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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 not 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 disquality 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 NJ 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 memo of 9/29/11 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.”

I think the foregoing quote from the holding says it all.  This opinion was on a motion to enforce settlement due to a dispute over release language. “In sum, the parties in this case need not include language in the settlement documents noting Mr. Sipler’s obligations to Medicare of fashion a Medicare set-aside for future medical expenses.”  I don’t think it has much impact on the current landscape.  Additionally, this case didn’t involve someone who would need a set aside as a primary payer existed in the form of his private health insurance provider. 

The issue is whether the client can treat with Medicare for their injuries post settlement.   In my opinion you don’t have to do a set aside any more than you have to set up an SNT for someone that is on Medicaid.  However, the client must understand the risks associated with failure to set up a set aside if they are on Medicare.  Just because a court says you don’t have to set it up, doesn’t mean that Medicare will not refuse to pay for injury related care in the future.  If Medicare denies payments to an injury victim, what impact do you think that Federal District Court opinion will have while the client goes through a 420-day internal appeal process with Medicare before they get to a federal district court?  Medicare has become more aggressive with post settlement enforcement of the MSP for future injury related care and has the information from every settlement including the ICD9 codes related to the injuries as a result of the mandatory insurer reporting. 

As some of you may know, CMS regulations regarding set asides might be coming in the very near future.  There is currently a proposal for proposed regulations.  AAJ is commenting on that as are state TLAs.  Everyone believes the regulations will require something but we aren’t sure exactly what that will be yet. 

For the time being, I would just make sure the client is aware that if they are a Medicare beneficiary then the settlement may impact their future eligibility for injury related care.  If they want to be cautious, they can get an allocation done and then set money aside.  If not, counsel should document their file about the plaintiff being educated about the risks.