More on the Delaware Collateral Source Rule

Commentary, Medicare Advantage, Medicare Set-Aside Blog, MSP Litigation on August 20, 2015
Posted by Jennifer Jordan, JD, MSCC

On August 14, 2015, the Superior Court of Delaware used the Stayton decision to rule that future medical damages for Medicare beneficiaries should also be limited by the “amount of projected Medicare write-off.” In this suit following a slip and fall in a retail store, Plaintiff had sought damages for future medical expenses to which Defendants filed a motion in limine seeking to limit them to the amount actually paid by Medicare, i.e., the Medicare fee-schedule. Following Stayton, the court found that the plaintiff’s damages were limited to the amount actually paid by Medicare rather that that which would be billed.

In the wild west that is LMSAs, this ruling is significant. If truly only protecting Medicare’s interest, we should only set aside that which Medicare would be responsible.  But the plaintiff made a valid point that Medicare fee schedule should not be the determining factor for her medical damages since she cannot actually secure services at that rate. Because Medicare is statutorily prohibited from making payments related to this tortious act, future related treatment will not be billed at the Medicare rate. So the question here is whether the exercise is to estimate the amount of money needed to secure future medical services or to protect Medicare’s interests as those two acts are not necessarily the same. Plaintiff is free to negotiate and settle her claim as Medicare is not a party, but the wild card is whether Medicare will ever make future related payments after the compensation received, however calculated, has been spent.

In reality, this same problem exists for all Medicare Set-Asides, even those approved by CMS. In CMS approved workers’ compensation MSAs, future damages are calculated using the state workers’ compensation fee schedule, a rate that a claimant does not have access to once the claim is terminated. And that is the CMS mandated methodology. Therefore if CMS’s preferred rate for WCMSAs is known to be insufficient to actually secure medical services, the Delaware court’s application of the Medicare “write-off” is just as reasonable a methodology for calculating future medicals. In the end, the Medicare exclusion is dictated by the amount of compensation received, so long as not determined with an intent to shift the burden of the treatment to Medicare. However given that most liability settlements are compromised for pennies on the dollar, absent some CMS guidance, how are we to ever be sure what the proper way to calculate a future medical allocation when Medicare is involved.

The Delaware court’s opinion lacks details sufficient to tell for sure, but given that the term Medicare Set-aside never appears, it is obvious that the court wasn’t considering Medicare’s interests in this settlement. The opinion goes on to actually state that the Medicare “system [was] not established to leave a Medicare enrollee in a position where he cannot receive or pay for healthcare, in the event that a primary payer does not pay.” The court genuinely believes that Medicare will make payment regardless of the secondary payer issues because that is what the system is set up to do. It cites the statutory authority to make conditional payments as well as the obligation to bill none other than Medicare for a patient covered under Medicare to reach the conclusion that it does not believe that the plaintiff would ever be in a position where she could not obtain treatment through Medicare. Interesting how a misguided court can undermine 15 years of progress in shifting improper payments away from Medicare.

DOROTHY M. RUSSUM, : Plaintiff, v. IPM DEVELOPMENT PARTNERSHIP LLC, a Delaware limited liability company, and SILICATO COMMERCIAL REALTY, INC., a Delaware corporation, Defendants.

C.A. No: K13C-03-022 RBY
2015 Del. Super. LEXIS 406
August 14, 2015, Decided