New Jersey District Court Says no MSP Provisions Absent Prior Agreement

Medicare Set-Aside Blog on August 8, 2012
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On July 24, 2012, the US District Court for the District of New Jersey enforced a settlement agreement absent any statements regarding Medicare Secondary Payer provisions desired by the defendants. On the eve of trial, Defendants agreed to pay Plaintiffs $225,000 in exchange for a release from all claims arising out of the accident – nothing else was discussed. Therefore the court did not hesitate to enforce the settlement on those terms alone. But what did they really accomplish?

In addition to a standard confidentiality clause, also tossed out by the court because it was not previously discussed, Defendants had added the following to the settlement agreement:

(1) Plaintiff cannot claim reimbursement from Medicare for injuries arising out of the March 8, 2006 accident;
(2) Plaintiff’s private health insurance will not pay for claims arising out of accident-related injuries because those injuries are preexisting; and
(3) Medicare will not pay for any future treatment for injuries arising out of the accident.

Given that these are statements of the obvious rather than actual demands of the defendants, one must question what the objection was, let alone why the court felt so strongly about disregarding them. Medicare is statutorily prohibited from making payments related to the accident, therefore statements 1 and 3 are merely statements of truth (and I can’t really speak to #2 not knowing what his plan actually covers and doesn’t). While Plaintiff argued that “federal law does not require [him] to disqualify himself from Medicare benefits or establish a Medicare set aside for his future treatment,” the fact is that the law itself disqualifies him from future related Medicare benefits, at least to the extent of the compensation that he received in exchange for the portion of the aforementioned general release covering future medical claims. So with or without these statements included in the settlement agreement, Plaintiff is in the same exact position with regard to the MSP, just less likely to truly understand the situation.

The one assertion of the Plaintiff that is true is that defendants have no authority (or duty) to protect the rights of Medicare, despite prevailing beliefs to the contrary. The MSP places requirements on only Medicare and those are to not make payments or to seek reimbursement in secondary payer situations. If parties to an insurance settlement create a Medicare Set-Aside, they do so in protection of their own interests, not Medicare’s. If no provisions are taken and Medicare makes related payments, all parties to the settlement are exposed to post-settlement reimbursement actions as either perceived primary payers or persons in possession of settlement funds. MSAs are merely meant to specifically earmark settlement funds expected to be used to pay for future related treatment so that Medicare does not in order to prevent those future reimbursement actions from occurring. Indirectly this protects Medicare’s interests, but there is no requirement to do so. Defendant has provided compensation for future medical and with or without the statements of explanation, it will be plaintiff’s obligation to use that money to pay for related treatment or endure the reimbursement demands of the federal government. And sadly those are the easiest for it to pursue as they are frequently accomplished through Social Security off-sets.

So while plaintiffs’ bar likely views this as a win, the only take away here is that in MSP situations, courts nationwide rely heavily upon the express written terms of the settlement agreement. If MSP provisions are desired, they must be discussed and memorialized if you hope to have them enforced in a court of law. However, the MSP is what it is and with or without terms in the settlement agreement specifically addressing them, Medicare is still excluded from making related payments and entitled to reimbursement and the party that is most likely to have to deal with these Medicare issues is the plaintiff. Hope these attorneys feel vindicated when their clients come back to them when they don’t understand why Medicare is denying claims for their related treatment because it was not explained in the settlement agreement.

Civ. No. 10-3550 (DRD)
2012 U.S. Dist. LEXIS 109278
July 24, 2012, Decided