LMSAs and a Meeting of the Minds – Bruton v. Carnival

Medicare Set-Aside Blog on May 9, 2012
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An MSA is not mandated by any law or regulation. The only obligation created by the MSP is that Medicare not make payments in secondary payer situations unless it does so conditionally and seeks reimbursement. There are no duties placed upon any entity outside the federal government in the MSP statute itself. Because parties to an insurance settlement are susceptible to MSP recovery actions related to an insurance settlement, we create MSAs to provide funding for future treatment to prevent Medicare from making those payments conditionally and later seeking reimbursement. This is a risk management activity, not one of MSP compliance. So when settling your claims where Medicare has an identified future interest, what you do to hedge against that exposure to future Medicare recovery actions are contractual terms of your agreement alone and not directly supported by any express statutory or regulatory MSP provisions. So terms like “inclusive of all Medicare provisions” to “will meet all MSP regulations” will ultimately not survive when challenged in court unless the actually details of what was agreed upon are evident to a judge.

Let’s take a recent case in point where an LMSA was contemplated but not exactly agreed upon. A slip and fall injury on a cruise ship was settled at mediation and the mediation settlement agreement required that plaintiff execute a “general release with approved confidentiality provisions and Medicare provisions.” Defendant drafted an agreement requiring the creation of a Medicare set-aside trust account and delivered it to Plaintiff. Plaintiff took that paragraph out and amended it to state that she has reached MMI and that no part of the settlement was intended for future medical expenses yet she would take express measures to ensure that conditional payments were resolved. Plaintiff executed the release and sent it back to Defendant who refused to tender payment due to the deletion of the LMSA provision. Plaintiff filed a motion to compel settlement arguing that the settlement agreement that she executed contained “sufficient … and reasonably acceptable Medicare language.” Because the agreement did not require an LMSA nor is one required by law, the court found that the mediation agreement governed and enforced the mediation agreement.

Of course you know I have issues with this decision (don’t I always?). I think it is simply wrong because it is inconsistent with ALL similar case law to date given that there is no meeting of the minds. Defense included LMSA language and Plaintiff took it out – there is no agreement on the issue. The mediation agreement called for “approved” Medicare provisions and one party deleting the other’s Medicare provisions is not approval. Therefore the court should have determined that it was unable to enforce the agreement. Instead it enforced the agreement and forced the defendant to accept the Medicare provisions as written by Plaintiff. This exposed the defendant to the possibility of future Medicare reimbursement actions that the defendant would have otherwise protected itself from in the settlement. If settlement value was derived by including future Medicare covered medicals which we can be certain were part of the demand, then Plaintiff just received a windfall because it can be assumed that she will not be using it for future medical treatment. The new provision says that she is at MMI which only means that she will not improve any further, not necessarily that she does not require any further treatment. Will she need treatment and be excluded by Medicare anyway and not have the funds set-aside and available to make payment? The right thing for the court to do would have been to send the parties back to start because clearly they were not in agreement.

LMSAs are not mandated by law, but neither are WCMSAs.The fundamental issue in all types of insurance settlements is that Medicare may be excluded from payment so what are you going to do to make sure that the plaintiff receives treatment and/or that the defendant isn’t being pursued for additional reimbursements. A contractual component of the settlement agreement should not disregard by a court because it is not expressly called for by law, particularly a law that infers its existence. But it is really up to the parties to execute a well drafted settlement agreement. Memorialize what you did in the interest of MSP compliance so that if and when the time comes to defend or support those acts, the evidence is in black and white. Treat the “Medicare provisions” as an annoying afterthought and risk getting burned. Unfortunately more bad precedent like this burns us all. Fortunately CMS has got something up its sleeve that may just be the game changer we’ve been waiting for so keep an eye out for that. More information on that just as soon as the Executive Order 12866 Regulatory Review is concluded.

Case No. 11-21697-CIV-UNGARO/TORRES
2012 U.S. Dist. LEXIS 64416
May 02, 2012, Decided