In a recent post, a plaintiff’s attorney wrote that the defendant insurance company was requiring a funded medicare set aside for his 59 year old client.
You concluded that, “There are so many reasons a defendant could want a set-aside, but no where will you find a law or reg that affirmatively states that need.” Consistent with that statement, I read a Massachusetts Bar Assoc article that said “CMS does not currently take the position that MSAs are required in tort settlements” and “there are no regulations that require MSAs in tort settlements.” I know the AAJ (former ATLA) says Section 111 does not require MSAs.
On the other hand, I attended a 2009 seminar put on by a defendant insurance attorney that said MSAs are required in tort liability cases.
I don’t want to stick my head in the sand on this. I’m really trying to be certain. So, the bottom line: Is a medicare set aside ever required by law in a liability case? If not, how could the defendant ever have to pay twice?
A “Medicare set-aside” is not expressly required by law in any type of insurance settlement. However what is required by law is that Medicare not make payment for treatment related to an insurance settlement, judgment or award, regardless of admission of liability, where compensation is paid in exchange for a release from responsibility for medical – past, present or future, known or unknown, anticipated or not and every other thing I’ve seen in general release language to date. Once a “primary payer” is established, Medicare becomes entitled to reimbursement of any related payments it may have made conditionally, and may exclude benefits for related treatment on an ongoing basis. Hence, an MSA is merely the vehicle to fund that future anticipated treatment that Medicare is now prohibited from providing. There is nothing in the statute that terminates the MSP obligations or prevents Medicare from making post-settlement conditional payments which it would be entitled to all of its recovery rights, inclusive of interest, double damages and a whole host of individuals susceptible to recovery claims. This is generally why defendants fear paying twice – just as there is no express requirement for MSAs, there is also no express termination of the defendant’s exposure to indefinite claims by CMS for the lifetime of its beneficiaries. In light of MMSEA reporting, the federal government will now be on notice of every previously confidential settlement so what do you think they will do with that information. AAJ is correct that the MMSEA does not require MSAs, but can you see how the act could infer the obligation.
The AAJ’s opinion, and I believe that the ABA has now adopted a similar one during its midyear meeting, is that given the absence of express requirements, no obligation exists. They rely heavily upon the absence of a CFR section in subpart D of Title 42 that would essentially mirror the one in subpart C that governs workers’ compensation settlements and is the backbone of the WCMSA review program that was instituted in July 2001. Because comp is essentially no fault and the same in all states, CMS was able to assemble a voluntary program where people could seek its opinion as to the adequacy of the future arrangements made to prevent Medicare from assuming the burden. However if you take the time to read 411.46, it says nothing more than if an allocation for future medical is made, Medicare is excluded from providing benefits until that allocation is exhausted on related medical treatment. And it only addresses the issue because the components of a WC settlement are generally always just indemnity & medical, determined individually, are present in every case and represent the commutation of a life time entitlement. There is no similar program for liability only because every state law is different, every claim is governed by a different contractual obligation, state law limits and damages caps may apply, etc. It is not that CMS does not want LMSAs done, it just wants to avoid establishing policy given the difficulty in addressing all the the variable issues from state to state, policy to policy.
So rather than look at the absence of formal written policy, you should look at CMS’ actions to determine what its position is. Each of the 10 CMS regional offices adopted its own policy as to whether or not it reviews LMSAs. Philadelphia is currently reviewing everything submitted. Chicago has a dollar threshold. San Francisco is not reviewing anything. Furthermore, Barbara Wright in the MSP Central office routinely makes very calculated comments during the MMSEA town hall calls inferring that the statutory obligation of all types of insurance is the same, it is merely the availability of the voluntary review that differs. Examples from some of those calls, transcripts of each available on their website, include:
September 30, 2009 – “…there is not the same formal process for liability set asides that there is for workers’ compensation set asides. However, the underlying statutory obligation is the same.”
October 29, 2008 – “we, in brief, we have a very informal, limited process for liability set asides. We don’t have the same extensive ones we have for Worker’s Comp. In either case CMS approval of a set aside amount is not required. It is a voluntary process.”
March 29, 2009 – liability “does not have the same formal review process although our regional offices will consider review of proposed liability set-aside amounts depending on their particular work load and whether or not they believe significant dollars are at issue.
So while I am familiar with and sympathetic to the AAJ and that author’s opinion, I personally do not find it persuasive, especially given that the article you referenced cited the conclusions of a law student for support. I understand that he also published an article in the December edition of Trial, but given that it is not freely available to non-members, I can only assume that it says much of the same. Given the weight of the available evidence to the contrary, and the public policy that will ultimately support any measures that help preserve the Medicare program, I can’t see anything other than MSAs being appropriate in any type of insurance claim involving an injury requiring ongoing treatment that would otherwise be entitled to Medicare coverage. If a demand for future medical is made and paid, how is Medicare wrong in requiring its beneficiaries spend the money on that which it was received for. Rather than fight LMSAs in general, the legal and insurance industries would be better served by devoting more time to debating the nature and extent of the contribution to that anticipated future course of care in liability situations. Apportionment principles that would apply to both past and future meds is where our focus should be.