s interest.

Related: Liability Settlement Solutions

Can a court modify a workers’ compensation settlement agreement?

October 16, 2011

ArvinMeritor, Inc. v. Clifton Johnson, 331 S.W.3d 267 (Ala. Civ. App. Feb 25, 2011)

Can a court unilaterally modify or supplement the essential terms of a workers’ compensation settlement agreement that has been incorporated into a judgment? 

In ArvinMeritor, the claimant filed a claim for workers’ compensation benefits against the employer in 1999.  In 2003, the trial court found the claimant to be 100% permanently disabled as a result of an occupational disease and required employer to pay workers’ compensation disability benefits and all future medical benefits related to claimant’s occupational disease.  Additionally, the claimant filed a third-party claim against tortfeasors for the same occupational disease.

In November, 2008, the claimant reached a settlement with the third-party tortfeasors for an amount in excess of past workers’ compensation payments made by the employer.  In an effort to avoid double compensation pursuant to Ala. Code 1975, § 25-5-11(which gives the employer the right to credit third-party proceeds against its liability for workers’ compensation benefits, and a right to subrogation with respect to employee’s recovery of medical expenses from the third party), the employer and the claimant reached a settlement agreement.

In January, 2009, the employer and the claimant petitioned the trial court for approval of their settlement.  The proposed settlement stated that a Medicare set aside trust would be established and would cost $83,936.17.  However, at this point in time, CMS had not approved the Medicare set aside trust.  The proposed settlement further stated that the employer will contribute up to $65,000.00 to fund the Medicare set aside trust and the remaining balance shall be paid by claimant.  The trial court approved the settlement prior to CMS’s approval of the Medicare set aside trust.

In July, 2009, the claimant filed a petition with the trial court stating that the Medicare set aside trust described in the settlement had not been established and the employer had stopped paying claimant’s medical expenses.  Claimant indicated that he was ready and willing to pay his portion of the Medicare set aside trust ($18,936.17), as set out in the settlement.  At that time, the employer’s counsel stated that CMS required an amount significantly higher than the proposed Medicare set aside trust of $83,936.17.  The employer argued that they were ready and willing to pay the $65,000.00 they had agreed to pay in the approved settlement and the claimant was responsible for the difference.

The trial court essentially concluded that the employer “induced” the claimant to agree to the settlement by making him believe he would only be responsible for the remainder balance of the Medicare set aside of $18,936.17, as the Medicare set aside allocation was not presented to the claimant as a mere estimate.  Based on the above reasoning, the trial court ruled that the employer is responsible for the remainder exceeding $18,936.17 and is required to pay the claimant’s medical expenses until the Medicare set aside trust was funded in its entirety.

On appeal, the Alabama Court of Civil Appeals reversed the part of the trial court’s holding concluding that the court cannot “unilaterally modify or supplement the essential terms of a workers’ compensation settlement agreement that has been incorporated into a judgment.”  The terms of the settlement were ambiguous and the parties had failed to provide in their settlement agreement that the cost of the Medicare set aside agreement may exceed $83,936.17, and it is not the role of the court to advise the parties on settlements.

In addition to holding the trial court in error for “imposing a legally incorrect remedy”, the appellate court also ruled that the employer was responsible for paying medical costs for the claimant’s occupational disease.