Will the Supreme Court Help Us Figure Out What Will Happen When MSA Funds are Improperly Spent?

Commentary, Medicare Set-Asides, News and Events on November 9, 2015 | Posted by Jennifer Jordan, JD, MSCC

Theoretically CMS is supposed to deny related Medicare payments until such a time that it can be proven that an MSA was properly exhausted on related medical treatment. It is then that the question arises as to what will happen if the Claimant used the money and can’t pay for this own medical expenses. Our hope is that CMS would deny anyway, even though claimant can’t pay for his own treatment, and we would remain protected by the actions taken at settlement to protect Medicare’s interests. Unfortunately given our political environment, we know somewhere deep down that public policy will prevail and any Medicare beneficiary in need of medical treatment will receive it regardless of the state of his MSA accounting. And it is that fact that leaves many of us wondering if we are truly protected from post-settlement recoveries by CMS even though we funded MSAs at settlement, even those approved by CMS.

In order to try to anticipate how the courts could deal with that issue, I frequently find myself watching similar recovery actions to see if we can draw MSP comparisons and ERISA recoveries have definitely proven to have many similarities. For example with regard to the issue of apportionment, the U.S. Supreme Court decided in 2013 that US Air had the right to full recovery from a 3rd party settlement, stating that an employer was allowed under 29 U.S.C. 1132(a)(3) to enforce the reimbursement provision in its plan. The plan said the employer had first claim on the entire recovery and no equitable argument, including the double recovery rule, would trump that contract. However the court did find that there was room for the common-fund rule to operate since the plan was silent on the issue of attorneys’ fees and remanded the case to determine how the parties would share the costs of procuring the settlement. From an MSP perspective, Medicare has a statutory right to full reimbursement, so even stronger rights than an ERISA plan. And remand wouldn’t have been necessary given procurement costs are expressly address in the regulations.

Today, the Supreme Court again grabbed my attention as it is hearing oral arguments in Board of Trustees of the National Elevator Industry Health Benefit Plan v. Montanile. In this case, the ERISA plan is seeking reimbursement from proceeds of a 3rd party settlement however Mr. Montanile is arguing that the plan cannot recover because he spent the entire settlement already. ERISA does not provide for a general federal right for a plan to sue a participant for breach of the plan’s contractual provisions, therefore employers can only seek “appropriate equitable relief” as provided by ERISA and you cannot place an equitable lien against something that is no longer there. Fortunately for those who only care about MSAs, the MSP does expressly provide for two private causes of action so at least we shouldn’t have to worry about similar equity arguments. But can you imagine how fast MSA funds would disappear if we did? The bass boat industry wouldn’t be able to handle the demand.

So sorry if you were hoping for an answer but the Supreme Court isn’t quite ready to tackle the MSP. But if you have a vested interest in personal injury recoveries and are interested in following this case further, the transcript of the oral arguments should be available within a week at: http://www.supremecourt.gov/.