On March 23, 2015, the United States District Court for the Eastern District of Pennsylvania published its opinion on Villare v. GEICO Casualty Company, finding that since Plaintiffs had put forward uncontroverted evidence in the form of affidavits showing that Mr. Villare was not a Medicare beneficiary and that no Medicare lien existed, Plaintiffs had fulfilled their obligations under the settlement agreement and were therefore entitled to the $100,000 payment for which they bargained. The court makes it clear that if Geico wished to make the settlement contingent upon a letter from Medicare attesting that there was no Medicare lien and/or that there would not be any future Medicare lien, it could have done so during the settlement negotiations. Since it did not, Plaintiffs’ motion to enforce the settlement agreement was granted. More than this however, the case highlights the lack of understanding among liability litigants and the judiciary as to the requirements of the MSP Act, including the significance of being a current Medicare beneficiary or potentially becoming one within 30 months of the settlement date, the differences between resolving Medicare’s past conditional payments, and how to appropriately take Medicare’s future interests into account when settling future entitlement to medical care associated with the pending claim.
Plaintiffs James and Suzanne Villare sought to recover from their auto insurance company, Defendant Geico Casualty Company, after Mr. Villare was injured in a collision with an underinsured motorist. Following a settlement conference, the parties agreed to settle for $100,000.
The terms of the settlement, as memorialized in a February 12, 2015 letter from Defendant’s counsel, included Plaintiffs’ agreement “to satisfy any and all liens being asserted in this matter with these settlement funds.” However, upon reading the Release and Trust Agreement drafted by Geico, Mr. Villare was unable to sign the Release and Trust Agreement because it included an inaccurate provision attesting that he was not within 30 months of becoming eligible for Medicare. After striking the inaccurate sentence, the Villares signed the Release and Trust Agreement, including all other provisions requested by Geico. Geico however refused to send payment and as a result Plaintiffs filed a Motion to Enforce the Settlement Agreement.
Plaintiffs argued that the material terms of the settlement were (1) Geico would pay $100,000 in exchange for a full and final settlement of all claims, (2) Plaintiffs would execute a Child Support Affidavit, and (3) Plaintiffs would agree to satisfy any and all liens being asserted in this matter with the settlement funds. These settlement terms were memorialized in a February 12, 2015 letter from Geico’s counsel.
To consummate the settlement, Geico provided a Release and Trust Agreement for Plaintiffs to sign. Consistent with the settlement terms, the Release and Trust Agreement provided that any liens have been settled or satisfied, that Plaintiffs will satisfy such liens in the future, and that Plaintiffs will “defend, indemnify, and forever save harmless” Geico from any such liens that have been or may be asserted, including Medicare liens. However, the Release and Trust Agreement also requested that Plaintiffs represent that they have not received Medicare or Social Security benefits related to the accident, and that they will not be Medicare-eligible within 30 months.
The final sentence regarding Medicare eligibility within 30 months was problematic because Mr. Villare was 64 years old and would be Medicare eligible within 30 months when he turned 65. To remedy this problem, Plaintiffs signed and notarized a version of the Release and Trust Agreement that omitted the sentence about not becoming Medicare-eligible within 30 months. The signed version otherwise included all of the representations and indemnification provisions that Geico requested. Plaintiffs therefore argued that this signed agreement fulfilled their settlement obligations.
Geico, however, insisted that the Villares provide evidence that there were no outstanding Medicare liens in the form of a final letter from Medicare. In response, the Villares took additional steps to show that there were no Medicare liens. A legal assistant for Plaintiffs’ counsel contacted Medicare to inquire about Mr. Villare’s Medicare status and submitted an affidavit stating that Mr. Villare was not Medicare eligible, had no open Medicare claims, had no Medicare number, and that a Medicare representative stated that Medicare could not provide a letter about his claim status because he was not Medicare eligible and was not registered with Medicare. Mr. Villare also provided an affidavit attesting that he did not meet any of the requirements to be eligible for Medicare and had not submitted any claims to Medicare.
Plaintiffs therefore argued that they had complied with their obligations under the settlement agreement and had made a good faith effort to comply with Geico’s additional requests regarding Medicare liens. They requested the Court either order Geico’s counsel to deliver the settlement funds to them or set the case for trial.
Geico did not dispute the basic facts but argued that Plaintiffs had not yet satisfied the settlement agreement because they had not provided proof of satisfaction of any Medicare liens in the form of a letter from Medicare. Geico argued that Medicare has a 30-month “look back period” “which Medicare may review in determining the issuance of liens.” Additionally, Geico pointed to Medicare regulations that specify that a beneficiary must reimburse Medicare if he is covered by liability insurance and receives a liability insurance payment for medical services that Medicare covered. 42 C.F.R. § 411.24(h). Moreover, they were concerned that if the beneficiary failed to do so, the insurance company would have to reimburse Medicare, even if it had already reimbursed the beneficiary for the same claim. Id. § 411.24(i)(1).
Geico argued that Mr. Villare had represented during settlement negotiations that he would need future medical care as a result of the accident totaling $91,375 to $199,950 over the rest of his life. To the extent that such costs are covered by Medicare, Geico argued that Medicare could seek repayment from the Villares and/or from Geico under 42 C.F.R. § 411.24 and the look back policy. Geico also argued that the defense and indemnification language in the Release and Trust Agreement was insufficient because if Medicare was unable to collect a lien from the Plaintiffs, it was unlikely Geico would be able to enforce the defense and indemnification provisions.
Geico argued that it had offered two ways to resolve this dispute. First, it could place the settlement funds in escrow until Plaintiffs obtained a letter from Medicare attesting to the lack of a Medicare lien. Second, it had proposed that Plaintiffs and their counsel sign a separate Medicare Hold Harmless agreement, in which both Plaintiffs and their counsel would agree to indemnify Geico. Geico contended that the settlement agreement was a valid and binding contract, so this case should not be listed for trial and instead one of the two options Geico had suggested should be pursued.
The parties both agreed that a final and binding settlement was reached in this case and that the material terms included the Plaintiffs’ agreement “to satisfy any and all liens being asserted in this matter with these settlement funds.” Therefore, the only dispute was whether Plaintiffs have complied with that requirement.
The court indicates that at hearing, counsel for both parties agreed that the only known, outstanding lien is a lien from Aetna and that the Villares had agreed to pay the Aetna lien with the proceeds from the settlement. The court also pointed out that both counsel also agreed that there was no explicit discussion of Medicare liens or the Medicare look back period during the negotiations that resulted in the settlement agreement. The court also highlights that there is no dispute that the Villares have signed, notarized, and delivered to Geico’s counsel a version of Geico’s Release and Trust Agreement that includes all of the provisions requested by Geico except for one sentence that inaccurately represents that the Villares will not become Medicare-eligible within 30 months.
Notably, the court notes that the version signed by the Villares explicitly obligates them to “defend, indemnify, and forever save harmless” Geico “from and against any and all liens” arising out of the incident that is the subject of this litigation, “including, without limitation, any Medicare or Medicaid liens.” Furthermore, since Plaintiffs have put forward uncontroverted evidence in the form of affidavits showing that Mr. Villare is not currently Medicare eligible and, to date, is not the subject of any Medicare liens, the Court concludes that Plaintiffs have fulfilled their obligations under the settlement agreement and are entitled to the $100,000 payment for which they bargained.
The court makes it clear that if Geico wished to make the settlement contingent upon a letter from Medicare attesting that there were no current Medicare liens and/or that there will not be any future Medicare liens, it could have done so during the settlement negotiations. Since it did not, Plaintiffs motion to enforce the settlement agreement was granted.
As this case clearly shows Medicare Secondary Payer Act issues have arrived in liability cases. And as this case highlights, all of the parties involved, including plaintiff counsel, defense counsel, corporate defendant, insurer, and yes, even the judiciary must become familiar with and have a working understanding of the MSP Act. As the facts of this case indicates, no one was comfortable with or understood the intricacies and requirements of the MSP Act, including the significance of being a current Medicare beneficiary or potentially becoming one within 30 months of the settlement date, the differences between resolving Medicare’s past conditional payments, and how to appropriately take Medicare’s future interests into account when settling future entitlement to medical care associated with the pending claim.
Having established that the plaintiff was not a current Medicare beneficiary, there were no conditional payments made by Medicare; therefore no liens to worry about. Since the plaintiff however was anticipated to become a Medicare beneficiary within 30 months of the settlement date, the parties were responsible for making sure Medicare’s future interests were protected so that Medicare remained a secondary payer post settlement. Neither the parties or the court here did anything to make sure Medicare’s future interests were protected. As a result, the litigants left the federal court house without any protection from CMS either denying future Medicare coverage to the plaintiff, requiring plaintiff spend the entire $100,000 settlement on future medical care related to the claim before Medicare becomes the primary payer, or if Medicare makes a conditional payment in the future, from seeking reimbursement from the plaintiff or defendant. And then of course there are the possibilities of MSP private cause of action by the plaintiff or medical providers or Medicare Advantage Plans (should plaintiff forego Parts A and B and instead opt for Part C coverage) or Medicare Prescription Drug Plans (should plaintiff keep Parts A and B and decide to also purchase Part D coverage) against defendant for double damages should Geico deny such request for reimbursement in the future. Unfortunately, because of the parties’ lack of understanding of the MSP Act, the possibilities for potential liability are endless.
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