Putting the Medicare Cards On the Table: Court Rules That L-MSA Not Required Per the Parties’ Mediation Settlement Agreement

Putting the Medicare Cards On the Table: Court Rules That L-MSA Not Required Per the Parties’ Mediation Settlement Agreement

 By: Mark Popolizio, Esquire, Crowe Paradis Services Corporation

In Bruton v. Carnival Corporation, 2012 U.S. Dist. LEXIS 64416 (S.D. Florida May 2, 2012) the court ruled that a liability Medicare set-aside (L-MSA) was not required as part of the settlement based on the terms of the parties’ mediation settlement agreement and other considerations.

The Bruton case, and the important practical considerations it raises, can be broken down as follows:

Facts

Berneva Bruton (plaintiff) filed a claim against Carnival Corporation (defendant) for injuries allegedly sustained in a slip and fall accident aboard a Carnival ship.

In December 2011, the parties reached a settlement at a mediation conference. In relation thereto, the parties executed a Mediation Settlement Agreement (Mediation Agreement) which, in pertinent part, required plaintiff to execute a “general release with approved confidentiality provisions and Medicare provisions.”[fn1]

Following the mediation, defendant sent plaintiff the settlement agreement[fn2] which contained provisions related to Medicare. Plaintiff was agreeable to certain provisions contained therein, but objected to specific provisions requiring her to establish an L-MSA.

In this regard, plaintiff was agreeable to the following provisions:

Based on the grounds that the Plaintiff has reached Maximum Medical Improvement (MMI) as relating to the incident, no part of the monetary settlement is intended to provide compensation for future medical expenses incurred by MEDICARE. Additionally, as of the time of settlement, the parties were unable to obtain from MEDICARE the amount of past medical expenses, if any, incurred by MEDICA[R]E as a result of the alleged incident aboard the VESSEL. However, [Plaintiff] agree[s to] satisfy any MEDICARE lien amount out of the monetary settlement amount herein.[fn3]

However, plaintiff objected to, and actually crossed out, the following language:

[Plaintiff] further agrees to retain a portion of the amount in a trust account administered by their undersigned attorneys for three (3) years from the date settlement funds are received or until MEDICARE provides [Plaintiff] with written notice that any claim for reimbursement, as authorized by the Medicare Secondary Payer statute … has been waived or resolved, whichever occurs first.[fn4]

After deleting the MSA language, plaintiff returned the modified release to defendant. However, defendant refused to tender payment based on plaintiff’s deletion of the MSA provisions.

Plaintiff Files Suit

Plaintiff then filed a Motion to Compel Settlement Pursuant to Terms of Mediation Settlement Agreement in United States District Court for the Southern District of Florida.

Plaintiff argued that the Mediation Agreement did not require her to establish an L-MSA, and that one was not required by law. Further, plaintiff claimed defendant was adequately protected since as part of the settlement agreement she agreed to satisfy any Medicare liens or claims, and agreed to fully release defendant from any future obligations that may arise in relation to the underlying accident.

Defendant countered that the “overriding need of the Defendant to consider [Medicare’s interests]” dictated that the settlement include an L-MSA. While defendant acknowledged the “unsettled state” of the law in regard to whether MSAs were mandated in liability claims, it argued that consideration of “Medicare future’s interests in the context of the need for any future medical expenditure on” plaintiff’s part should serve as the “guide post” for the parties. Thus, defendant argued that the “most appropriate course of action” was for plaintiff to establish an L-MSA.

How Did the Court Rule?

The court framed the question before it as follows: The sole issue here is whether the [Mediation Agreement] requires the creation of a Medicare set-aside trust account.[fn5]

In addressing this issue, the court began by first explaining that under Florida law it is the party seeking to enforce the agreement who has the burden of showing “assent by the opposing party and [establishing] that there was a meeting of the minds or mutual or reciprocal assent to certain definite propositions.”[fn6] The court further noted that to have an enforceable settlement the agreement must be “sufficiently specific and mutually agreeable on every essential agreement”[fn7] and that “a contract results if the acceptance of an offer is absolute and unconditional, and identical with the terms of the offer.[fn8]

From there, the court then measured the facts of this case with these principles. In doing so, the court concluded that the Mediation Agreement did not require plaintiff to establish an L-MSA, essentially finding that there was “no meeting of the minds” on this particular issue. The court ruled:

We find that the [Mediation] Agreement does not require the creation of a Medicare set-aside trust account. The Agreement specified only that Plaintiff was to execute a general release with ‘Medicare provisions’ without specifying what those provisions would be. The Agreement makes no mention whatsoever of a Medicare set-aside account. Moreover, Defendant has not claimed that the parties discussed this particular issue during settlement negotiations or that settlement was conditioned upon the creation of such an account. (Emphasis Added).[fn9]

In addition, the court noted that plaintiff agreed to be responsible “for any claims or liens by Medicare” and was required to indemnify and hold harmless defendant “from any liens, suits, or actions arising under the Medicare Secondary Payer statute” as part of the settlement agreement. In light thereof, the court found that the settlement agreement (without the MSA language) adequately “addresse[d] Defendant’s concerns about Medicare’s interests and its own liability for Medicare liens.”[fn10] The court also commented that there was “no legal requirement that the settlement in this personal injury lawsuit include a Medicare set-aside trust account, a point Defendant has implicitly conceded.”[fn11]

Accordingly, the court found that plaintiff fulfilled her obligations under the Mediation Agreement; and ruled that defendant, by failing to tender timely payment, breached said agreement.

Practical Considerations

From the author’s view, one of the main takeaways from the Bruton case relates to the importance of making sure that all Medicare Secondary Payer (MSP) issues are clearly raised, specifically identified, and ultimately agreed upon as part of the settlement negotiations.[fn12] Unfortunately, the failure of the parties to clearly address MSP compliance issues continue to complicate, frustrate, and in some cases, torpedo, settlements in far too many instances.

To avoid these potential quagmires, the key is to (a) understand what the Medicare cards are (or could be) and (b) make sure that these cards are on table as part of the settlement negotiations.

With respect to point (a), this involves having a solid understanding of one’s compliance obligations under the Medicare Secondary Payer (MSP) statute and CMS’ policies. This also includes recognizing the various MSP issues which remain uncertain or unclear to ensure that all relevant MSP matters are properly considered.

For defense counsel, knowledge of any specific client requirements concerning MSP compliance is absolutely critical, not only with respect to properly representing and protecting client interests, but also in regard to appropriately addressing the Medicare issues as part of defense handling. Toward this end, counsel should inquire about, and become familiar with, any applicable client MSP protocols or best practices early on, and assure that his/her defense handling proceeds in accordance therewith.

Key inquiry areas on this front include, but are not limited to: Does the client have specific WC-MSA protocols? What is the client’s position regarding the question of Medicare’s “future interests” in liability settlements and/or the L-MSA issue? If a MSA is applicable, does the client have any protocols regarding MSA administration? How is the issue of Medicare conditional payments to be handled? Are there specific settlement provisions and language the client would like included in the settlement agreement? Do the unique circumstances of a particular claim warrant additional considerations and approaches?

If the client does not have set practices or protocols, counsel should coordinate with the client to develop a Medicare game plan. One way or another, counsel and the client need to be on the same page with respect to what the MSP issues are, and how they will be handled, prior to entering into settlement discussions.

With respect to point (b), once equipped with this precursor knowledge and understanding, it is then imperative that all relevant MSP issues are clearly raised, identified and discussed as part of settlement negotiations (and, in some instances, perhaps even before entering into settlement discussions).

Here is where it all too often falls apart. This is can be so for a myriad of reasons, such as incomplete knowledge of MSP issues, discovery of subsequent facts that raise MSP concerns, or perhaps defense counsel learning about client protocols after negotiating the settlement. Also, the use of general phrases often leads to confusion as parties may interpret same differently based on their particular understanding of MSP compliance obligations, past practices, or their own private interests. To a large extent, these latter issues surfaced in Bruton as the crux of the dispute in that case concerned exactly what was meant and intended by plaintiff agreeing to execute a “general release with approved … Medicare provisions.” Accordingly, spelling out the exact MSP issues and addressing them with specificity is critical as part of the settlement process.

In terms of preemptively addressing MSP issues, it may be prudent, or even necessary, to get the Medicare cards out on the table in advance of the actual settlement discussions themselves as these issues could directly impact the negotiations. Take, for example, the MSA. If an MSA is deemed appropriate by the primary payer, then alerting plaintiff’s counsel of this fact and obtaining the MSA figure prior to starting the settlement discussions may make sense as this could have a direct impact on plaintiff expectations, case value, and corresponding “demand” and “offer” positions. In the author’s experience, settling the claim and then advising the plaintiff that an MSA will be necessary and/or obtaining the MSA figure post settlement often creates significant complications which could ultimately doom the settlement for a number of reasons. Also, if a party has an objection to including an MSA, then this issue is identified early and the parties can work to address how best to resolve the matter.

On many levels, the Bruton case illustrates the importance of getting the Medicare cards out on the table as part of the settlement negotiations. In arriving at this point, it is important to understand that there are many different facets to MSP compliance. Accordingly, all relevant MSP compliance components (i.e. MSAs, conditional payments, etc.) as may pertain to a particular case should be specifically identified during the settlement negotiations, and the intended obligations and requirements pertaining to each should be clearly spelled out.

About the Author

Mark Popolizio, Esquire is Section 111 Senior Legal Counsel for Crowe Paradis Services Corporation. Mark is a nationally recognized authority in MSP compliance. He has authored numerous articles on MSP issues including MMSEA Section 111, MSAs and conditional payments. Mark is a regularly featured presenter at national seminars and other industry events. Prior to dedicating his practice to MSP compliance in 2006, Mark practiced workers’ compensation and liability insurance defense for ten years representing carriers, employers, third party administrators and self insureds. Mark is based out of Miami, Florida and can be reached at mpopolizio@cpscmsa.com or (786) 459-9117.

Footnotes:

1. Bruton v. Carnival Corporation, 2012 U.S. Dist. LEXIS 64416, at *2 (S.D. Florida May 2, 2012).

2. This agreement was officially titled as “Release and Hold Harmless.”

3. Bruton v. Carnival Corporation, 2012 U.S. Dist. LEXIS 64416, at *2.

4. Id. at *2-3.

5. Id., at *5.

6. Citing, Ribich v. Evergreen Sales & Serv., Inc., 784 So.2d 1201, 1202 (Fla. 2d DCA 2001); see also Vital Pharms, Inc. v. S.A.N. Nutrition Corp., 2007 U.S. Dist. LEXIS 41013 (S.D. Fla. June 6, 2007).

7. Citing, Vital Pharms., 2007 U.S. Dist. LEXIS 41013 (internal citation omitted).

8. Citing, Ribich, 784 So.2d at 1202; Giovo v. McDonald, 791 So.2d 38, 40 (Fla. 2d DCA 2001) (what is an “essential term” of a contract differs according to the circumstances, but it must include the terms specified in an offer in order to make a contract).

9. Bruton v. Carnival Corporation, 2012 U.S. Dist. LEXIS 64416, at *6.

10. Id. at *7.

11. Id.

12. With respect to the main import of the Bruton case, the author recognizes that some may focus on the court’s statement that there was “no legal requirement that the settlement in this personal injury lawsuit include a Medicare set-aside trust account, a point Defendant has implicitly conceded.” Id. at *7. In essence, these observers will view the primary significance of this case from the vantage point of the issue of MSAs in liability cases.

While certainly noting the court’s statement, in the “practical considerations” section of this article the author focuses on certain practical aspects of MSP compliance in relation to the issue as specifically defined by the court in this case: The sole issue here is whether the [Mediation Agreement] requires the creation of a Medicare set-aside trust account. From this vantage point, the author concentrates on the specific claims handling implications and concepts raised by Bruton from this perspective.

Thus, a complete examination into the complex, convoluted and polarizing topic of “liability MSAs,” and how this decision may apply to that question, is beyond the scope of this analysis. On that note, in the author’s view, that issue would entail review of additional and different information and considerations than that presented and evaluated by the court in this case. In addition, from the author’s perspective, a proper examination into this question would require a much broader analysis than considered in Bruton. In that regard, in Bruton, the parties and the court approached the issue in terms of whether an MSA was “required” in the context of a liability settlement. From that perspective, the parties and court essentially concluded that there was no such “requirement;” which is essentially in accord with CMS’ statements that an MSA is not technically “required” per se – in either workers’ compensation or liability claims. See e.g., CMS Town Hall Transcript, March 24, 2009 at p. 61; CMS Town Hall Transcript, September 30, 2009 at p.25-26; CMS Town Hall Transcript, October 22, 2009 at p. 64-65; and Written Statement of Sally Stalcup, CMS MSP Regional Coordinator (Dallas Regional Office), May 25, 2011.

However, from the author’s review of CMS’ statements (both oral and written) on the issue, the question may not necessarily be “is an L-MSA required?” That answer is seemingly “no”--- even from CMS’ perspective. Id. Rather, the “issue” may more appropriately be: “Is there an obligation to protect Medicare’s ‘future interests’ as part of a liability settlement?” or, from a more practical position, “Does CMS believe there is an obligation to protect Medicare’s ‘future interests’ as part of a liability settlement?” See id; and Charlotte Benson, CMS Memorandum: Medicare Secondary Payer: Liability (Including Self Insurance) Settlements, Judgments, Awards, or Other Payments and Future Medicals, September 30, 2011. As part of this, consideration should also be given to the fact that recent versions of the MSP manual have included references to both L-MSAs and no fault Medicare Set-Asides. Also, at the time of this article’s publication, CMS has advised that it is in the process of developing regulations surrounding Medicare Secondary Payer compliance regarding future medicals. See pending rule; “Medicare Secondary Payer and ‘Future Medicals’ (CMS-6047-ANPRM),” May 3, 2012. Thus, while CMS may acknowledge that L-MSAs, are not “required,” this other evidence would seem to suggest that on some level, to some extent, and in some manner, the agency believes there is some obligation to consider Medicare’s interests with respect to certain liability settlements, with the “MSA” being just one vehicle or option available toward that end. Assuming that this in fact CMS’ position, the question would then become; “are they correct legally?”

So there is no misunderstanding, the author wants to be clear here: The author is not opining on the issue of L-MSAs, or what obligations may exist, if any, with respect to Medicare’s “future interests” in liability settlements as part of this analysis. Rather, he is merely suggesting that, from a purely academic standpoint, the Bruton case probably should not be looked upon as some seminal judicial opinion regarding the $64 million question regarding L-MSAs or the nature and extent of any potential rights Medicare may have regarding its “future interests” in liability cases based on the nature of this case, the exact issue before the court as actually framed by the court, the information and resources considered, and, the limited phraseology of the “future interests” question as discussed by the parties and the court.

_____________________ 

Crowe Paradis Services Corporation

Mark Popolizio, Esquire is Section 111 Senior Legal Counsel for Crowe Paradis Services Corporation. Mark is a nationally recognized authority in MSP compliance. He has authored numerous articles on MSP issues including MMSEA Section 111, MSAs and conditional payments. Mark is a regularly featured presenter at national seminars and other industry events. Prior to dedicating his practice to MSP compliance in 2006, Mark practiced workers’ compensation and liability insurance defense for ten years representing carriers, employers, third party administrators and self insureds. Mark is based out of Miami, Florida and can be reached at mpopolizio@cpscmsa.com or (786) 459-9117. 

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