New Jersey State Court Reduces LMSA to allow for Attorney’s Fees
Roy Franco
May 26, 2011

Claimant became a Medicare beneficiary as a result of injuries she sustained in an accident. Her attorney contacted Medicare to determine the amount of the conditional payment, but found nothing was owed. Concerned that Medicare may make payments in the future that are related to the incident in question, the attorney made sure to create a system to prevent this occurrence in the future, Liability Medicare Set-Aside Arrangement (LMSA). The amount of LMSA reflected what a jury would have awarded for projected medical costs for a surgery necessitated by the injuries. The attorney then filed a motion to establish his right to take a fee from the amount used to fund the LMSA. (See Hinsinger v. Showboat Atlantic City, 2011 N.J. Super LEXIS 96 1/21/2011, Superior Court of New Jersey).

In reaching its decision, which allowed the attorney to recover his fee the Court made several key findings. Given the state court action of this proceeding, along with the fact that not many published opinions have arisen on the topic of utilizing a LMSA in a liability case, Hinsinger will likely translate into having persuasive value for other jurisdictions. Other opinions are expected as Courts struggle to implement the Medicare Secondary Payer Act (MSP).

Some of the points made by this Court:

1. MSP has expanded over time in an effort to save taxpayer money where healthcare is provided by other means;
2. With regard to settlements, judgments, or awards providing for funds for future medical services, Medicare’s interest must be taken into consideration;
3. The Centers for Medicare and Medicaid Services (CMS) has established the use of Medicare set asides as a method of protecting Medicare’s interests in funds received for future medical care;
4. Medicare set asides are accounts set up to provide for future medical services to the injured individual;
5. Medicare will not cover any medical expenses until the set aside account is exhausted;
6. No statutory or regulatory requirement exists to create a Medicare set aside, but it is recommended by CMS and has become standard practice, particularly in workers’ compensation cases;
7. There is no reason to apply a different standard to set asides created with money obtained from third-party liability claims than it applies to those created with money obtained from workers’ compensation claims;
8. Medicare reduces its recovery by the costs expended in procuring the judgment or settlement where the claim is disputed;
9. Recovery of procurement costs applies to both past and future medical damage recoveries;
10. Settlement or judgment monies received by a plaintiff for future medical expenses is a “primary payment”; and
11. CMS Memorandum, dated May 7, 2004, limits administrative expenses and attorneys fees associated with establishing the Medicare set-aside arrangement, but there is no similar prohibition for procuring the funds from a civil suit to begin with, and is in line with general principles of equity.

For New Jersey, the LMSA is the appropriate vehicle to protect Medicare’s interest and allow attorneys to take their fee. It makes sense to maintain present settlement values. Had the attorney fee not been allowed, the settling party would have had to pay more or the plaintiff (and his attorney) would have taken less. In terms of the equity, this preserves the status quo of what has existed before the LMSA.

One component of this decision that may be challenged, in this author’s opinion, is the Court’s quick acceptance that regulations (offered after public comment) for workers’ compensation equally applies to third-party liability claims. This may be a difficult stretch for other courts to make. Statutorily, the right exists. It is the method of how to comply that must be defined. The workers’ compensation regulations do not take into consideration other elements of damages or claim defenses. As liability claims are mostly compromised, “full value,” for future medical treatment cannot be expected as the settlement value for the case will not support it. More cases will either be abandoned or tried which promotes inefficient administration of judicial resources. What is needed is a process that promotes settlement, which can be established through clear rule making.

Call Franco Signor LLC today if you have a personal injury case involving a Medicare beneficiary. We know how to traverse the Medicare maze!