Court Grants Motion to Enforce Settlement & Evaluates the Need for Liability Medicare Set-asides
In Abate v. Wal-Mart Stores East, L.P., 2020 U.S. Dist. LEXIS 222363 (W. Dist. Penn. November 30, 2020), the Court addressed a Motion to Enforce Settlement filed by the Defendant. The parties had previously reached a settlement agreement regarding an incident that occurred while Plaintiff was on the Defendant’s premises and a Release Agreement was signed. Thereafter, the Plaintiff informed the Court that she was dissatisfied with her counsel and indicated that she was forced to sign the Release Agreement and had not been permitted to review it first. Defendant’s Motion to Enforce Settlement followed, which the Court granted.
The Court analyzed multiple issues in its decision regarding the validity and enforceability of the settlement. One of the Court’s most interesting discussions concerned the impact of the Medicare Secondary Payer Act. The Plaintiff argued that the settlement was unenforceable because the Plaintiff’s physician had not certified the completion of treatment in compliance with the September 30, 2011 memorandum from CMS, as required by the terms of the Release Agreement. In fact, the plaintiff’s physician had confirmed that she was still being treated as of March 2020. The Plaintiff maintained that the parties could not meet their obligation to properly consider Medicare’s interests without the physician’s certification of completed treatment. Plaintiff’s argument was based on the assumption that the physician certification was a material term of the Release Agreement, the absence of which makes the settlement unenforceable. The Court disagreed, however, noting that “the doctor’s certification was merely the means by which Walmart contemplated that Plaintiff would demonstrate that she had ‘satisfied Medicare’s interest’ in the settlement proceeds’ but the central objectives of the settlement could still be achieved even if the plaintiff’s medical care had not concluded. ”
In reaching its decision, the Court looked to the plain language of the Release Agreement and determined that Medicare’s interests with respect to future medical care could still be protected. It pointed out that the release contemplated that future medical claims might arise, it obligated the Plaintiff to use the settlement proceeds to satisfy those obligations as may be required by the MSPA, it allowed the Defendant to require proof of such compliance, and it required the Plaintiff to defend and indemnify Walmart in the event that Medicare later sued the defendant based upon Plaintiff’s failure to abide by her obligations. Although this agreement placed the burden to satisfy any future Medicare lien on the Plaintiff, the Court noted that such an agreement was not precluded by the September 30, 2011 memorandum from CMS.
Importantly, the Court viewed the 2011 CMS Memorandum as advisory in nature, simply meant to provide information regarding proposed liability Medicare Set-aside Arrangements. The Court noted that the memorandum does not require a physician certification of completed treatment, nor does it require the funding of an LMSA when treatment is ongoing. In support of its position, the Court cited a string of cases that refused to give weight to the 2011 CMS Memorandum and determined that federal law does not require set-asides in personal injury settlements. See Christensen v. Harris County, 529 U.S. 576 (2000); Shalala v. Guernsey Memorial Hosp., 514 U.S. 87 (1995), Zinman V. Shalala, 67 F. 3d 841 (9th Cir. 1995), and Sipler v. Trans. Am. Trucking, Inc., 881 F. Supp. 2d 635 (D.N.J. 2012).
The 2011 CMS Memorandum is often criticized by those in the MSP industry. While it outlines when a LMSA is not necessary, it does not provide guidance on when such an arrangement is needed. CMS has issued proposed rules that would provide Medicare beneficiaries and their representatives with options for meeting future medical obligations in cases like this one. Unfortunately however, CMS has pushed back the release date multiple times. We will let you know as soon as we have further updates on the proposed rules. In the meantime, we would be happy to help you determine the best way to address Medicare’s interest with regard to future medical treatment in liability settlements.