Courts Can Only Enforce the Law, Making MSAs Tricky at TImes

Commentary, Liability, Medicare Set-Aside Blog, Medicare Set-Asides, MSP Litigation on February 12, 2015 | Posted by Jennifer Jordan, JD, MSCC

The most important thing you can do in any settlement involving a Medicare beneficiary is thoroughly memorialize the measures taken to protect Medicare’s interests. Vague mention in passing can lead to settlements blowing up or one of the parties not receiving what it bargained for. Take for example a recent Second Circuit Court of Appeals ruling involving the NY State Department of Corrections and Community Supervision (DOCCS). In presenting its settlement terms to the district court, counsel for DOCCS explained that a “written stipulation would follow because it needed to collect and review documentation pertaining to Medicare or Medicaid, which ‘[did not] have anything to do with the merits of the case.’” In approving the settlement, the court confirmed that the DOCCS had “articulated on the record the ‘material terms of the settlement and . . . although documentation need[ed] to be executed to confirm the settlement, the settlement … w[ould] be effective as of [that day], notwithstanding any additional documentation which need[ed] to be executed.’”

As you may have guessed by now, the unimportant detail that could be worked out later was a Medicare Set-Aside and obviously the parties could not reach an agreement on the issues as they both headed back to the district court to file motions to enforce. Eventually the court ruled in favor of the plaintiff, which was subsequently affirmed by the Court of Appeals. The court found that the parties expressed a clear intent to settle and “[a]lthough defendants could have conditioned the settlement on plaintiff’s providing a physician’s letter or agreeing to a [Medicare set-aside], they did not do so.” The court also noted that if the Medicare issue was so critical, they could have made the settlement conditioned on execution of the stipulation, rather than render it effective as of the date of the hearing.

Because there is no express statutory mandate supporting Medicare set-asides, particularly in liability claims, your efforts to protect Medicare’s future interests are only as good as the contractual terms of your settlement agreement. The courts can only enforce the law, therefore it is up to the parties to negotiate the terms that the court can then enforce. In this case, there was no mention of an MSA at the time of settlement but it is clear that Medicare issues were contemplated, just not articulated. It is also obvious that plaintiff must have subsequently argued that no MSA was needed and that the defendants wanted at least a physician’s letter, likely stating that no further related treatment was required.  No offense to the parties, but this is about as serious as a kindergarteners fighting over a cookie.

Rather than burden the court, the proper outcome of this dispute should have been the defendants acknowledging that there is truly no requirement for a LMSA but that it is their money and their exposure and they would like some acknowledgement that Medicare’s interests were in fact considered in the settlement, even if plaintiff felt there was no interest to protect. The parties should have then put their collective heads together and written that stipulation stating that, although no formal Medicare set-aside was prepared in the settlement of this claim, plaintiff received consideration in exchange for defendants’ release from liability of all medical liability and plaintiff acknowledges that such compensation may trigger the Medicare Secondary Payer Act. Should any related treatment be required, plaintiff understands that she must use settlement funds to pay for it and shall not seek treatment through the Medicare program.

Although a formal MSA would help quantify the extent of the MSP exclusion, it is not necessary, particularly when one party denies the need for one at all. If you truly understand the point of the MSP, you will realize that there are a number of ways to handle the issue without reaching such an impasse.  Don’t let your inaccurate understanding of MSAs hold up, or blow up, settlements.

 

GWENDOLYN COLE HOOVER, M.D., Plaintiff, v. NEW YORK STATE DEPARTMENT OF CORRECTIONS AND COMMUNITY SUPERVISION, ALBION CORRECTIONAL FACILITY, SUE WOJCINSKI, SANDRA DURFEE, ANGIE MAUME, DONNA BAKER, Defendants Appellants
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
2015 U.S. App. LEXIS 2107
February 11, 2015, Decided