Liability Future Medical Allocation Questions

PMSI would like to thank all who attended our MSP Compliance in Liability Settlements Webinar on February 21, 2012. It has become abundantly clear to us based on the amount of questions received during and after the webinar coupled with the  lack of guidance from CMS in the liability arena, that more education on this topic is desired by the industry. We thought it would be helpful to address some of the questions presented after the webinar1, as well as the answers which were provided.

Question: Where a liability claim is being settled involving a workers’ compensation claim and the workers’ compensation claim will remain open and continue to provide coverage for the claimant’s medical treatment and all alleged injuries associated therewith, is there any need for the liability settlement to include a protection for future medical payments?

Answer: In this situation, an MSA would not be required until the future medical portion is settled with the workers’ compensation carrier (as long as all the claimed/alleged injuries settled in the liability case are being covered by the workers’ compensation claim). At that point in time, the workers’ compensation carrier should consider establishing an MSA if future treatment will be needed for the injury. Please see CMS Memo dated April 22, 2003, question and answer 19 for more information on this topic.

Question: Obviously, liability claims handlers are extremely challenged in this arena. With the understanding that the Hadden case is on appeal, what would be your recommendation for us in determining a liability future medical allocation involving cases with comparative negligence as strong settlement arguments?

Answer: The U.S. v. Hadden case involved the issue of whether a comparative fault reduction should be applied to Medicare’s conditional payment demand, thereby reducing the amount that Medicare could collect. Upon appeal to the Sixth Circuit Court of Appeals, the court affirmed the district court’s decision that Medicare was entitled to its entire conditional payment demand, and that full reimbursement is required regardless of comparative fault or apportionment principles. For more information on the most recent activity from the Hadden case, please see our previous blog entry.

Until Hadden is overturned, we can expect that Medicare will seek to have their entire conditional payment demand reimbursed (up to the amount of the settlement, minus any procurement costs) unless there is a court order determining the apportionment or comparative negligence (as was available in the Bradley v. Sebelius case). If there is a court order, then Medicare will have to accept a portion of its conditional payment demand.

As it relates to liability allocations, Medicare has not spoken to this issue and there is no specific case law or other written guidance confirming whether comparative fault reductions can be applied to liability allocations. However, if you have a reasonable basis, and even better, a court order or findings to support the comparative fault argument, that would create a viable argument to reduce the liability allocation. Of course there is no guarantee at this point in time that CMS would accept that reduction as they have provided very little guidelines surrounding liability future medical allocations.

Question: We currently have a substantial brain damage case in which settlement discussions are occurring. Plaintiff is currently a Medicare recipient due to the severe extent of his injuries. We are insisting that a liability allocation be approved by Medicare prior to full and final settlement of the claim. Plaintiff’s counsel has contacted Medicare regarding review of this liability case and the response was: “Frankly, I don’t understand where people get the idea that Medicare needs to be involved in a liability settlement that includes future medicals. This is not a workload with which we want to be involved.” To say the least I was surprised to get this response from the San Francisco Medicare office- do you have any thoughts on this?

 Answer: San Francisco is one of the CMS regional offices that does not review liability settlements; it appears to be a workload issue as referenced in their response. However, several other CMS regional offices are more willing to review liability settlements as their workload permits. Regardless of whether CMS will review the settlement and allocation, to protect Medicare’s interests one might still want to consider setting aside funds to cover treatments which would otherwise be covered by Medicare. Without an allocation for future medicals to avoid shifting the burden of treatment to Medicare, the Plaintiff may have to expend his/her entire settlement on Medicare covered expenses related to the injury before Medicare will provide coverage. In addition to the consideration of an allocation, the settlement documents should reference the portion of the settlement which is to be used for future Medicare covered medical treatment and any other actions taken by the parties to protect Medicare’s interests.

PMSI is available as a resource for all MSP compliance related issues and encourages our MedicareInsights blog readers to utilize our Ask the Experts e-mail box to submit questions at any time. Additionally, stay tuned to the blog for information on additional webinars that will be presented throughout 2012 on various MSP compliance related topics.


1. [Questions and answers have been paraphrased.]

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