Richard L. Gilbert
Judge of the Superior Court (Retired)

Recent Developments in Medicare Set-asides

The 'Sipler" Case

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Richard L. Gilbert, Judge of the Superior Court (Retired)

Resolution Arts Building

 2630 J Street, Sacramento, CA  95816

T: 916.442.0414  F: 916.442.7046

© Richard L. Gilbert 2015

The United States District Court in New Jersey recently issued an interesting, though unpublished, opinion concerning Medicare Set asides. In Sipler v. Trans-M Trucking, the parties reached a preliminary settlement of the case without discussing potential Medicare liability. In the settlement documentation subsequently presented by the defense, the defense included a previously un-discussed confidentiality provision and a provision concerning Medicare:

"1) he [Sipler] cannot claim reimbursement from Medicare for injuries arising out of the March 8, 2006 accident; (2) his private health insurance will not pay for claims arising out of accident-related injuries because those injuries are preexisting; and (3) Medicare will not pay for any future treatment for injuries arising out of the accident."

The court enforced the settlement agreement on plaintiff's motion without requiring the inclusion of any language regarding Medicare or a Medicare set aside. The court discussed Medicare's rights and the potential requirement for Medicare set-asides in third-party cases:

"Indeed, no federal law requires set-aside arrangements in personal injury settlements for future medical expenses. To be sure, Medicare set-asides are prudent in settlements for future medical expenditures in the worker's compensation context because, under the MSP, Medicare becomes a secondary payer for such expenditures to the extent a "compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses," 42 CFR 411.46(a), or "the settlement agreement allocates certain amounts for specific future medical services," 42 CFR 411.46(d)(2).

The settlement in this case, however, does not arise in the worker's compensation context. And it does not indicate a particular amount to compensate Mr. Sipler for future medical expenses arising out of the accident. Nor should it. In contrast to the worker's compensation scheme that "generally determine[s] recovery on the basis of a rigid formula, often with a statutory maximum .... [t]ort cases ... involve noneconomic damages not available in workers' compensation cases, and a victim's damages are not determined by an established formula." Zinman v. Shalala, 67 F.3d 841, 846 (9th Cir. 1995) (citation omitted). Thus, to require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements. See McDermott, Inc. v. AmClyde, 511 U.S. 202, 215 (1994) (noting that "public policy wisely encourages settlements"). In sum, 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 that Judge Debevoise is spot on, and not just because he reaches the same conclusion as I do in the article on this website (Click HEREfor our article).

 

I am told that some plaintiffs' attorneys are reading the conclusion in Sipler that set-asides are "not required" as the beginning and end of the inquiry in their cases. This is a shallow and foolish approach.

The issue before the court in Sipler was not whether Medicare set-asides are "required," but whether a party could insist upon the inclusion of that term in final documentation contrary to the original agreement.

 

I read the Sipler decision as holding that, because Set asides are not specifically required, and thus not "inherently" a part of settlement agreements, they cannot be forced on a party, absent agreement.

 

There is nothing in Sipler, however, that prevents a defendant from insisting upon some form of set aside or other arrangement to protect Medicare's interest as a condition of settlement in the first instance. Had this been the case in Sipler, I think the outcome would have been different.

 

Based on my reading of the case, I think it is foolish to read the court's accurate holding in Sipler and conclude, without more thought, that Medicare set-asides are not "required". The point, among others, of the discussion of Medicare Set asides on this website is that the absence of a formal "requirement" for Medicare Set Asides is not the end of the analysis as to whether one should be pursued. The failure to include set asides in the right case may, in fact, be contrary to the plaintiff's best interests. Moreover, such a failure could ultimately subject plaintiff's counsel to liability either to Medicare or to the plaintiff saddled with the denial of Medicare benefits or to an unexpected reimbursement claim.

 

Click HERE for a PDF version of the Sipler decision. Remember, it is unpublished!