Frank C. Kilcoyne, CSSC

We Have a Joust and a Ruling...

Two parties recently took the issue of how to handle Medicare’s interests in a liability case to court. They received a ruling in their case, but I’m not sure that this ruling provides any clearer guidance for anyone else facing the same issues.

In Hardwick v. The State of New York (State of New York Court of Claims) the defendant State of New York asserted that the federal Medicare Secondary Payer Act ("MSPA") establishes insurers - including the self-insured State of New York - as primary payers. Thus, in any action where the claimant/plaintiff is alleging personal injuries, the case must be reviewed in order to determine whether or not the claimant/plaintiff is “Medicare eligible.”

[For our purposes here, we define “Medicare eligible” as a person having: a) reached the age of 65 or b) having the potential to be a Medicare recipient within 30 months, or c) having received Social Security Disability (SSD) for the previous 24 months or longer.]

The plaintiff argued it was not that simple. They cited a May 2013 article published in the Defense Research Institute (DRI)(1) which stated that "Medicare does not impose an explicit or implied obligation on the part of liability insurers to 'protect Medicare's interests’ by paying or reimbursing Medicare for future medical expenses that may be incurred by Medicare beneficiaries" and that "there is no broad obligation to 'protect Medicare's interests' or to allocate a portion of the settlement funds for payment of a claimant's future medical expenses.”

The Court concluded that the claimant correctly contended that federal law does not require a Medicare Set Aside be established in personal injury liability settlements for future medical expenses. However, the Court also found that the state of the law is unclear as to whether federal law requires a self-insured defendant to protect the interests of Medicare for future medical expenses. Ultimately, upon a reading of the particular language contained in the settlement document used in this case, the court sided with the defendant State of New York.

Despite there being a ruling in this case, it does not seem to solve the bigger question for everyone else: do settling parties in a liability case have to set money aside to cover potential future Medicare-covered expenses or don’t they? In the absence of clear regulatory guidance, I affirm my prior stance: you simply have to analyze the specific facts of the case and make your decision on a case-by-case basis. In completing your analysis, you may find this order of query helpful:

1. Is the plaintiff considered “Medicare eligible”? (see above)                 If yes…

2. Has the treating physician certified in writing that the treatment for the injury related to the settlement has been completed and that future treatment will not be needed?

             If yes…

“Medicare considers its interest, with respect to future medicals for that particular settlement, satisfied.” (Benson Memo)(2)

              If no…

3. Does the settlement provide compensation for future medicals?        If yes…

1. Do nothing. CMS has not made any formal pronouncements on LMSAs. Based on the absence of statutory, regulatory or administrative directive or guidance, this is a sound option, especially in “small risk” cases.

2. Explicitly account for Medicare’s interests in the settlement agreement. Place protective language in the settlement agreement and release addressing the issue of future medical costs.

3. Estimate the cost of claimant’s future medical care and allocate a specific amount in the settlement agreement. This amount can be funded with a structured settlement to reduce the cost and also time future payments to the claimant to coincide with future needs.

4. Obtain a professional allocation from a vendor, limited to the claimant’s future anticipated cost of Medicare allowable medical care. This solution is most effectively funded through the use of a structured settlement.

5. If not already Medicare-enrolled, a claimant might choose to purchase private insurance and keep accountings of the premiums and co-payments made in support of that policy while receiving services typically covered by Medicare. Once the amount provided by that insurance exceeds the amount identified as “compensating” the claimant for future medicals, the plaintiff may arguably have complied with the statute.

6. Submit the set-aside amount or have the professional allocation submitted to CMS for review and approval, acknowledging that CMS is unlikely to respond as there is no formal process for review and approval of a LMSA. Even if they do not review the LMSA, there is, at least, a record of the good faith efforts to consider Medicare’s interests at the time of settlement.

These guidelines are not vetted or endorsed by CMS or any other entity; I simply believe they are a good common sense way to approach an historically murky problem. Do you have a case with potential Medicare entanglements?  Need help crafting a settlement that considers all relevant issues?

Contact Frank C. Kilcoyne, CSSC, at frank.kilcoyne@jmwsettlements.com or call

(800) 544-5533. I am here to help.


(1) Bucher, Kathryn, McConnell, Richard L. McDonald, Katherine R., “Dispelling Medicare Myths in Tort Settlements.” For The Defense, May 2013

(2) https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/coordination-of-benefits-and-recovery-overview/non-group-health-plan-recovery/downloads/future-medicals.pdf