Settlement Enforced Where Parties Were Silent About Medicare
Jeff Signor
January 27, 2014

An appellate court in Oregon finds there is a binding settlement where the Medicare issue was not explored until after the case settled.   (See Rhoades v. Beck, 2014 Ore)

In Rhoades the parties settled the personal injury case for a total of $20,500 ($15,000 to the injured plaintiff and $5,500 to her spouse).  An exchange of letters between the parties confirmed the settlement.  After the exchange of letters, plaintiff received a conditional payment letter identifying a Medicare reimbursement amount of $22,970.62.  Plaintiff refused to execute the settlement agreement.  Defendant moved to enforce the settlement and the trial court granted the motion, and also entered a general order dismissing plaintiff’s Compliant.

Plaintiff argued to the appellate court that because liability for Medicare’s reimbursement amount was a material term that remained uncertain, the parties never formed a binding settlement agreement.  The defense argued that there was an agreement to settle the case, as evidenced by the exchange of letters on this point.  Additionally, the defense took the position that the plaintiff was aware that Medicare had made payments related to the loss prior to entering into the settlement, and even if the plaintiff was unaware, such lack of knowledge is not a basis for finding that the parties did not enter into a binding agreement.

The appellate court agreed with the defense, finding that the parties’ communications and acts objectively established that they has a meeting of the minds.  The trial court’s legal conclusion that there was an enforceable contract was correct”.

Franco Signor Commentary:  An element of any case involving a Medicare beneficiary is taking steps prior to any mediation or settlement negotiations.  Whether the court finds there is a binding agreement, or whether the court holds like court did in Tomlinson v. Landers, the end result is the same: Unless the parties want to expose themselves to protracted litigation, and ultimately a Medicare reimbursement amount they did not bargain for, proactive assessment of the Medicare piece is imperative.  See Tomlinson v. Landers, 2009 U.S. Dist. 38683.  In Tomlinson, the court holding was the exact opposite as it was in Rhoades.  The court in Tomlinson found that there was no “meeting of the minds” concerning settlement and that adding Medicare as a payee on the settlement draft was a change in the terms and conditions of the settlement.

It is immaterial as to which court got this issue correct.  In either case, all parties are left wondering whether Medicare will be repaid as a result of the settlement.  The fact that Medicare could file a legal action to seek double damages, or initiate a Treasury collection proceeding (tapping into tax refunds, payroll tax accounts, or even pending payments owed on federal contracts/grants) against the primary plan, it is inevitable the primary plan will want assurances from the Medicare beneficiary that repayment has occurred.

Thus, when a settlement occurs with a Medicare beneficiary, the primary plan has a tremendous incentive to make certain the MSP obligation created by the settlement is resolved.  It is clear the primary plan has no legal tools at its disposal to complete the obligation, but can leverage the timing of settlement (where appropriate to do so) to encourage cooperation from the Medicare beneficiary and his/her counsel on how proceeds are to be distributed.  The negotiation of how to handle Medicare must take place before a case is settled.  That is why parties should work together as soon as practical on a plan to achieve the objective.

At Franco Signor we offer a no-nonsense approach to MSP compliance that cuts through the MSP technical jargon and provides the practitioner with what is needed for successful compliance.   Settlement funds need not be trapped in holding accounts as parties wrangle on what needs to be done.  We can provide a plan of action that will allow claims to close and plaintiffs to receive their proceeds promptly.  Call us today — We look forward to serving you soon.