Another Court Case, Perpetuating the Confusion Surrounding LMSAs

CMS, Liability, Medicare Set-Aside Blog, MSP Litigation on November 29, 2017 | Posted by Jean S. Goldstein, JD

Yesterday, a decision came out of the District Court for New Mexico, based upon an action to determine whether a Medicare Set-Aside was needed in a matter involving a personal injury suit.  (Silva v. Burwell, No. 16-cv-488 JCH/KK, 2017 U.S. Dist. LEXIS 195032, (D.N.M. Nov. 28, 2017).)  The applicability of the Medicare Secondary Payer act to liability matters is quite clear as outlined in the Medicare Secondary Payer (MSP) statute.  However, what is interesting about this case is the Court’s interpretation of the lack of guidance by the Centers for Medicare and Medicaid Services (CMS) on liability Medicare Set-Asides (LMSAs), and the perpetuated confusion created by cases such as this one.

Facts of the Case

In 2011, the Plaintiff, Fabian Silva, sustained permanent and severe brain damage and physical injuries, as a result of medical malpractice.  Plaintiff filed suit in a state court, against the hospital and physicians, which was subsequently settled by the parties.  Medicare made payment for some of medical expenses arising from the incident, which were paid in full by the Plaintiff.  The hospital defendants in the malpractice case asserted that Plaintiff must create an MSA from the settlement funds for future medical expenses.  However, Plaintiff disagreed with this assertion indicating that the guidelines as related to MSAs involve workers’ compensation cases, and not liability or personal injury settlements.  In turn, the Plaintiff asked CMS to provide:

  1. The legal basis of a claim for repayment for Mr. Silva’s future medical expenses; and
  2. Clarification of whether an MSA was required with respect to Mr. Silva’s future medical care.

CMS did not respond or take a position on Silva’s request, and consequently the hospital defendants agreed to release settlement funds if the Plaintiff could obtain a federal court order containing a finding that no federal law or CMS regulation requires an MSA from the personal injury settlement funds as related to the injury. Thus, giving rise to the instant action against the Defendants, The Secretary of the U.S. Department of Health and Human Health Services (Secretary), Centers for Medicare & Medicaid Services and the U.S.  Department of Health and Human Services.  In filing the action in the District Court, Plaintiff specifically requested a declaration that:

  1. No MSA is required in Plaintiff’s state court settlement to pay for his future medical expenses;
  2. That CMS may not in the future decrease or refuse to pay for medical bills incurred or otherwise penalize Plaintiff; and
  3. That MSAs are not required under the law for personal injury or medical malpractice damages.

In response, Defendants filed a Motion to Dismiss for lack of subject matter jurisdiction arguing that:

  1. there is no justiciable case or controversy because the Secretary has no duty under the law to take a position on the controversy;
  2. the United States is immune from suit; and
  3. Plaintiff has failed to exhaust his administrative remedies under the Medicare Act.

Applicability of the Medicare Secondary Payer Act to This Case

In its decision, the Court provided a brief discussion of the MSP act, Congress’ intent in enacting the statute, and the application of the MSP to the case.  Specifically asserting that the MSP is applicable in circumstances “when a Medicare beneficiary suffers an injury covered by a group health plan or liability, workers’ compensation, automobile, or no-fault insurance, [and] Medicare conditionally pays for the beneficiary’s medical expenses.” 42 U.S.C. § 1395y(b)(2)(B)(i)).   Further the Court indicated that a liability insurance company may be a primary plan under the MSP. Id. at 5. The designation as a primary payer, is what triggers Medicare’s right to reimbursement from the payer, if and when Medicare pays for a beneficiary’s medical expenses.

Significance of This Case to Your Liability Claims

The Court specifically addressed the hospital defendants concerns about a later suit by CMS if an MSA is not created, and wanting confirmation of whether an MSA must be completed before the settlement.  In response, the Court asserted that the Federal Defendants provided no indication that they are interpreting that the MSP requires MSAs in personal injury cases.  The Court expressly stated that “[t]here is no law or regulation currently in place that requires the CMS to decide whether Plaintiff is required to create a MSA for personal injury settlements.  [However]…CMS provides no other procedure by which to determine the adequacy of protecting Medicare’s interests for future medical needs and/or expenses in conjunction with the settlement of third-party claims.” Id. at 12.  While it is true, the MSP does not address “Medicare Set-Asides” or mention “MSAs” at all, an MSA is the vehicle most commonly used to comply with the MSP statute regarding future medical and prescription drug treatment needs.  Moreover, in this Opinion, the court is implying that an MSA is the recognized and preferred method by which to consider Medicare’s interests.

Unlike workers’ compensation cases, there is no formal guidance currently available regarding MSP compliance for liability settlements; particularly as we continue to await news regarding the expansion of CMS’ review program.  However, if you read between the lines of this opinion, the Court is emphasizing that although there is no regulation or law that mandates LMSAs; this does not mean there will be no consequences, if Medicare’s interests in the settlement of a liability claim have not been fully considered, and if efforts at protecting those interests have not been taken. The Court also appeared to be unaware of CMS’ plans of potentially reviewing LMSAs as early as July 1, 2018, as the Court stated “the uncertainty created by CMS’s repeated failure to clarify its position on requiring MSAs in personal injury settlements generally and in specific cases is also proving burdensome to the settlement process.” Ultimately, the Court dismissed the action for lack of standing [1], and in doing so, indicated that there is no requirement that CMS respond to the Plaintiff’s request to determine whether an MSA is appropriate and that the lack of a response from CMS is not reason enough for the Court to step in and determine whether the Plaintiff is required to create an MSA.

To summarize, this case is another example that MSP compliance should be considered with the resolution of all liability claims.  Unfortunately, this case along with many others before it, simply adds to the confusion surrounding liability settlements.  The case further fails to clarify the real issue with respect to liability settlements: each case must be evaluated on a case by case basis, from a medical and legal perspective, with documentation as to what is being done to consider Medicare’s interests.  As always, we are committed to helping you put the proper protections in place to achieve MSP compliance.  Please contact us at info@medval.com, to identify and implement the proper internal protocols and best practices to identify the liability claims for which Medicare’s interests should be considered.


[1] To establish standing, a plaintiff must show (1) an injury in fact, (2) a causal relationship between the injury and the challenged conduct; and (3) likelihood that the injury would be redressed by a favorable decision. Id.at 7. The Court in determining the lack of standing compared this case to Protocols, LLC v. Leavitt, 549 F.3d 1294, 1298 (10th Cir. 2008), wherein it was shown that Plaintiff suffered an actual injury as it arranged settlements in the past contrary to what CMS recommended to be required, and quite possibly future demands could result based on the difference in amounts such that an actual injury could be recognized.  In the instant matter, the Court held that Plaintiff has not shown that CMS has taken a position contrary to Plaintiff’s interpretation of the MSP, and that there was no recognized injury in fact.