April 15, 2021

Rasa Fumagalli JD, MSCC, CMSP-F

Medicare Secondary Payer (MSP) compliance settlement terms utilized by defendants are often overly broad in nature. The recent opinion, Kupolati v. Village of Timber Creek Association, 2021 N.J. Super. Unpub. LEXIS 7 (App. Div. Jan. 5, 2021) and Abate v. Wal-Mart Stores, No. 1:17-cv-288-SPB, 2020 WL 7027481 (W.D. Pa. Nov. 30, 2020) (mem.), highlight the problems that may arise when MSP compliances issues are overlooked or misunderstood during settlement discussions.  These cases highlight the need for collaboration between the parties as it relates to Medicare Secondary Payer terms at settlement.

In Kupolati, the Superior Court of New Jersey, the appellate division was asked to review the defendant’s appeal from the trial court’s order that granted Plaintiff’s motion to enforce her settlement agreement with the Village of Timber Creek Association (Association). The Superior Court affirmed the trial court’s order.

The underlying facts of the case show that the plaintiff injured herself when she slipped and fell on a sidewalk near her home. She subsequently agreed to accept the sum of $180,000.00 in exchange for a signed general release that waived any claims against the Association.

The general release that was sent over by the defense included the release of past and any future Medicare conditional payments under the Medicare Secondary Payer Act.  Plaintiff’s counsel however objected to the general release since it addressed claims that were “now existing or which may accrue, including any claims asserted or which could have been asserted in any lawsuit, on account of and in any manner arising out of or related to an event …. occurring on or about 3/20/2015 at Village of Timber Creek.”

The defense terms also included a provision requiring the plaintiff’s treating physician to certify that she would not require any additional treatment or monitoring. This request was never discussed during the settlement negotiations.

The plaintiff moved to enforce the settlement without the objectionable provisions while the defendant requested enforcement with the provisions. In granting the plaintiff’s motion, the trial court considered “standard practice” when it comes to general releases. It found that the defendant failed to show that the inclusion of the treating physician’s certification regarding future treatment in the terms of a settlement release was standard practice. Similarly, the defense’s inclusion of a general release of a non-party insurer was not considered to be standard practice.

On appeal, the defendant argued that the trial court should have heard evidence since there was a genuine issue of fact as to the settlement terms, or in the alternative enforced the defendant’s version of the settlement terms.  The appellate court noted that the plaintiff met her burden of establishing the agreement to settle the case through her attorney’s certification of his version of the settlement conference. The attorney certified that the parties never discussed the physician’s certification during the conference, nor did they agree to generally release the insurer. Since defense counsel never denied the plaintiff’s version of the settlement conference, the court found that there was no genuine issue of fact that would warrant a hearing.

The court next considered whether the objectionable provisions regarding the general release of the insurer and physician certification were consistent with industry customs. The court noted an agreement may be supplemented with terms common to an industry “if each party knows or has reason to know of the usage and neither party knows nor has reason to know that that the other party has an intention inconsistent with the usage.” Restatement (Second) of Conts. § 221 (Am. Law Inst. 1981) In evaluating this argument, the court determined that the terms were not consistent with industry customs since the defendant failed to present any competent evidence to support this. The court also affirmed the trial court’s interest award.

A review of the Abate opinion shows a similar motion to enforce a settlement agreement, albeit from the defense. In Abate, the plaintiff was offered the sum of $250,000.00 to settle her claim from injuries she sustained from a falling ladder at Wal-Mart. Although the plaintiff signed the settlement release, she claimed that she was never allowed to review the agreement and did not authorize the terms. The Court granted the defendant’s motion after reviewing the evidence in the case.

The facts of the case show that the parties engaged in settlement discussions in October and November of 2019. Settlement documents were executed at the end of November. Subsequently, the Centers for Medicare & Medicaid Services (CMS) issued a final conditional payment demand that Plaintiff’s counsel sent to the defense.

The plaintiff then sent the court an ex parte letter alleging that she had been “bullied” into signing the settlement release. In December of 2019, the court held a conference with the parties to address the plaintiff’s correspondence. During the conference, the plaintiff was represented by a new attorney. Her former counsel testified that the plaintiff had been advised about her net settlement after attorney’s fees and the Medicare lien was deducted. He also testified that he explained the release language to her and his request for a written certification from the treating physician that no further injury related treatment would be required. This was requested so that Medicare’s interest would be taken into account. He further noted that it is “typical for them to do that thing. We’ve encountered that in the past.”

In granting the defendant’s motion to enforce the settlement agreement, the court determined that the plaintiff’s former counsel had the express authority to accept the settlement offer in the case. The settlement terms were also sufficiently definite and supported by adequate consideration. There had also been no showing of fraud, duress or mistake that would support setting the agreement aside.

The court next considered the contract provision that required the plaintiff to “warrant and agree” that she has “satisfied Medicare’s interest” by securing a written certification from her treating physician that was consistent with the CMS Memorandum dated September 30, 2011 (CMS Memo). This report had not been obtained since the plaintiff was still treating. In light of this, the plaintiff argued that the settlement release was unenforceable and missing a “required component.” The court rejected this argument noting that the essence of the agreement was Walmart’s agreement to pay money in exchange for the plaintiff’s agreement to terminate the litigation and release claims. It also reviewed the CMS Memo noting that it did not “require” that a settling Medicare beneficiary obtain a letter certifying the completion of treatment.

Conclusion

Medicare Secondary Payer compliance obligations impact both parties to a settlement. Failing to address these issues before crafting a release can lead to the parties fighting in court over the inclusion of Medicare-related settlement terms.  Although settlement terms are usually drafted by the defense, the MSP terms may consist of numerous boilerplate provisions that have no bearing on the actual settlement, and inclusion of them could be problematic for the Medicare beneficiary. Careful attention should be paid to the following key MSP compliance areas when it comes to the settlement documents:

1. 1. Get an agreement on what ICD codes will be reported pursuant to Section 111 Mandatory Insurer Reporting. Section 111 Total Payment Obligation to Claimant (TPOC) reporting will identify the diagnosis codes that are being released in connection with the settlement. A discussion and agreement between the parties as to the correct accident date(s) and diagnosis codes will prevent any post-settlement MSP compliance issues.

Practice Tip:  Get an agreement in writing regarding what codes will be reported by the defendant to make sure that unrelated care or non-compensated injury claims aren’t reported incorrectly.

1. 2. The conditional payment reimbursement obligations in the release should be consistent with the settlement discussions.

Practice Tips:  A practitioner should be mindful that interim conditional payment numbers from the Benefits Coordination & Recovery Center may change once the case settles and it is reported with the final settlement detail as well as when the defense completes the Section 111 Mandatory Insurer Reporting in the claim.  In addition, a practitioner should proactively identify any Medicare Advantage Plans that may have made injury-related payments in order to avoid any unexpected post settlement recovery claims.

1. 3. Settlement terms that address future injury-related treatment should be consistent with the settlement discussions.

Practice Tips:  A unilateral requirement in the settlement terms that the plaintiff obtains a written certification from a treating physician that the plaintiff has completed his treatment and does not require any more treatment is inappropriate. A better course of action is to have a discussion of the MSP Act and its potential impact on a settlement with the plaintiff prior to the settlement conference. This would allow the plaintiff to determine what course of action, if any, they prefer to take while understanding the risks/benefits of each approach.

1. 4. Watch for settlement terms that do not apply, such as a requirement that CMS review a Liability Medicare Set-Aside. Similarly, a settlement with an estate for a wrongful death action should never have any boilerplate language regarding future medicals.

A proactive approach to MSP compliance will result in smoother settlements every time.  Collaboration with the other side when it comes to Medicare compliance settlement terms will save a lot of time and potentially prevent any arguments about the enforceability of the settlement.  Here, “an ounce of prevention is worth a pound of cure.”