Comments (0)

By Settlement Solutions, May 21, 2013 3:35 pm

We previously blogged about a case wherein Medicare was unable to recover conditional payments due to the fact that the claimant sought unauthorized treatment under Texas workers’ compensation law. Please click here to read our prior blog.

On appeal, the Firth Circuit has affirmed this decision; please see Caldera v. The Insurance Company of the State of Pennsylvania, 2013 U.S. App. LEXIS 9706 (May 14, 2013).

It is likely that this decision will be appealed to the U.S. Supreme Court, and until such time the Supreme Court decides whether or not to hear the case, this decision remains controversial. Some view this decision as a burden shift to the taxpayer, due to the fact that Medicare was unable to recover payments where a claimant did not exhaust his state workers’ compensation administrative remedies.

Others view this case as a wise decision and beneficial for workers’ compensation carriers due to the fact that the treatment sought by the claimant in this case was unauthorized under Texas workers’ compensation; therefore the workers’ compensation carrier did not become primary and responsible for repayment to Medicare.

PMSI will continue to follow this case and will keep its subscribers updated on any developments with regard to a possible appeal to the U.S. Supreme Court.

Comments (0)

By Settlement Solutions, May 16, 2013 11:11 am

A liability case out of a District Court in Louisiana, Benoit v. Neustrom, 2013 U.S. Dist. Lexis 55971 (April 17, 2013), issued an order wherein an LMSALiability Medicare Set-Aside was apportioned and reduced. A Motion for Declaratory Judgment was filed by Michael Benoit (“Plaintiff”), in which he sought a judgment to declare the interests of Medicare satisfied with a reduced LMSALiability Medicare Set-Aside proportionate to the Plaintiff’s recovery.

The facts preceding the settlement involved the Plaintiff filing suit against Michael Nuestrom, individually and as Sheriff of Lafayette Parish, and Rob Reardon, individually and as Warden of the Lafayette Parish Correctional Center (collectively, “Defendants”). The Plaintiff alleged that the Defendants and their employees failed to properly evaluate his condition upon his transfer to Lafayette Parish Correctional Center. Specifically, he claimed he was not given a pre-medical evaluation when he was suffering in his cell from the effects of alcohol detoxification. The Plaintiff was later found face-down and unresponsive in his cell; he was diagnosed at the hospital with hypoxic brain injury, secondary to seizure, followed by cardiac arrest, secondary to alcohol withdrawal and hypoxic encephalopathy. He was admitted to the hospital and received treatment including physical, occupational and speech therapies. Upon discharge from the hospital, Benoit was placed in a nursing home and then moved to outpatient care.

In October of 2012, the parties reached a settlement agreement, conditioned upon the Plaintiff’s release of all claims against all Defendants and the Plaintiff’s assumption of sole responsibility for protecting and satisfying the interests of Medicare and Medicaid. At that point in time, an LMSALiability Medicare Set-Aside projection was prepared by an independent MSAMedicare Set-Aside vendor which estimated that the cost of future medical expenses would range from $277,758.62 to $333,267.02. Additionally, the parties established an amount to reimburse Medicare for past conditional payments and establish a special needs trust in exchange for a lien waiver by Medicaid.

The remaining issue for the court’s consideration was the Plaintiff’s future medical care as a result of the alleged accident and the extent to which the LMSALiability Medicare Set-Aside can or should be reduced to account for the financial hardship to the Plaintiff. The court noted and received the following into evidence: 1) the settlement amount was $100,000; however, the amount due to the Plaintiff would be reduced to $55,707.98, after payment of fees, expenses and Medicare conditional payments; 2) the LMSALiability Medicare Set-Aside prepared by an MSAMedicare Set-Aside vendor which demonstrates that the future medical cost estimates are considerably larger than the net settlement figure; and 3) a Social Security financial statement offered to demonstrate financial hardship on the Plaintiff.

Before diving into the court’s decision and its logic, it should be noted that CMSCenters for Medicare and Medicaid Services was noticed on the hearing for the Motion for Declaratory Judgment. The United States Attorney / CMSCenters for Medicare and Medicaid Services declined to participate in the hearing; however, they did issue a letter to all parties of the litigation declaring an amount due of $2,777.88 to CMSCenters for Medicare and Medicaid Services for past conditional payments. Therefore, CMSCenters for Medicare and Medicaid Services did not provide its input on a major issue that the parties were seeking to resolve—the future medical aspect of Medicare Secondary Payer (MSPMedicare Secondary Payer Act) compliance in the settlement. The settlement parties had already addressed the conditional payment aspect of the case.

Since the court did not have CMSCenters for Medicare and Medicaid Services to opine on the future medical aspect of this case, when considering the Plaintiff’s Motion for Declaratory Judgment, the court looked to two main items for guidance on possible apportionment to the LMSALiability Medicare Set-Aside: a handout from the MSPMedicare Secondary Payer Act Regional Coordinator for CMSCenters for Medicare and Medicaid Services in Region VI (aka “Stalcup memo”) and the well known MSPMedicare Secondary Payer Act case, Bradley v. Sebelius, 621 F.3d 1330 (11^th Cir. 2010).

In the Bradley case, the probate court reduced Medicare’s lien based on the proportion of Medicare’s contribution to the total settlement’s potential worth, had adequate funds been available. The DHHSDepartment of Health and Human Services disagreed with the probate court’s decision citing that the MSPMedicare Secondary Payer Act Manual provided them with a full right of recovery. The district court agreed with the probate court and upheld its decision, finding that the MSPMedicare Secondary Payer Act field manual did not hold the weight of the law and that there is a strong public interest in encouraging settlement in the interests of judicial economy. Additionally, the court noted that within the Stalcup memo the only situation in which Medicare recognizes allocation of liability payments to non-medical losses is when payment is based on a court of competent jurisdiction’s order after their review of the merits of the case.

Between the Stalcup memo and the Bradley case, as well as recognizing the fact that Medicare does not have a formal policy in place for LMSAsLiability Medicare Set-asides, the court resorted to making its own finding of fact as to the appropriate amount of the LMSALiability Medicare Set-Aside. A court-ordered equitable allocation could be considered reasonable based upon guidance in the Bradley case and the Stalcup memo.

The Plaintiff argued that 10% of the gross settlement proceeds would be an equitable amount since the recovery obtained was 10% of the possible recovery if he had prevailed on all the liability issues. The court disagreed with that methodology, but still found that an equitable allocation was in order for the Plaintiff’s family due to his financial hardship. Noting that the mid-point of MSAMedicare Set-Aside projections was $305,512.50, and that the settlement is 18.2% of that figure, the court found that the LMSALiability Medicare Set-Aside amount should be $10,138.00. (The percentage of 18.2% was determined by the court by dividing the net proceeds to the Plaintiff by the mid-point amount of the LMSALiability Medicare Set-Aside. More specifically, the $10,138.00 amount was determined by multiplying the 18.2% to the net proceeds to the Plaintiff of $55,707.98.)

This decision is interesting as it is the first of its kind seen by the industry. Since CMSCenters for Medicare and Medicaid Services has not yet provided any formal guidance around LMSAsLiability Medicare Set-asides, this methodology could be used by liability settlement parties in order to achieve appropriate consideration of Medicare’s interests while still allowing settlement.

Parties settling with Medicare beneficiaries should consider their risk tolerance and the circumstances of each case before deciding the best methodology to achieve consideration of Medicare’s interests with regard to any allocation of future medical treatment. While CMSCenters for Medicare and Medicaid Services has not formally approved the LMSALiability Medicare Set-Aside calculation used in this case, the fact that the court issued an order on the appropriate/equitable amount of the LMSALiability Medicare Set-Aside after reviewing the merits of the case, it would seemingly prevent CMSCenters for Medicare and Medicaid Services from challenging the court’s order pursuant to their own guidelines.

Comments (0)

By Settlement Solutions, April 8, 2013 2:53 pm

Next week, Heather Schwartz, Esq., MSCC, CHPE, CLMP, CMSP will offer her expertise in reference to the SMARTStrengthening Medicare and Repaying Taxpayers Act of 2011 ActStrengthening Medicare and Repaying Taxpayers Act of 2011 and other MSPMedicare Secondary Payer Act legal updates on Tuesday, April 16, 2013 from 1 PM -2 PM EDT.

The webinar is complimentary and 1 hour of CEU and CLEContinuing Legal Education credit has been applied for in multiple states; all attendees who successfully complete the Webinar will be provided with a Certificate of Attendance. For more information on obtaining CEU or CLEContinuing Legal Education credit for this webinar and to Register, please click here.

Comments (0)

By Settlement Solutions, March 26, 2013 10:27 am

Case law as it pertains to MSPMedicare Secondary Payer Act compliance in liability settlements continues to reach different conclusions in different courts. In fact, the only aspect that appears to be consistent in these opinions is a lack of any significant trend or majority position concerning exactly how to apply the MSPMedicare Secondary Payer Act Act in liability cases. More specifically, due to the ambiguous/confusing nature of the MSPMedicare Secondary Payer Act in liability settlements, there has been a vast difference of opinion as to how to protect Medicare’s interest through the use of MSAsMedicare Set-Asides under the MSPMedicare Secondary Payer Act.

We have seen several cases find that a LMSALiability Medicare Set-Aside is required/appropriate for compliance with the MSPMedicare Secondary Payer Act in Louisiana and Mississippi (see Frank v. Gateway Insurance Co., 2012 U.S. District LEXIS 33581 and Welch v. American Home Insurance Company, 2013 U.S. District LEXIS 25948). Additionally, in a recent Florida case, Early v. Carnival Corp., 2013 U.S. District LEXIS 16711, the court refused to provide an advisory opinion on whether an LMSALiability Medicare Set-Aside was required under the MSPMedicare Secondary Payer Act because to do so would have required the court to draft (rather than interpret) a key part of the settlement. However, in Sterrett v. Klebart, 2013 Conn. Super. LEXIS 245 (February 5, 2013), the court found that the settlement parties were not required to set-aside any settlement proceeds for future medical benefits, despite the fact that the injured party became a paraplegic as a result of the alleged injury in this liability lawsuit.

The facts of the Sterrett case involve the Plaintiff, Clifford Sterrett (Sterrett), who was a social invitee at the home of the defendants. Sterrett was walking down the stairs at the home when he fell backwards and was injured. Sterrett suffered a spinal cord injury that resulted in paraplegia and alleged that the defendants were negligent because the stairway did not have a handrail. The defendants countered that Sterrett was contributorily negligent because he was under the influence of alcohol at the time that he fell. The defendants also asserted a series of other special defenses.

The parties mediated and reached a settlement in the amount of $550,000. The court recognized that considering all of the facts and circumstances of the case, particularly the nature of Sterrett’s injuries and all of the special defenses raised by the defendants, the defendants’ agreement to settle the case for $550,000 represented a substantial compromise over the potential verdict range in a jury trial. Due to the fact that the settlement was “compromised” and settlement funds paid to Sterrett were not intended to include funds representing compensation for future medical benefits, the court found that the settlement parties were not required to set-aside any of the settlement proceeds for future medical benefits which may be paid by Medicare.

There was an acknowledgement that there was an obligation to reimburse Medicare for conditional payments and that Medicare was owed $14,448.30. The court further found that the parties “reasonably and adequately considered the interest of Medicare in the settlement, and the plaintiffs and defendants should not be subject to any claim, demand, or penalty from Medicare as a result of the settlement payment that has been agreed upon in this manner.”

What is interesting about this case is that the court acknowledged that Sterrett would incur medical bills payable by Medicare in the foreseeable future. However, because the settlement funds contemplated by this particular settlement agreement did not include any significant amount that would be used to cover the costs of future medical expenses, there was absolutely nothing to set-aside. It appears that by “creative lawyering” of the settlement allocation, the parties were able to convince the court that nothing in this settlement involved future medical costs. In this particular case, the court was more than willing to go along with this way of thinking.

The court seemed to side step the issue of the burden shift of future costs to Medicare. Obviously, in this case the plaintiff is a paraplegic and someone is going to have to pay for his medical coverage. The parties and the court appear to be simply pointing fingers to the government and saying, “Let Medicare pay.” However, in the end, the burden may end up being shifted to Sterrett, the Medicare beneficiary in this case. As this case is reportable under MMSEAMedicare Medicaid and SCHIP Extension Act Section 111Section 111 of the Medicare Medicaid and SCHIP Extension Act stating requirements for mandatory insurer reporting , the Centers for Medicare and Medicaid Services (CMSCenters for Medicare and Medicaid Services) will flag the ICD-9International Classification of Diseases, 9th Revision codes reported and associated with the settlement and could potentially deny Sterrett coverage for items related to the injury until the entire settlement is exhausted. The court stated that the plaintiffs in this case should not be subject to any future claim, demand, or penalty from Medicare in the future. Yet, CMSCenters for Medicare and Medicaid Services is arguably not bound by this statement or this decision and further, it appears that no determination as to Sterrett’s contributory negligence was made by the court; therefore, Sterrett may be without recourse if he appeals loss of Medicare coverage through Medicare’s administrative appeals process.

Even if Medicare does not deny Sterrett coverage in the end, the burden is arguably being shifted to Medicare in some form or fashion. The future medical cost has to go somewhere- and it is going to be either the Medicare beneficiary or the Medicare Trust Fund. Although CMSCenters for Medicare and Medicaid Services has not finalized “formal guidance” on how to comply with the MSPMedicare Secondary Payer Act with regard to future medical treatment in liability cases, it seems that the intent behind the MSPMedicare Secondary Payer Act and the protection of Medicare’s interests was not accurately applied to this case and seems to have lost its way.

Hopefully in the future, courts will have a better understanding of the potential burden shift to Medicare and will find a resolution that not only protects the settlement parties, but also protects the Medicare Trust Fund and the Medicare beneficiary.