Claimant Not Entitled to Medicare Set-Aside Funds Due to Misrepresentation of Medicare Status

In a case out of the Civil Appeals Court in Oklahoma, Ramos v. Becco Contractors,Inc., 2013 Okla. Civ. App. LEXIS 105 (December 13, 2013), a claimant who misrepresented his immigration status and eligibility for Medicare was unable to persuade the court to force his employer to pay him funds for an MSA.

Jose C. Ramos (Claimant) suffered a work injury to his right foot during the course of his employment with Becco Contractors (Employer). The Claimant sought permanent total disability benefits for his injury, and in doing so, provided a nine-digit number for his SSN to his Employer. The trial court, on consideration of the evidence, awarded benefits for permanent partial disability, disfigurement, continuing medical treatment and vocational rehabilitation, and reserved the determination of permanent total disability pending the outcome of vocational rehabilitation.

The parties subsequently mediated the terms of the settlement, and ultimately came to the agreement that the Employer would pay $125,000 to the Claimant. In addition, the Employer agreed to fund an MSA in the amount of $12,361.18, in the event the MSA was approved by CMS. Also, if CMS required additional money for the MSA beyond $12,361.18, the Claimant agreed he would provide the additional funding from his settlement proceeds.

The settlement was finalized on June 1, 2009. However, the Claimant did not become a naturalized citizen until December 18, 2011. The Employer paid the Claimant the principal amount of $125,000, but refused to fund the MSA. The Employer asserted that upon submission of the MSA to CMS, it was discovered that the Claimant was not Medicare eligible, and the number reported by the Claimant as his SSN was a taxpayer identification number and therefore the Claimant was not Medicare eligible until he became a naturalized citizen in December 2011. Because the Claimant was ineligible for Medicare at the time of settlement, and the Employer argued that due to his misrepresentation, the provision of the settlement calling for the funding of the MSA was unenforceable.

The Claimant’s response was that he did not speak English and did not appreciate the difference between the nine-digit number issued to him as a taxpayer identification number or the significance of the difference as it related to his Medicare eligibility, either at the time he filed his claim or at the time of settlement. Alternatively, he argued that he settled his claim for the total sum of $137,361.18, and, regardless of the designation of the $12, 361.18 as an MSA, he was nevertheless entitled to payment of the full settlement amount.

The trial court determined that the Claimant providing an incorrect SSN and an incorrect Medicare status was a material misrepresentation and that the Employer was relieved of any requirement to fund an MSA or pay the equivalent in cash to the Claimant.

The Claimant then appealed the trial court’s determination. The appellate court ultimately agreed with the trial court. The appellate court found that because the Claimant agreed that the MSA would not be paid without CMS’ approval, and CMS approval of the MSA was not obtained, the Claimant could not now complain of the Employer’s failure to pay the MSA. Therefore, the decision was affirmed and the Employer did not have to fund the MSA.

There are many lessons to be learned from this case. First, a claimant’s Medicare status should be verified through the Social Security Administration and/or Medicare before including an MSA as part of the settlement terms. Had the Employer verified the Claimant’s status prior to discussing the settlement terms, it would have been known that an MSA was not needed. However, if time is of the essence and the parties cannot conduct an official benefits verification, a statement should be included in the settlement documents wherein the claimant affirms his/her Medicare and Social Security Disability (SSDI) status. If the claimant’s stated Medicare and/or SSDI status turns out to be incorrect or untruthful and the MSA has not yet been funded, the Employer may not have to pay the MSA due to the fact that the claimant made a material misrepresentation.

Second, this case teaches us yet again about the importance of carefully crafted settlement language when including terms related to an MSA. In this case, because the settlement language was particular in stating that the Employer only had to fund the MSA if CMS gave its approval, the appellate court found the condition to not be fulfilled and therefore the Employer did not have to fund the MSA. Employers and payers would be wise to include similar types of condition precedents in settlement
documents to ensure that an MSA does not have to be funded if it is no longer needed. Examples of such condition precedents would be, Employer will fund $xxx for an MSA “only if CMS approves the MSA,” or “only if the claimant is living,” or “only if the claimant is Medicare eligible, 62½ years of age or older, or has currently or previously applied for SSDI benefits.”

This case is a great example the importance of settlement language and the impact it can have on cost savings for payers and employers. If you would like assistance with crafting your MSP compliant settlement language, please contact Heather Schwartz Sanderson, Corporate Counsel, PMSI at 813.612.5504 or via email at

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