LMSA Required or Not – Florida Court Weighs In
Roy Franco
February 8, 2013

The question everyone wants answered is whether a LMSA is required as part of the settlement of a liability claim.  The short answer is no.  The Centers for Medicare & Medicaid Services (CMS) is responsible for the administration of the Medicare program but it has yet to issue regulations on the topic.  Last June, CMS started the process toward possible regulations when it issued an Advanced Notice of Proposed Rule Making (ANPRM) seeking industry input on the topic.  However, there is no set timeline when, or even whether, such rulemaking will take place.  The only piece of guidance is a single memo issued by CMS on 9/29/2011 advising parties that its interests were protected in situations where medical treatment was complete.  Beyond that, the Parties are left to determine the best course of action to achieve compliance.  In this vacuum of compliance authority, our recommendation to parties settling the liability case is to act reasonably with regard to Medicare’s interests.

In order to act reasonably the  Parties must  cooperate with each other for mutual preservation against a later claim by CMS.  Absent such cooperation, it is difficult for one party to enforce its will on the other.  A case in point is Early v. Carnival Corporation, 2013 U.S. Dist. LEXIS 16711, U.S. Dist. Court for the Southern Dist. of Florida.  In this case, the parties had agreed on an amount of settlement, but disagreed on whether a Liability Medicare Set Aside was required.  The Parties therefore agreed to disagree on that point, and consented to submit the issue to Federal Court for a decision.  The Judge dismissed the case because the Parties wanted an advisory opinion.  Whether a LMSA is required is an essential term of the settlement according to the Court, and the Parties, not reaching agreement on that point, were asking the Court for a ruling about what terms to include in their potential settlement.  This is not allowed under case law.  See Vanderbilt Co. v. Occupational Safety & Health Review Comm, 708 F.2d 570, 574 (11th Cir. 1983).

The Court did recognize prior involvement by other Courts on the LMSA issue in the past, but distinguished such involvement as falling into two distinct categories.  One such category is where the Parties agree on requiring the LMSA, and it appears the Courts are eager to step in and confirm the allocation in such situations.  The other situation is where the Parties have disagreed on the inclusion of the MSA.  In that scenario, the Court usually invalidates the settlement as the Parties minds have not met.

The decision in Early is consistent with our present understanding of MSP law.  No doubt it will be touted as reason by Parties to not protect Medicare’s interest.  However, the decision does nothing to mitigate Parties exposure under MSP.  Should CMS present a claim for conditional payments subsequent to the settlement of a claim, it would have every right to do so under 42 U.S.C. Section 1395y(b)(2)(B)(ii) of the repayment section.  Once liability is demonstrated, CMS can recover where a primary plan, or an entity that receives payment from a primary plan (lawyers included), has or had a responsibility to pay.  Mind you we have not seen such a claim since U.S. v. Stricker was filed several years ago, but the law does allow for it.  Given the U.S. deficits and the pressure on Medicare (which comprises 25% of the U.S. budget) such CMS claims would not be unlikely.

The best method to foreclose MSP exposure is to first find an exception by which Medicare’s interest is satisfied.  If none of those exceptions apply to your claim situation then consider a method to protect Medicare’s interest and use the Courts to confirm it.  While the Judge in the Early matter refused to issue an advisory opinion, he did sympathize with the dilemma and felt it important to include in his opinion that Parties may be prudent to include a MSA as part of the settlement.

Cooperation is the key.  Our company  deals with this issue daily, and we would be glad to work with you to help mitigate your MSP exposure.


Roy Franco and Jeff Signor