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In Schexnayder, the plaintiff was injured in an automobile accident while in the course and scope of his job.  Mr. Schexnayder was struck from behind by an 18-wheeler insured by National Casualty Company.  As a result of the accident, the plaintiff underwent three surgical procedures related to his neck and back injuries.  His past medical expenses exceeded $377,000.  The workers’ compensation carrier that covered the employer Mr. Schexnayder worked for at the time of the accident paid a portion of the medical.  The remainder of the medical expenses was paid for by private insurance and Medicare paid no portion of any of the medical bills. 

The third party defendant admitted liability for the accident but defended disability, medical issues and economic losses.  The case with the liability insurer was settled at mediation.  Part of the agreed upon settlement was that the plaintiff would be solely responsible for protecting Medicare’s interests under the MSP.  The workers’ compensation claim was also settled for waiver of a significant portion of its lien plus a partial reimbursement.  An MSA was not done as part of the workers’ compensation settlement because it was determined it wasn’t necessary since Mr. Schexnayder was not a current Medicare beneficiary nor did he have a reasonable expectation of Medicare enrollment within 30 months of the settlement date. 

The case came back before the court post settlement by consent of both of the parties.  The court retained jurisdiction post order of dismissal if the settlement was not consummated.  Because a CMS approved Liability Medicare Set Aside might not be possible and or might not occur for quite some time, the settlement couldn’t be finalized.  In an effort to avoid rescinding the settlement completely, yet comply with the provisions of the MSP, the parties filed a joint motion for declaratory judgment seeking approval of the settlement and a declaration that the interests of Medicare were adequately protected by setting aside a sum of money for future medical expenses.  The court held an evidentiary hearing on these issues ultimately leading to the order, which cited the Stalcup LMSA memo.

In the order, Mr. Schexnayder is commanded to “promptly reimburse Medicare”  for an conditional payments.  He was also ordered to fund a $239,253.84 Medicare set aside to pay for future medical items or services which would otherwise have been covered by Medicare related to the injuries he sustained in the accident.  The order also specifically required the set aside funds to be put into an interest bearing account to be “self-administered” by Mr. Schexnayder’s wife. 

This case is another glaring example of the confusion over Medicare Set Asides and Medicare secondary payer compliance.  I am perplexed by this order on many levels.  First, the case does NOT involve a Medicare beneficiary.  So this begs the question of why there was discussion and an order to reimburse Medicare for conditional payments.  There were NONE.  Further, why discuss Medicare set asides when the case does not involve a Medicare beneficiary or someone with a reasonable expectation of being a Medicare beneficiary within 30 months?  Second, even assuming this case was appropriate for an MSA why discuss the Stalcup memo since this settlement was a hybrid which did involve extinguishing a workers’ compensation carrier’s liability for future medical care.  Accordingly, the CMS policy memos which govern workers’ compensation Medicare set asides would be arguably applicable so a discussion of the Stalcup memo isn’t necessary. 

In an effort to clear up confusion, I want to emphasize that the first step in determining what is necessary for Medicare secondary payer compliance is determining whether you are dealing with a Medicare beneficiary in the first place.  If the answer is no, there isn’t going to be a Medicare conditional payment issue or a Medicare set aside issue.  However, if the client has a “reasonable expectation” of becoming a Medicare beneficiary within 30 months (having been awarded SSDI), you will have a potential Medicare set aside issue that will need to be addressed.  The reasonable expectation issue has NOTHING to do with conditional payments as Medicare only makes conditional payments for current Medicare beneficiaries.  If a case extinguishes a workers’ compensation carrier’s liability for future medical care for a Medicare beneficiary then the set aside is governed by the CMS policy memorandums issued for WCMSAs.  There is extensive guidance for set asides in workers’ compensation settlements.  If there is no workers’ compensation settlement and the case is a pure third party liability settlement then there are no formal guidelines that govern Liability Medicare set asides.  That being said, all parties should now read the only official guidance issued by a CMS regional office on LMSAs which is the Stalcup memo from Region 6.  The memo lays out as clearly as you are going to get at this point what CMS’ policy is regarding LMSAs. 

All parties to a settlement involving a Medicare beneficiary have significant obligations under the Medicare Secondary Payer Act.  Attorneys should take the time to familiarize themselves with these obligations as it is critical in today’s hyper sensitive Medicare settlement landscape.  If a case does not involve a Medicare beneficiary or someone with the reasonable expectation of becoming a Medicare beneficiary within 30 months, then there isn’t any need to report that settlement under the Mandatory insurer reporting; there isn’t any need for language in the release regarding conditional payments and there isn’t any need for a Medicare set aside.  Insisting upon any of this when a case does not involve a Medicare beneficiary is foolish and causes unnecessary delays in resolving cases.  Everyone should take a deep breath when it comes to Medicare compliance and be reasonable in terms of what is demanded at settlement.  I am not saying that all parties shouldn’t protect themselves when a case involves a Medicare beneficiary, but having a good understanding of the issues is the first step to handling these issues the RIGHT way.