Can a Defendant Delay Payment of Settlement Funds Pending Receipt of Medicare Conditional Payment Information?

A state trial court sitting in its appellate capacity was called upon to decide this question in Robinson v. Land-O-Sun Dairies, LLC, 2012 Phila. Ct. Common. Pl. LEXIS 324 (Sept. 19, 2012). The Pennsylvania court ultimately delineated those situations where it would be acceptable for a defendant to delay payment of settlement funds pending receipt of Medicare conditional payment information.

In the Robinson case, the plaintiffs initiated personal injury claims that arose out of a motor vehicle accident on October 29, 2008. The plaintiffs occupied a vehicle that was rear-ended by a vehicle owned by Defendant Penske Truck Leasing Co., L.P. The parties reached a settlement agreement and, after receiving notice of the settlement, the Court marked the case as settled on September 17, 2011.

On November 16, 2011, the plaintiffs filed a Motion for Failure to Deliver Settlement Funds. Seven days later, the defendants filed an Answer. Although the parties did not dispute that they entered into a valid, binding settlement agreement, the defendants contended that the plaintiffs did not fulfill a condition of the settlement. The defendants noted a specific condition of the settlement agreement which was placed upon the plaintiffs that had not yet been met:

. . . this settlement is predicated upon you providing me with up to date Medicare lien information along with lien information from any other provider.”

Although the plaintiffs threatened that they would be filing a Motion to recover interest on the unpaid settlement funds as well as attorneys’ fees and costs for failure to tender the settlement funds, the defendants contended that the plaintiffs’ failure to provide lien information (including Medicare conditional payments) produced a material dispute as to the terms of the settlement and they were therefore justified in temporarily withholding the settlement funds. The defendants further contended that all four plaintiffs were receiving governmental benefits at the time of the settlement—all four had been receiving some form of Social Security benefits and some were over the age of 65 at the time of settlement.

On December 30, 2011, the Court denied the plaintiffs’ motion for Failure to Deliver Settlement Funds and ordered the plaintiffs to provide final Medicare statements and up-to-date lien final statements on behalf of all four plaintiffs. On January 20, 2012, the plaintiffs appealed the decision. The sole issue before the court was whether it erred in its decision in denying the plaintiffs’ motion and ordering them to provide the information requested.

 The Court concluded that it was correct and upheld its initial decision to deny plaintiffs’ Motion for Failure to Deliver Settlement Funds. It further found that it was correct to order the plaintiffs to provide final Medicare statements and up-to-date lien final statements on behalf of the four plaintiffs.

In making its decision, the Court examined a prior case, Zaleppa v. Seiwell, 2010 Pa Super. 208, 9 A.3d 632 (2010), wherein a private party’s means of protecting Medicare’s right to reimbursement was addressed. In Zaleppa, following the verdict and prior to tendering a check to the plaintiff, the defense raised concerns about its obligations under the MSP. The defense further requested through a post-trial motion that the trial judge allow it to name Medicare, plaintiff and plaintiff’s counsel as payees on the check or in the alternative, pay the verdict into the trial court pending notification from Medicare that the liens had been satisfied. The defense was concerned about her potential liability stemming under the MSP. The defense’s post-trial motion was denied as the Court opined that “the statutory scheme established by the MSP is not designed to enable private parties to act on behalf of the United States government as private attorney general.”

Here, the Court found the facts of Zaleppa to be markedly different from the facts currently before the Court. The defense in Robinson is not acting as a “private attorney general” to assert recovery on behalf of Medicare but, rather is seeking to enforce a settlement agreement and release, the terms of which required the plaintiffs to provide final lien information in order to protect against the defendants’ further liability. This condition was unambiguously stated in the settlement agreement and should be enforced under the principles of contract law.

The distinction of the Robinson case to Zaleppa seems to provide guidance to parties who want to settle quickly prior to resolving Medicare conditional payment issues. Defendants/primary payers would be ill-advised to settle cases with potential Medicare beneficiaries and then seek post settlement/judgment relief to protect themselves from liability under the MSP, as was done in Zaleppa. Considerations for compliance with the MSP should occur prior to settlement.

As occurred in the Robinson case, by requiring and creating a condition of the settlement that the plaintiffs provide Medicare conditional payment information before settlement funds are required to be disbursed, strict contract law will be enforced. The defendant will not be required to pay settlement funds unless that condition is satisfied.

Of course, having Medicare conditional payment information prior to settlement is the ideal scenario, but in a world where our judicial system seeks to ease their dockets and litigants as well as attorneys who want to finalize settlements and receive their money, it is understandable that the parties may want to resolve liens post-settlement. It is also understandable when receipt of conditional payment amounts may not be timely and the delay in response from Medicare may cause the settlement to stall or fall through completely.

Parties to settlements can settle prior to obtaining Medicare conditional payment information and, also at the same time, satisfy any requirements under the MSP, if they do so intelligently and are careful in crafting their settlement documents.

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