Wright v. Liberty Medical Supply – Three-Party Checks and Medicare

Medicare Set-Aside Blog on July 29, 2011
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Inclusive of an MSP issue or not, a settlement agreement is always simply a contractual agreement among the parties to terminate a legal liability. If you have no meeting of the minds, you have no complete agreement.

In Wright v. Liberty Medical Supply, defense ran into trouble by surprising plaintiff with three separate settlement checks, one payable to Medicaid, one to Medicare, the plaintiff and her attorney, and a third to plaintiff and her attorney for the balance. Because they had not agreed to that action as a term of the settlement, defense was held in violation of the agreement. Fortunately because defense had a valid reason of attempting to ensure that the liens were repaid, no sanctions were granted. Regardless, even with the right intentions, this act when not agreed upon has unraveled more than one settlement during the past year and should be handled cautiously. While it is neither a prohibited act nor required by any MSP law or regulation, three-party checks must be a term of the agreement If defense wants to use them to make sure that Medicare has been satisfied.

It is difficult to see what the continued opposition is to three-party checks given that they are generally written upon proof of an estimate of the amount owed and the agency will return any overage to the plaintiff. Plaintiff’s counsel here alleged that the inclusion of the agencies as payees made it impossible to satisfy the liens, and that simply cannot be the case. The Medicare manuals have express procedures for how to deal with receipt of a three-party check. While even CMS is not a fan, they are dealt with and done so in a timely manner, else potentially run afoul of due process issues (see Walls v. Leavitt). It would be interesting to know if there was an ulterior motive other than sanctions.

Grace Wright and Terry Wright, Plaintiffs, v. Liberty Medical Supply, Inc. d/b/a
Liberty Medical Supply Pharmacy, and PolyMedica Corporation, Defendants.
C.A. No. 7:09-cv-02490-JMC
2011 U.S. Dist. LEXIS 81621
July 25, 2011, Decided