Florida Supreme Court Rules that the Collateral Source Does Not Apply to Medicare Payments
Heather Sanderson
October 16, 2015

Today, the Supreme Court of Florida issued an opinion regarding Medicare payments and the collateral source rule in John Joerg, Jr., etc. et. al v. State Farm Mutual Insurance Co. (October 15, 2015).


Background: In Florida, the collateral source rule provides that trial courts must reduce awards “by the total of all amounts which have been paid for the benefit of the claimant, or which are otherwise available to the claimant, from all collateral sources . . . .” § 768.76(1), Fla. Stat. (2014). But, there are certain exceptions to this rule. For example, there are no reductions “for collateral sources for which a subrogation or reimbursement right exists.” §768.76(1), Fla. Stat. The statute also explicitly states:


[B]enefits received under Medicare, or any other federal program providing for a Federal Government lien on or right of reimbursement from the plaintiff’s recovery, the Worker’s Compensation Law, the Medicaid Program of Title XIX of the Social Security Act or from any medical services program administered by the Department of Health shall not be considered a collateral source.

The exception generally does not provide a windfall to plaintiffs due to the fact that Medicare retains a right of subrogation/reimbursement. However, a 1984 Florida Supreme Court case entitled Florida Physician’s Insurance Reciprocal v. Stanley found that “evidence of free or low cost services from governmental or charitable agencies available to anyone with specific disabilities is admissible on the issue of future damages.”

The case at bar here involves Luke Joerg (Joerg), a Medicare recipient who was riding his bicycle when he was struck by a car. He pursued a negligence action against the driver and Respondent State Farm Mutual Automobile Insurance Company (State Farm). He withdrew his action against the driver and pursued State Farm exclusively.

Joerg filed a Motion in Limine to exclude evidence of any collateral source benefits to which he was entitled, including discounted benefits under Medicare and Medicaid. The trial court initially granted Joerg’s motion, but only with respect to past medical bills. After Joerg moved for reconsideration, the trial court vacated its prior ruling and allowed State Farm to introduce evidence of “future medical bills for specific treatment or services that are available . . . to all citizens regardless of their wealth or status.” However, it precluded State Farm from introducing evidence of Joerg’s future Medicare or Medicaid benefits.

State Farm appealed to the Second District which affirmed the lower court’s decision on all counts, except for the admissibility of Joerg’s future medical benefits. The Second District found that under Stanley, Joerg’s Medicare benefits were free and unearned and therefore should not have been excluded by the collateral source rule. The Florida Supreme Court accepted the case for de novo review.

Issue: Does the exception to the collateral source rule created in Stanley apply to future benefits provided by social programs such as Medicare?[1]

Ruling: No. Future Medicare benefits are both uncertain and a liability under Stanley, due to the right of reimbursement that Medicare retains. Medicare’s ability to enforce the right of reimbursement of Medicare benefits has made it apparent that the exclusion of evidence of Medicare and similar collateral source benefits will not result in undue windfalls to plaintiffs such as Joerg in this case. Florida courts have previously recognized that the exemption for Medicare in the collateral source damages statute does not create undue windfalls for plaintiffs.

Additionally, the Supreme Court of Florida ruled thatwith regard to future care, it is even more speculative to anticipate a reduction of future damages. This is because the structure of the Medicare Secondary Payer Act (MSP) is intended to prevent Medicare from paying if there is a forthcoming payment from a primary payer.

Franco Signor Commentary: The decision makes sense with regard to the intent behind Florida law and the collateral source rule still applying to Medicare benefits. Medicare has a right of subrogation as to any conditional payments, and will deny future Medicare coverage for Joerg until his entire settlement amount is properly exhausted. This was a liability case and a Liability MSA (LMSA) did not appear to be discussed.

However, from an MSP compliance perspective, the ramifications of this Florida Supreme Court decision could be significant. Some attorneys in Florida have interpreted Florida’s collateral source rule to mean that compliance with the MSP: i.e., conditional payment reimbursement and Medicare Set-Asides (MSAs) are not required in Florida. This is not the case as the MSP still fully applies.

The Medicare Trust Fund has a right to reimbursement for conditional payments and that right is absolute and cannot be absolved by Florida law. Florida’s collateral source rule simply states that these reimbursement amounts cannot be introduced to juries. With regard to MSAs, particularly in workers’ compensation cases, if no MSA or amount is allocated for future medical so as to not shift the burden to Medicare, Medicare will require the Medicare beneficiary to exhaust their entire settlement on Medicare covered expenses related to the injury before Medicare will provide coverage.

Where a Medicare beneficiary loses their Medicare benefits, they may seek a private cause of action. As discussed in recent blogs, the MSP Private Cause of Action located at 42 USC 1395y(b)(3)(A) has been a recent weapon against primary payers for double damages where Medicare’s interests have not properly been considered. Everything considered, the lesson for primary payers on Florida jurisdiction claims is that Medicare’s interests still need to be considered and Medicare payments are not an exception under the Florida collateral source rule.

[1] The Stanley case provided that evidence of free/low cost services from governmental or charitable agencies available to anyone with specific disabilities is admissible on the issue of future damages.