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Category Two – Need For an MSA

Bruton v. Carnival Corporation[i] presented the issue of whether an MSA was required wherein the parties agreed at mediation to settle with a general release that included “Medicare provisions”.  Bruton brought suit against Carnival for injuries allegedly suffered when she slipped and fell aboard one of Carnival’s cruise ships.  The case was settled at mediation and the parties agreed to settle with a general release that included “Medicare provisions”.  The release tendered to Bruton contained language requiring a professionally administered MSA.  Bruton demanded removal of this language from the release.  When Carnival refused, a “Motion to Compel Settlement Pursuant to Terms of Settlement Agreement” was filed in the United States District Court for the Southern District of Florida. 

In the decision, the court found there was an enforceable agreement to settle.  It held that the mediation agreement didn’t require the creation of a “Medicare set-aside trust account”.  Specifically, the court found that the agreement made no mention of an MSA nor did Carnival claim that the parties had discussed that particular issue during the settlement negotiations.  Since the release executed by the plaintiff did make Bruton responsible for satisfying any outstanding Medicare conditional payments, the release did address Carnival’s concerns about
“Medicare’s interests and its own liability for Medicare liens.”  Since Bruton complied with the terms of the mediation agreement, the Court found that Carnival was in breach of the mediation agreement and ordered Carnival to tender the settlement check to Bruton. 

In a case very similar to Bruton which was widely distributed across the country as standing for the proposition that an MSA wasn’t necessary in a liability case, Sipler v. Trans Am Trucking[ii] actually dealt with enforcement of a settlement due to a dispute over release language concerning the MSP.  Sipler was injured when a bus he was riding was struck a truck owned by Trans Am Trucking.  The case was set for trial but settled on the eve of trial.  The agreement to settle was a payment of $225,000 in exchange for a release from all claims arising out of the accident.  There were no other terms discussed or agreed upon.  Defense counsel drafted a release and the case was dismissed without prejudice but the court retained jurisdiction to enforce settlement.

Defense counsel sent a proposed release that contained a confidentiality clause and provisions relating to Mr. Sipler’s health care liens and future care.  Specifically, the plaintiff could not claim reimbursement from Medicare for injuries arising out of the accident; his private insurance could not pay for claims arising out of the accident because those injuries were preexisting and Medicare would not pay for any future treatment for injuries arising out of the accident.  Plaintiff counsel refused to accept these provisions and defense counsel refused to consummate the settlement agreement without those provisions.  A motion to enforce the settlement by plaintiff counsel ensued.

In bringing his motion to enforce settlement, plaintiff counsel argued that the parties didn’t agree to confidentiality or any provisions relating to health care; federal law does not require the plaintiff to disqualify himself from Medicare benefits or establish a set aside and defendants had not authority to protect the rights of Medicare.  Defendants argued that federal law requires personal injury settlements to protect the rights of Medicare with respect to both past and future medical expenses.

In its analysis of the issue, the court went through New Jersey law relating to enforcement of an agreement to settle.  It also went through the basics of the Medicare Secondary Payer Act.  The court then correctly goes on to point out that Medicare never paid anything for Mr. Sipler’s care and he had private health insurance which was primary. The court stated that “Mr. Sipler may not seek payments from Medicare for such expense to the extent they are provided for by his health insurance policy and/or the settlement.”  This is correct as the private health insurance coverage would be primary over Medicare.

The court, even though it didn’t have to go any further, then addressed the question of whether the MSP requires language in the release specifying “(1) his obligation not to seek such payments from Medicare and (2) a particular portion of the settlement amount to be set aside for future medical expenses arising out of the accident.”  The defense cited the Sally Stalcup handout for the proposition that a set aside wasn’t necessary.  The court correctly points out that there is no federal law that requires set aside arrangements in personal injury settlements.  The court in dicta does draw some distinction between workers’ compensation settlements and third party liability settlements relating to the question of whether there is a need to set aside funds.  In the end though the court states that the “parties in this case need not include language in the settlement documents noting Mr. Sipler’s obligations to Medicare or fashion a Medicare set-aside for future medical expenses.”

In Early v. Carnival Corporation[iii], a Florida Federal District Court was asked to determine whether a Medicare Set Aside was required.  Early filed suit against Carnival after allegedly being injured while a passenger on one of Carnival’s cruise ships.  The case was set for mediation and settled subject to two conditions.  The conditions were that the court retained jurisdiction to enforce the terms of the settlement and to determine the issue of a possible Medicare set aside, if any.  Post mediation, Early filed a Motion for Determination of Whether Medicare Set Aside is required.  In the motion, the terms of the mediation agreement were outlined which included that the “parties disagree on whether a Medicare Set Aside (“MSA”) is required in their settlement agreement, but agree to submit the issue for the court to decide.”  In Early’s petition, it was argued an MSA was not required.

In the decision, the court examined the Medicare Secondary Payer Act and recognized that one method to comply with the MSP is to create a set aside arrangement.  The Court cited articles authored by David J. Berg and myself[iv] to support that idea.  The court did recognize that the question of “[w]hether the MSP applies to every tort settlement, thus likely requiring an MSA, is a question that confounds practitioners and litigants.”  The court went on to address what constitutes a settlement under Florida law.  Then the court turned to its analysis of the legal principles as applied to this case.

The issue to be addressed was stated succinctly as the “parties cannot agree on a settlement term and are requesting the Court to fill in that term for them or offer an opinion on the MSP’s legal requirements for guidance.”  In reviewing other decisions regarding set asides, the court found they fell into two scenarios.  The first category was cases where the parties have a settlement agreement and agree on the necessity of a set aside but can’t obtain approval by CMS of the MSA arrangement.  There are several cases where courts have “approved” a set aside when CMS was unwilling to review and approve one for the parties.  The second category was cases where the parties have a settlement agreement but disagree as to whether the settlement agreement’s terms included the creation of an MSA.  In the instant case, the court found that it didn’t fit into either category and the parties were essentially asking for an advisory opinion or insert a term of settlement.  The court held that the parties request had to fail because the Court can’t create terms for the parties’ private settlement agreement or render advisory opinions.  Ultimately, the Court found that there was in fact no settlement at all!  By virtue of the parties submission of this critical term of the purported settlement to the court was evidence that there was no meeting of the minds or settlement.  It is an unfortunate result as I am quite sure the parties really wanted to settle the matter.  It shows the inherent risks of submitting these issues to the court for a decision.