(Big R Towing v. Benoit) CMS Successfully Shifting the Burden of MSP Enforcement to the Federal Court System

Medicare Set-Aside Blog on January 17, 2011
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For the last several years, CMS has been instructing the insurance and legal industries that the only thing that would curtail its limitless ability to fully recovery for all Medicare payments, past, present and future, made related to an injury subject to some form of insurance coverage is a judicial ruling based upon a hearing on the merits. Well ask and CMS shall receive. On January 5, 2011, the United States District Court for the Western District of Louisiana issued a Findings of Fact, Conclusions of Law, and Order in the case of Big R Towing v. Benoit [2011 U.S. Dist. LEXIS 1392] determining just what Medicare’s interests were and what would adequately protect it in that settlement. Sadly, this order is just further evidence that this is not the solution to the problem either.

Now don’t get me wrong, kudos to the parties in that case for taking the steps necessary to terminate the defendant and insurer’s liability, to protect the claimant’s Medicare eligibility beyond the decided amount and for granting court time to evaluating the situation. However, how much of this can the federal court system sustain? In this particular case, the parties agreed to settle on a certain amount and sought a hearing only on the MSP issue. Can you imagine if every liability case that voluntarily settled required a hearing on the merits anyway in order determine if and to what extent Medicare might have an interest? The expense endured by the federal court system to provide this service could easily match the savings to the Medicare program, so as a tax payer, I have to believe there has got to be a better way. But to CMS, I guess this is better than it paying to extend the voluntary review program to LMSAs, especially if the outcome is as good as they obtained in this case.

In the case at hand, the court granted 100% funding of two surgeries at what appears to be private pay rates and with no regard to the lifetime of follow-up care those surgeries will require, let alone any pharmaceutical needs that correspond, which could easily exceed the costs of the surgeries over the 20+ year life expectancy. That amounts to just slightly over one third of the total agreed settlement amount. If in fact the total settlement amount represented a true compromise, the court could have provided analysis to determine a prorated amount of the anticipated future care to the overall recovery or at least take into consideration the impact of attorneys’ fees on the amount. Furthermore, some portion of that settlement amount represents a quantifiable supplement to future diminished wage earning capacity due to the injury, so is it fair to the injured worker to over-allocate his recovery to future medical in lieu of wages simply because he is, or soon going to be as the case may be, a Medicare beneficiary?

Medicare undoubtedly has a valid statutory interest in the settlement of many insurance claims, but the nature and extent of that interest has yet to be agreed upon by CMS, the insurance and legal industries, and the judiciary system. Until all of these entities come to a common understanding of what Medicare’s interest truly is, all parties will continue to be harmed in some fashion by these inconsistent decisions. The federal courts are certainly better positioned than the state courts [see Zaleppa v Seiwell] in the application of federal law over a state law tort or workers’ compensation claim; however, current application of the MSP in most federal cases continues to follow CMS published guidelines and rely primarily upon CMS’ interpretation of the MSP rather than perform its own analysis. While an improvement, it is still not the solution. If we could achieve some reasonable and consistent standards for MSAs, we would ultimately need neither CMS approval nor involvement of the federal courts to achieve MSP compliance.

Again, great effort on the part of the Louisiana District Court; however the MSP war wages on…

Big R Towing, Inc. v. Benoit, et al., No. 10-538, 2011 U.S. Dist. LEXIS 1392 (W.D. La. Jan. 5, 2011).