Another case out of New Jersey demonstrates the continuing confusion regarding best practices in handling the aspect of future medicals in a liability settlement with a Medicare beneficiary. In Sipler v. Trans Am Trucking, Inc., 2012 U.S. Dist. LEXIS 109278 (July 24, 2012), the plaintiff, Jeffrey Sipler (“Sipler”) was a passenger on a bus which was rear-ended by an employee of Defendant Trans Am Trucking (“Trans Am”). Sipler and his wife filed suit against TransAm and several years later, the parties reached settlement on the matter with the material terms of the settlement that Sipler would receive $225,000 in exchange for a release from all claims arising out of the accident. No other terms were discussed or agreed to at that time; however, defense counsel agreed to draft a proposed release.
When defense counsel sent a proposed release to the plaintiff’s counsel, they refused to accept provisions related to Sipler’s health insurance and obligations to Medicare. Specifically, plaintiffs’ counsel rejected provisions within the release which stated: 1) he cannot claim reimbursement from Medicare for injuries arising out of the 2006 accident; 2) his private health insurance will not pay for claims arising out of accident-related injuries because those injuries are pre-existing; and 3) Medicare will not pay for any future treatment for injuries arising out of the accident. Plaintiff’s counsel contended that he rejected these provisions due to the fact that federal law does not require his client, Sipler, to disqualify himself from Medicare benefits or establish an MSA for his future treatment and the defendants have no authority to protect the rights of Medicare.
The plaintiffs filed a motion to enforce the settlement. The main issue before the court was whether the MSP requires language in the release provisions of the settlement agreement specifying 1) Sipler’s obligation not to seek such payments from Medicare, and 2) a particular portion of the settlement amount to be set aside for future medical expenses arising out of the accident.
In defense of their position and the language within the release, the defendants contended that federal law does require personal injury settlements to protect the rights of Medicare with respect to both past and future medical expenses. The defendants also cited a September 29, 2011 memorandum from CMS which provides that all parties have MSP to protect Medicare’s interests when resolving cases which include future medical expenses, and that the recommended method to achieve this protection is through an MSA allocation.
The court noted that CMS memoranda, like any other interpretations of an agency through manuals or opinion letters, lack the force of the law. Such “opinion letters” are interpretive by the agency, are not afforded notice and comment, and therefore they are not afforded weight of the law in the adjudicatory process. The court went on further to state that although Medicare is a secondary payer for Sipler in the context of this settlement, no MSA was required due to the fact that federal law does not require MSAs in personal injury settlements. If the settlement involved a workers’ compensation claim, an MSA would be a prudent course of action. In addition to the settlement not involving a workers’ compensation claim, the court noted that the settlement did not indicate a particular amount to compensate Sipler for future medical expenses arising out of the accident.
An interesting last public policy comment by the court was that it would be burdensome and perhaps discourage personal injury settlements if they were required to specifically apportion future medical expenses as part of the settlement.
This case depicts the current landscape surrounding liability settlements with Medicare beneficiaries. Because CMS has not officially provided any guidance or implemented any formal rules surrounding future medical allocations in liability settlements, there is a vast difference in opinions on how to best protect Medicare’s interests in such situations. Settlement parties are often able to finalize all aspects of the liability settlement except for the Medicare issue. The lack of clarity from CMS on liability settlements may be delaying settlements in and of itself, since all aspects are agreed on except for the appropriate route to MSP compliance regarding future medicals.
However, one point that everyone seems to be clear on is that Medicare is a secondary payer under the MSP when a liability primary payer exists. In this case, the court noted that Sipler may not seek payments from Medicare for such expenses to the extent they are provided for by his health insurance policy and/or the settlement. What may not have been contemplated by the court is that if and when his private health insurance ceases to exist, Medicare may require him to spend his entire settlement funds on Medicare-covered expenses related to the injury before it will provide coverage. The settlement will be reported to Medicare through MMSEA Section 111, and because no allocation was made for future medicals in the settlement, Medicare may assume that the entire settlement is for future medicals and require that to be spent before it provides coverage.
When plaintiffs such as Sipler are dumbfounded that their settlement results in a loss of Medicare coverage, we can expect that they will be looking to be made whole for this loss. Primary payers would be wise to allocate a reasonable portion of the settlement for future medical expenses so that plaintiffs are only required to exhaust that amount before Medicare will pay. Additionally, doing so will decrease the chance for any future liability under the MSP, most particularly a private cause of action right by the Plaintiff for double damages for the failure to protect Medicare’s interests.