Medicare Set Aside Argument

Recently we settled a significant personal injury case where we addressed the issue of a Medicare Set Aside (MSA). The issue was raised by defense during settlement negotiations. Defendants argued they could be held liable by Medicare as could we if we ignored the MSA issue. They initially attempted to control what portion of the settlement funds would be used for a MSA. This post discuses how we handled the MSA issue.

Medicare and Medicad Liens. The Medicare program was established by Congress in 1965 in the Social Security Act. 42 U.S.C. sec. 1395 et seq. Medicare provides medical payments for Medicare eligible people (people receiving Social Security benefits). Under federal law Medicare has a super lien for reimbursement of Medicare benefits paid for the injured Medicare recipient’s medical specials. Nonetheless, federal regulations require Medicare to reduce the amount of its recovery to take into account the cost of procuring the settlement when the claim is disputed and the recovering party has borne cost in obtaining the recovery. In re: Zyprexa Products Liability Litigation, 451 F. Supp.2d 458(E.D.N.Y. 2006)(analysis of Medicare and Medicade liens). Federal law also recognizes Medicad (state version of Medicare) liens, and provides federal authority for collection of Medicad liens.  See Arkansas Dept. of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006)(Arkansas Medicare statute for plenary lien held invalid, must recognize injured plaintiff).

Medicare Set Aside. A MSA is a fund separately identified from the settlement proceeds to be paid to Medicare for the injured plaintiff’s future medical needs. Recently defendants (insurance companies for defendants) have been arguing the settlement must include a MSA. This argument is made even when the injured plaintiff is not yet and may never be a Medicare recipient. Defendants also try to dictate  the amount of a MSA. In personal injury cases, these arguments must be resisted  to the point of litigating the MSA issue.

Federal Authority. “No federal law requires set-aside arrangements in personal injury settlements for future medical expenses.” Sipler v. Trans Am Trucking, Inc., (D.N.J. 2012). As recognized by the Sipler court, tort cases involve non-economic damages which are not determined by an established formula. See Zinman v. Shalala, 67 F.3d 841,846 (9th Cir. 1995). “[T]o require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process, and, in turn, discourage personal injury settlements.” Sipler; cf. Ahlborn,  587 U. S. at 268  (in context of Medicad).

Solution. Our solution is plaintiff will consider the need for a MSA after consulting with a  MSA law firm, but plaintiff has the responsibility and discretion to determine the final set aside (if any). The terms of the settlement order  give plaintiff control over the MSA issue. Below is the relevant language:

Finding of Fact-Establishment of Qualified Settlement Fund. The parties have agreed to use a Qualified Settlement Fund  (QSF) established pursuant to section 468B of the Internal Revenue Code for purposes of holding the settlement funds and the disbursement of such funds pursuant to orders of this court.

Conclusion of Law-Orders of Disbursement. Orders of disbursement from the QSF will be made to ensure Medicare conditional payments are reimbursed, that a Medicare Set-Aside (if needed) will be properly funded by plaintiff out of the settlement proceeds, and that plaintiff receives the full benefit of this settlement.

Order. Plaintiff’s counsel shall promptly engage the services of Garretson Resolution Group, a professional firm that specializes in Medicare Secondary Payer compliance, to evaluate the case, determine whether a Medicare Set-Aside (MSA) is recomended, and if so, to present a proposed MSA Allocation. Plaintiff’s counsel and the QSF Payment Administrator shall take into account the MSA recommendation of Garretson to determine if a MSA is appropriate and if so the amount needed to fund the MSA.

                                          

 

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