Recent Case Illustrates Importance of Addressing Medicare Issues Prior to Settlement


Genaro Ruiz, the Plaintiff, entered into a binding settlement agreement with Defendants, which included the State of Rhode Island. The parties agreed that to the extent that the Plaintiff was a Medicare beneficiary, he would be responsible for resolving Medicare claims. However, the details of how this would be effectuated were not discussed. When the State of Rhode Island (“the State”) later required that the Plaintiff furnish his Social Security number (SSN) to ensure compliance with Section 111 reporting requirements, he refused to provide the same. In response, the State refused to release the settlement funds to the Plaintiff.


In the present motions before the United States District Court for the District of Rhode Island, two hearings were held to address the arguments. At the first hearing, the Plaintiff argued that the SMART Act removed the need for him to provide part of all of his SSN. His argument lacked much support and the Court instructed that he provide the same. Additionally, after the Defendants confirmed that they had not attempted to query the Plaintiff’s Medicare status using the available information, the Court directed that they do so and continued the hearing. When the second hearing was convened, the Plaintiff had not found any further authority for his position that the SMART Act removed the need for him to furnish all or a portion of his SSN. In contrast, Defendants provided Proposed Rule, 2020 WL 764618 issued by the HHS which provided guidance for what is considered a good faith effort under the Safe Harbor established by the SMART Act. The Defendants also confirmed that they ran 110 queries in an effort to confirm whether the Plaintiff was a Medicare beneficiary. Following the hearing, the State of Rhode Island sent a formal request to the Plaintiff for the last five digits of his SSN. The Plaintiff responded that he was refusing to provide any portion of his SSN.


In ruling on the motions before them, the Court noted that Defendants “made far more than adequate ‘good faith efforts to identify a beneficiary’” as required by the SMART Act. As a result, they held that Plaintiff’s motion to enforce the Settlement Agreement was granted without further need for him to release his SSN as part of settlement. The Plaintiff had also argued for punitive damages and interest given the delayed release of the settlement funds as well as the payment of attorney’s fees due to violations of the Privacy Act. The Court denied these motions, finding that the State of Rhode Island acted in good faith in its efforts to comply with the SMART Act and that the Privacy Act was not applicable due to the fact that the SMART Act is a federal statute requiring the disclosure of the full or partial SSN. Although the Court noted that the Plaintiff’s refusal to disclose any part of his SSN breached his implied contractual duty of good faith and fair dealing, it was further noted that the State was likely without remedy due to the “extremely confusing set of federal enactments…together with their regulatory progeny.”


If the parties had addressed the Plaintiff’s Medicare status prior to finalizing a settlement, much of the time and expense involved in this case could have been avoided. We are happy to help with any questions you may have about the SMART Act, Section 111 reporting requirements, and ensuring the Medicare Compliance issues have been properly addressed before you enter into settlement.


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