More Dangers of Settling Claims in the Age of Set-Aside Uncertainty

More Dangers of Settling Claims in the Age of Set-Aside Uncertainty

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“Don’t mess with the Feds” should be every practitioner’s mantra when navigating Medicare reimbursement issues—especially in personal injury litigation. We continue to see liability carriers include increasingly expansive language in settlement agreements to inoculate themselves from CMS liability for the cost of a plaintiff’s past or future medical expenses. Unwary plaintiff’s counsel beware.

Sometimes, the Medicare reimbursement language in a settlement agreement can have severe consequences for both the plaintiff and their attorney. The recent decision in Abate v. Wal-Mart Stores East, LP, No. 1:17-cv-288-SPB (W.D. Pa. Nov. 30, 2020), is a case in point. In settling a premises liability claim, Walmart inserted language in the release that required the plaintiff to obtain written certification from her doctor stating, “to a degree of medical certainty,” that there was no ongoing or future care related to her injuries. The plaintiff’s treating providers refused to sign the certification, as she remained under active medical care.

The plaintiff subsequently discharged her original attorney and retained new counsel, who challenged the enforceability of the settlement. Walmart argued that the agreement remained valid, regardless of whether the doctor’s certification could be obtained. The federal district court sided with Walmart and ruled the settlement enforceable against the plaintiff.

The certification language referenced a September 2011 CMS policy memo [available HERE], which outlined a proposed mechanism to demonstrate that the parties were acting reasonably to protect Medicare’s interests in liability settlements. Walmart relied on this memo in crafting the release. The court found that the plaintiff’s obligation to “satisfy Medicare’s interest” could be fulfilled without the doctor’s certification, and that the central objective of the agreement—an exchange of payment for a release of claims—remained enforceable. Importantly, the court ruled that the burden of resolving any CMS issues now rested entirely with the plaintiff, including indemnifying Walmart for any future claims.

How the plaintiff in Abate will ultimately satisfy Medicare’s interest for her ongoing or future care is left unanswered. However, the court made clear that the 2011 CMS memo does not require a doctor’s certification or mandate a Liability Medicare Set-Aside (LMSA) in cases where treatment is ongoing. Rather, it merely proposes LMSAs as one option. The court also cited Sipler v. Trans Am Trucking, Inc., 881 F. Supp. 2d 635 (D. N.J. 2012), which is widely recognized for holding that no federal law mandates LMSAs in personal injury cases.

Nonetheless, both plaintiffs and liability carriers continue to drift in uncharted waters when it comes to LMSA issues. CMS has long promised formal rulemaking on future medicals in the context of personal injury settlements. Initially scheduled for September 2019, the latest projection set a release date for March 2021. Once published, these regulations will go through a comment period of no fewer than 60 days, followed by final drafting and implementation.

Even then, it remains uncertain whether CMS actually has the statutory authority to mandate LMSAs in personal injury contexts. Several courts—including Silva v. Burwell, 2017 WL 5891753 (D.N.M. 2017); Sipler, and Bruton v. Carnival Corp., 2012 WL 1627729 (S.D. Fla. 2012)—have concluded that the Secondary Payer Act does not require LMSAs.

Until more legal certainty is established, plaintiff’s counsel must continue to proactively address Medicare issues as part of their settlement processes. Waiting until after settlement to deal with CMS risks years of administrative headaches, possible litigation, and even exposure to professional liability.

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