We’re halfway through 2013, and while we await government regulations on the parameters for funding future medical treatment in cases involving Medicare beneficiaries, there have been several key court decisions this year on the issue. The upcoming guidelines are expected to pinpoint the circumstances in which a special account needs to be established – or dollars set aside – for Medicare’s funding of future medical treatment stemming from an injury for which a Medicare beneficiary received a settlement or damage award. These accounts are known as Medicare Set Asides (MSAs).
One recent federal court ruling shows the ramifications of settling parties’ failure to agree on the allocation of future medical expenses in liability cases, while another opinion clarifies when Medicare’s recovery right (including the cost of future medical care) ripens. Finally, a third decision highlights the circumstances when an MSA is not warranted.
Early v. Carnival
In February, a federal court in Florida held that the issue of whether an MSA is needed is an essential term of the settlement, to which the parties must agree.[i] The case – Early v. Carnival Corporation – involved injuries a cruise ship passenger allegedly suffered. At mediation, the parties agreed that the defendant would pay an undisclosed sum to the plaintiff, but notably, the parties could not agree on whether a MSA was needed, and asked the Court to determine that issue. The Court declined to do so – holding that settlements must be “mutually agreeable on every essential term,” and that the parties had failed to reach an agreement on the essential term of whether an MSA was needed. Accordingly, the Court found that because the MSA issue was undecided, the parties had failed to reach a settlement.
In its ruling the Court distinguished this case from others where the parties had asked the Court to enforce a settlement agreement. Here, the parties asked the Court to assist with a critical term of a potential settlement agreement. The Court noted that it could not draft an essential term of the agreement, nor issue an advisory opinion on the matter.
Bottom Line: This case demonstrates how the MSA issue can derail a settlement. Until the Centers for Medicare and Medicaid Services issue protocols for MSAs in liability cases, the best approach is for counsel to discuss this issue and ensure everyone involved is on the same page.
Weinstein v. Sebelius
In the second case, Weinstein v. Sebelius,[ii] the U.S. District Court for the Eastern District of Pennsylvania found that the plaintiff owed CMS nearly 20 times the amount a court-approved settlement allocated for Medicare’s reimbursement. Medicare had incurred $58,393.57 in healthcare costs for the treatment of plaintiff’s husband, and plaintiff subsequently obtained a medical malpractice settlement in state court linked to her husband’s care. Plaintiff sought to reimburse Medicare $2,922.34, and a state court approved specific language to that effect in the settlement agreement. After CMS issued a demand for the higher amount, a federal court ultimately reviewed Medicare’s claimed lien, and found that the plaintiff did owe Medicare the full amount ($58,393.57) as reimbursement for its funding of her husband’s medical care.
In its ruling, the Court noted that the lower court’s approval of the settlement agreement was not based on the merits of the case. The opinion stated that if a Medicare beneficiary seeks medical expenses as damages in a lawsuit, and the case ultimately settles, the settlement itself establishes the third party’s responsibility for those medical expenses, regardless of whether that party admitted liability.
Bottom Line: When a plaintiff seeks damages which include past and future medical expenses, the initial pleading can trigger Medicare’s broad and general right of recovery for those payments.
Sterrett v. Klebart
The third case, Sterrett v. Klebart,[iii] stems from a state court in Connecticut and establishes that if parties can determine that no settlement proceeds are payable or available for a claimant’s Medicare-covered future medical expenses, then an MSA is not needed. The parties settled a slip-and-fall claim, and in reaching that agreement, determined that the the settlement proceeds did not address future medical expenses otherwise covered by Medicare. The parties then asked the Court to determine that they had – per the Medicare Secondary Payer Act – reasonably considered Medicare’s future interest, although they’d concluded an MSA was not warranted.
The Court determined that the parties had adequately considered Medicare’s interests as they had properly evaluated the terms of the settlement. The Court held that the settlement proceeds did not represent compensation for Medicare’s future medical costs, but for the plaintiff’s noneconomic damages as well as some “modest allocation for future medical expenses arising out of the possible need for home health aides” which Medicare does not typically cover.
In its opinion, the Court stated that while the plaintiff would incur future medical expenses payable by Medicare post-settlement, the settlement funds did not contain sufficient proceeds to pay for such future medical expenses.
Bottom Line: This case strikes at the heart of MSA analysis: how many dollars out of one undifferentiated sum are really being paid for future medical expenses as compared to all other damage components pled and released, past medical expenses, and expected out-of-pocket medical costs?
At the Garretson Resolution Group, we urge attorneys to determine a claimant’s Medicare enrollment status as soon as claims are filed. Then as the case progresses, if the claimant is a Medicare beneficiary or likely to become one within 30 months of the settlement date, counsel can evaluate whether Medicare has funded or will need to fund any medical care at issue. This process enables the parties to establish how much, if any, money is needed to reimburse Medicare for past care
, and whether any funds exist to fund future care
. Overall, attorneys should implement a consistent procedure for handling liability cases involving Medicare beneficiaries, in order to ensure they’re satisfying Medicare’s reimbursement rights. If you have any questions, please contact John Cattie
) at (704) 559-4300.
[i]Early v. Carnival Corporation, 2013 WL 462580 (S.D. Fla. February 7, 2013).
[ii] Weinstein v. Sebelius, 2013 WL 1187052 (E.D. Pa. February 13, 2013). See also 42 Pa. C.S. §§8301, 8302.
[iii] Sterrett v. Klebart, 2013 Conn.Super. LEXIS 245 (filed February 5, 2013)(unreported).