CMS Declines to Participate Again; Louisiana District Court Determines MSA

In what appears to be a pattern of Federal court decisions, the MSA industry is taking note of a trend whereby parties to liability lawsuits are opting for a Court’s review and approval of a proposed LMSA.  It appears that United States Magistrate Judge C. Michael Hill, whose court resides in the Western District of Louisiana, Lafayette Division, is taking matters into his own hands due, most likely in part, to the lack of a formalized process and procedure by CMS when it comes to determining if the amount of a settlement sufficiently protects Medicare’s interests.

In March 2012, Judge Hill rendered an opinion in Frank v. Gateway Insurance Co., 2012 U.S. District Lexis 33581 (March 13, 2012), in which he concluded that the parties’ settlement amount reasonably protected Medicare’s interests.  Just as in the Frank matter, CMS followed their standard procedure and declined to participate in a court hearing involving the determination of LMSAs, stating that only under limited circumstances would they provide an opinion. This practice appears likely to continue until CMS creates formal guidance for LMSAs or alters its policy on whether it will participate in judicial hearings where the adequacy of protecting Medicare’s interests is at stake.   Until then, it seems that courts will be able to continue to stand in the shoes of CMS and provide a determination as to whether the particular liability settlement has properly considered Medicare’s interests.

CMS’ decision not to participate in these court proceedings may create issues in the future, if at some point the agency independently concludes that Medicare’s interests have not been protected in settlement documents. Will CMS give deference to the court’s determination when providing an opinion on the amount and need for a MSA when this has traditionally been an agency function of CMS?   Does the fact that CMS voluntarily failed to appear or timely appeal the court’s ruling now prevent it from later raising this issue in a legal forum under a theory of res judicata? Additionally, are the courts further muddying the waters of the current state of MSP compliance in liability settlements, or are the courts helping during this uncertain time when parties to a liability settlement are generally unable to receive security that they have protected Medicare’s interests? In the meantime, let us explore a recent case as an example of such a scenario.

In Bertrand v. Talen’s Marine & Fuel LLC.1, the plaintiff, Philip Bertrand (Bertrand), was injured in a workplace accident in December, 2007. Bertrand was employed with Talen’s Marine & Fuel LLC (Talen’s) as a captain on a tow boat. Bertrand hurt his lower back when a bathroom medicine cabinet fell off the wall. He twisted his back when he tried to catch the cabinet. Bertrand filed suit on August 10, 2010, seeking recovery for the damages that he sustained as a result of his workplace accident in 2007.

Bertrand’s lawsuit with the defendants was settled on January 6, 2012; however, Bertrand’s settlement with the defendants was conditioned upon approval of an MSA by CMS. On January 27, 2012, the parties filed a motion for declaratory judgment seeking: (1) approval of the settlement, (2) a declaration that the interests of Medicare is adequately protected by setting aside a sum of money determined by the court to fund any of Bertrand’s future medical expenses related to the injuries claimed and released in the lawsuit, and (3) an order setting that amount aside from the settlement proceeds and depositing it into an interest-bearing account to be self-administered by Bertrand.

When the court set the matter for an evidentiary hearing and sent a copy of the order to the U.S. Attorney’s Office in Lafayette, Louisiana, CMS advised it would not participate in the hearing. The hearing went forward without CMS, and the court received into evidence an LMSA that was prepared by an MSA vendor. The court also received all corresponding medical records which were pertinent to the calculation of the LMSA and the affidavit of the preparer of the LMSA. The LMSA called for $64, 866.88 to be set aside for future potential medical expenses that would be covered by Medicare and were related to the injuries claimed in the lawsuit, which the court found to be both reasonable and reliable.

Although the court noted that Bertrand was born in 1960 and would not obtain the age of 65 within 30 months of the date of the settlement, it went on to state that Bertrand will become an “entity who received payment from a primary plan,” and is therefore responsible as a primary payer for future medical items or services that would otherwise be covered by Medicare and therefore, the $64, 866.88 should be set aside in consideration of Medicare’s interest. The court additionally stated that Bertrand would be obligated to reimburse Medicare for any conditional payments. Between the LMSA and covering the conditional payment issue, the court concluded that Medicare’s interests were adequately protected in the settlement within the meaning of the MSP and the case was settled.

From the facts of the opinion, it seems that Bertrand was neither a Medicare beneficiary or expected to become a Medicare beneficiary within 30 months of the settlement. Therefore, conditional payments should not have been a concern since it is not possible for Medicare to make payments for an individual who is not currently receiving Medicare benefits. Additionally, the general industry consensus is that an allocation is not necessary if the injured party is not currently receiving Medicare or expected to become eligible within 30 months, yet the parties as well as the court felt that an LMSA was appropriate to protect Medicare’s interests.

Either way, it seems that the parties in Bertrand went above and beyond to ensure that the settlement was MSP compliant. This case is a great example of the extreme need for guidance from CMS with regard to future medicals in liability settlements. CMS is actually seeking to address this issue through their recent issuance of an Advance Notice of Proposed Rulemaking (ANPRM) on MSP and Future Medicals, which was posted to the Federal Register on June 14, 2012. The ANPRM proposes several different options on how future medicals should be addressed in both liability and workers’ compensation settlements. For more information on the ANPRM, please read our recent blog posting.

1. [2012 U.S. Dist. LEXIS 78053 (U.S. Dist. Court, Western District of Louisiana, Lafayette Division. June 4, 2012)]

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