Frank vs. Gateway Insurance Company, 2012 U.S. Dist. LEXIS 33581 (U.S. Dist. Court for the Western Dist. of Louisiana, March 3, 2012)
Facts: Plaintiff was injured while in the course and scope of his employment. He was a truck driver and at the time of the accident was unloading a trailer owned by a third party. He suffered a lumbar injury, requiring spinal surgery as a result of falling through a hole in the trailer. In addition to his probable workers’ compensation claim, he brought this claim against the owner of the trailer, which was insured by Gateway Insurance Company.
The case was settled on December 7, 2011 for an undisclosed amount. All claims were resolved with the exception of a possible future Medicare Set Aside. A Motion was set with the Court for a Determination of Need, and Amount of Medicare Set Aside for the purpose of complying with the Medicare Secondary Payer Act. All parties participated in the motion.
The U.S. Attorney’s Office was invited to participate in the hearing, but declined. The letter sent was made part of the record and read as follows:
“CMS [The Centers for Medicare & Medicaid Services] does not review or verify counsel’s determination of whether or not there is a recovery for future medicals services or counsel’s determination of the amount to be held to protect the Medicare Trust Fund except under limited circumstances. In this particular matter, CMS would neither participate nor review the parties’ determination of whether a set aside was needed or the amount of the set aside.”
At the hearing, the Court took evidence from the parties regarding plaintiff’s past treatment, present health condition and future treatment needs. The Court requested further affidavits from plaintiff’s treating physician for future prescriptions which were produced. An Order Setting the Amount for the Medicare Set Aside was then entered based on the evidence and law presented.
Issue 1: May a Court in absence of review action by CMS, act on its own authority to protect the Medicare Trust Fund?
Issue 2: Is a Medicare Set Aside required in a liability settlement for the protection of Medicare’s Interest under the Medicare Secondary Payer Act?
Opinion: The court cited as authority for its action the matter of Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010). In that case, CMS relied on its field manuals as a basis to override the Florida probate Court’s order to allocate limited settlement proceeds between the interests of Medicare and Non-Medicare parties. CMS believed the language contained in its Medicare Secondary Payer Manuals was to be given deference; however the Bradley Court held differently. Under Chevron U.S.A. Inc. v. Natural Resources Defense Council inc., 467 U.S. 837 (1984) the Supreme Court states “agency interpretations contained in policy statements, manuals and enforcement guidelines are not entitled to the force of law.” The allocation was allowed to stand, not only for that reason, but also because of the important historical public interest in expeditious resolution of lawsuits through settlement. The Secretary’s position [that a Court had no authority to allocate] would have a chilling effect on settlement, forcing parties through unnecessary litigation and burdening the court system.
Like Bradley, CMS declined to take any part in the litigation before the Court. The Court determined it had sufficient authority to act in order to bring finality for the parties to effectuate the agreed to settlement.
Under the law, Medicare may obtain secondary payer status if payment has been made, or can reasonably be expected to be made by liability insurance [a.k.a. primary plan]. Such insurance’s responsibility can be determined by a judgment or settlement. See 42 U.S.C. Section 1395y(b)(2)(A), 42 U.S.C. Section 1395y(b)(2)(B)(ii) and 42 C.F.R. Section 411.22(b)(1-3). By virtue of the terms and obligations in the settlement, plaintiff will become an “entity who received payment from a primary plan,” and therefore become responsible as a primary payer for future medical items or services that would otherwise be covered by Medicare. To the extent there are items or services incurred by plaintiff for items and services that would otherwise be covered or reimbursable by Medicare, that are related to what was claimed and released in this lawsuit, Medicare shall not be billed for those items or services until the funds received by plaintiff for that purpose are exhausted. The Court relied on the medical evidence presented to it has determined the sum of $3,200 to be utilized out of the settlement for this purpose. The Court held this amount fairly takes Medicare’s interests into account in that the figures are based on reasonably foreseeable medical needs (as opposed to the standard of proof required by substantive law, that would be applicable if the case were tried on the merits).
Franco Signor LLC Commentary: Courts are forced to fill the vacuum left by CMS. The Medicare Secondary Payer Statute is being interpreted as having both a retrospective and prospective requirement to protect Medicare’s interests. Determining what Medicare is owed as reimbursement for what it has paid prior to settlement is becoming easier for parties as they become familiar with the bureaucratic processes of Medicare contractors. However, limited guidance has been provided by CMS on how to handle that issue on a prospective basis.
CMS has issued a memo on September 29, 2011 that confirmed our position that Medicare’s interests are protected where a treating physician has certified treatment is complete and no future treatment is expected with regard to the accident. This memo has helped as the terms of a general release could always implicate responsibility by insurance carriers, Medicare beneficiaries and their counsel under the Medicare Secondary Payer Act. General Releases are standard fair in the settlement of a liability claim, and no party will pay over money in exchange for a release that could subject the parties to further claims. Thus, the memo is very helpful for those limited situations.
However, what happens when future treatment is contemplated and hotly contested in the claim. A treating physician cannot on one hand advise that there is treatment for purposes of settlement and after a case is resolved “certify” that treatment is complete. As the United States actively pursues fraud against Medicare, this purposeful shift of responsibility to the Medicare Trust Fund, where funds were in fact collected for future care should raise concerns.
This Court takes a bold step in putting forth a process to bring finality to a case. A Motion for the Determination of Need for, and Amount of Medicare Set Aside. We have advocated such a process in our book . Parties cannot self allocate as Medicare has emphasized on many occasions. Simply putting together a Medicare Set Aside is only step one of the process. An approval process is also required to protect the parties. And this case lays out that process well, starting with an invitation to participate to Medicare, through the local U.S. Attorney’s Office.
The process should not be a rubber stamp, as it is our opinion Medicare will prevail. However, this court does it right, taking in evidence, asking for further affidavits and then making a finding based on reasonable foreseeability on the possible future treatment. This process provides peace of mind for the plaintiff with regard to his or her future Medicare benefits, as well as the settling parties that the case is complete.
It was interesting for us to read that the Court requested additional evidence on pharmaceuticals. The Medicare Secondary Payer Act covers items and services paid by Medicare. Pharmaceuticals are covered by private insurance under Part D. Medicare does contribute for each beneficiary that is signed by a private insurance company under Part D, but such contribution cannot be classified as an item or service, because it does not pay for specific products. Recently Courts have held that these private insurance plans do not have the same rights as Medicare (See Humana Opinion), so we question whether it is appropriate to include pharmaceuticals outside of Part A (Hospital) and Part B (Medical Insurance) [traditional Medicare] when preparing these Medicare Set Asides for hearing before the Court.
Future incident-related treatment, and how such treatment must be managed in a settlement, is a topic of growing import within the liability industry. Practitioners must take the steps necessary to ensure a level of compliance, including retention of a court order, until CMS provides guidance on this topic. Franco Signor is increasingly being asked to assist parties and manage the future component of a settling liability claim. Call upon us for guidance!