A Federal District Court in Miami recently refused to determine whether an MSA was required in a personal injury case. In Early v. Carnival Corp., 2013 U.S. Dist. LEXIS 16711 (Feb. 7, 2013), the parties reached an agreement on all matters pertinent to the settlement, except for one item: whether an MSA was required by the parties. The Defendant, Carnival Cruise Line (“Carnival”), responded to the Plaintiff, Susan Early’s (“Early”) Motion for Determination of Whether Medicare Set-Aside is Required, stating that an MSA was required and urged the Court to enter an order requiring an MSA as part of the settlement terms.
In the Early case, the plaintiff alleged that she sustained an accident while a passenger on one of Carnival’s ships. Although the mediator found that the parties had “settled” the case, there were still conditions that had to be fulfilled: first, the Miami Federal District Court needed to enforce the terms of the settlement, and second, the court needed to “determine the issue of a possible Medicare Set-Aside if any.”
The Court acknowledged that the parties had agreed to 4 out of the 5 major terms of the settlement, and noted that they do not agree on whether an MSA is legally required as part of their potential settlement. To state it plainly, the Court recognized that to accomplish this it would have to fill in a term of the parties’ settlement agreement or they would need to provide an advisory opinion on the MSP’s legal requirements.
The Court recognized that some federal courts have determined whether a settlement requires an MSA and also determined the MSA amount, in some cases. However, the Court found that those cases appeared to fall into two distinct factual scenarios, neither of which was present in this case.
The first scenario is where the parties agree that an MSA is required, but they are unable to receive approval on the amount by CMS; therefore, they seek approval of the settlement by the Court and CMS is made aware of the settlement. Those facts were not present in the Early case since the parties did not agree to create an MSA nor had they submitted the issue to CMS.
The second scenario is where the parties already have a finalized settlement agreement but disagree as to whether the settlement agreement’s terms included the creation of an MSA. This situation occurred in another case involving Carnival, Bruton v. Carnival Corp., 2012 U.S. Dist. LEXIS 64416 (May 2, 2012). Please click here for our prior legal bulletin on this case. However, this second scenario was also not applicable due to the fact that Early and Carnival were not seeking to enforce the terms of a settlement agreement; rather, they were seeking assistance from the Court about what term to include in their potential settlement agreement.
Not only did the Court find that the Early case did not meet either of the two above factual scenarios, it also found that it could not grant the Plaintiff’s Motion to Determine if an MSA is required for two other reasons. First, the Court could not write-in the terms of the parties’ private settlement agreement, and second, it refused to provide an advisory opinion on the legal requirements of the MSP.
Interestingly, early on in the case the Court made a point of mentioning that “[w]hether the MSP applies to every tort settlement, thus likely requiring an MSA, is a question that confounds practitioners and litigants.” The Early case is a strong example of the Court’s point and the current state of affairs with regard to the need for clarity regarding MSAs under the MSP.
Last year, in June of 2012, CMS issued a proposed rulemaking regarding how to protect Medicare’s interests with regard to future medicals in both workers’ compensation and liability settlements. For our prior blog on this proposed rulemaking, please click here. However, the comment period closed for this Advanced Notice of Proposed Rulemaking (ANPRM) in August. Since then, CMS has not finalized these rules and is said to be still reviewing commentary from the industry. In the meantime, there is a drastic difference of opinion within the industry as to whether MSAs are appropriate or required in liability cases. Additionally, even if the parties agree that MSAs are appropriate/required in liability cases, there can at times be disagreement over whether it is the defendant or plaintiff’s obligation to address this issue.
Until CMS provides further direction and perhaps regulations around MSAs in liability cases, the tort industry would be wise to learn from the Early case and come to a consensus on their strategy to comply with the MSP before seeking guidance from a court.
Although this may not always be easy due to vast difference of opinion in the industry, the best approach may be to carve out a reasonable portion of the settlement if the plaintiff requires future medical treatment related to the injury. This amount should be based upon the medical records and should be clearly documented within settlement documents. Additionally, the parties can seek court approval of their proposed MSA amount if CMS declines review. In a time where there is uncertainty and disagreement surrounding MSAs, parties to liability settlements with Medicare beneficiaries should make good faith efforts to comply with the MSP if they can agree on settlement terms and are able to receive either court or CMS approval of the MSA.