T s
Big R Towing: Has a Federal C the
Court Taken t
p L icare Set Asi
First Step Towards Liability Medi ides?
Recently, a federal co siana, by con
ourt in Louis nsent of the settling part conjunction w
ties, and in c with a
maritime claim under th Jones Act was asked to rule on a m
c he t, motion to dete ermine future medical expe enses
e p d
to allocate settlement proceeds and to assure th parties the settlement properly con
he eir t nsiders Medic care’s
J 011 h
interests. That court’s January 5, 20 decision has caused q quite a stir am lement comm
mong the settl munity,
as the cou found that a $52,500 set aside for a $150,000 lia
urt t s ment was reas
ability settlem sonable. A c careful
f
review of the court’s decision, how s
wever, shows that the co ourt did not c create a Liab re
bility Medicar Set
Aside. In re s
nstead, wher the parties presented medical test timony identiifying future medical expe enses
totaling $52,500 and had already agreed to let the court d
$ h e
determine the allocation b based on evid dence
d, e
presented the court essentially ra he
atified what th parties allready determ ut r
mined, but pu a number to it.
According this case serves as an excellent example of ho far partie may go to achieve Med
gly, a e ow es dicare
ce, n t m ng in
complianc but does not serve as the practical model for doin so (nor is iit advisable) i all events.
Backgrou und
In Big R Towing v. Be enoit,1 the co
ourt ruled on a joint motio n to determin future medical expense for
ne es
purposes of allocating the settleme proceeds. The parties asked the c
ent s mine whether their
court to determ
settlemen properly considered and protected Medicare’s inte
nt d M erests under the Medicare Secondary Payer
e
Act, 42 U. MSP Act”).
.S.C. §1395y(b)(2) (the “M
Benoit ha been employed as a captain for a tugboat owne by Big R Towing. Th parties dis
ad c ed he sputed
B d nd
whether Benoit injured his back an hip while doing deck w w,
work on a tow given rest ed
trictions place on
s one
Benoit due to preexisting conditions in his spine for which he had undergo multiple surgeries. Aft the ter
tow, Beno did not ret
oit a
turn to work and was paid maintenanc and cure b
d ce er
benefits unde general ma aritime
t
law. But the parties could not ag r
gree whether Benoit need ded further ssurgery on his back and a hip
replaceme T
ent. Big R Towing filed suit for declarratory relief o n the issue a to whether maintenance and
as r
cure was owed to Ben for those specific medical procedur
noit asserted claim for
res. Benoit’s countersuit a ms
damages brought und the Jone Act and general marit
der es g time law. T The parties settled for a gross
settlemen amount of $150,000 during a settleme conferenc on Decemb 13, 2010. Since Benoit was
nt $ ent ce ber
receiving Social Security Disability Insurance (“S
I SSDI”) benefit part of the settlement’s consideration was
ts, e
greed to be responsible fo protecting Medicare’s p ast and futur interests under the MSP Act.
that he ag r or re P
re
As to the issue of futur medical ex p
xpenses, the parties conse ented to the court making f ct
findings of fac and
conclusions of law and issuing an order.
d
The court made certain findings bas on the re
t n sed ce
ecord, evidenc presented, and stipulat arties,
tions of the pa
including the following findings. Fir CMS did not currently have a polic or procedu for review
rst, cy ure wing or
providing an opinion regarding the adequacy/recovery of f
e cal
future medic expenses in liability c cases.
Second, Benoit qualifie as a Jones Act seaman and earned approximate $50,000 p year at the time
B ed s n d ely per e
of the disputed accident (December 27, 2009). If the case w eed
were to proce to trial and a plaintiff v verdict
b t
were to be rendered, Benoit would be entitled to pecuniary aand non-pecu uniary damag g
ges, including past
economic loss and future econom loss and medical expe
c mic s,
enses. Thus under the circumstance the e,
parties’ se as
ettlement of $150,000 wa a reasonable comprom mise. Third, t the parties coonsidered Be enoit’s
projected future loss of earnings and projected future med es,
dical expense which, based on evid dence
provided by his health care provide equaled $32,000 for lo
ers, $ ower back surgery and $2 eft
20,500 for a le hip
replaceme um $ s
ent. The su of these expenses, $52,500, was to be set a aside by Ben noit to fund those
es.
procedure Fourth, th e t o
here was no evidence that Benoit was attempting to maximize ot ther aspects of the
nt e’s
settlemen to Medicare detriment.
t f
The court made the following rele sions of law: 1) the parties had reaso
evant conclus onably considered
’s n ment; 2) Medicare was a s
Medicare’ interests in this settlem secondary pa y-related Med
ayer for injury dicare
1
n W.D. La. Jan. 5, 2011).
Civ. Action No. 10-538, 2011 WL 43219 (W 2
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e he
covered expenses in th past or wo er
ould be a paye for such ex xpenses in the future; 3) BBenoit was reqquired
to reimburse Medicare for any cond ditional paymeents made by Medicare pr to the dat of the order; and
y rior te
r xpected that Benoit may become a Med
4) it was reasonably ex b uture, and $5
dicare beneficiary in the fu 52,500
fairly take Medicare’s interests into account for future injury-r
es o f related care.
Following its conclusio noit mptly reimbur Medicare for any conditional
ons, the court ordered Ben 1) to prom rse
payments made, and 2) to set aside $52,500 out of his $150,0 settlement and to use it to pay for future
s 2 e t 000 e
ated care othe
injury-rela ed
erwise covere by Medicar re.
Medicare Secondary Payer & Ben
e noit
Medicare’ priority righ of recover under the MSP Act enc
’s ht ry compasses p payment for mmedical expe enses.
g re p
According to the MSP Act, Medicar does not pay when pay een
yment has be made or can reasonab be bly
expected to be made by a worker compensation plan, a lliability plan, or a no-fault plan. Ther
rs’ t refore,
when a pr rimary plan ac ent
ccepts payme responsib Medicare’s re
bility (i.e., settlles a claim), M s
ecovery rights ripen
e nd
under the MSP Act, an Medicare may recover for any cond itional payme ents made, as well as for future
s
ated care (ass
injury-rela suming other qualifying criteria are met ) where amou unts for such care are allo
ocated
or otherwwise comprise a significant part of dam
e mages and ar reasonably considered by the parties as
re y
being paid as a part of the gross set
d ttlement proceeds.
In liability cases, we know that ofte the plaintiff is not reco
k en %
overing 100% value for da amages susta ained.
s
Factors such as dispu a mits d
uted liability and policy lim confound a plaintiff’s ability to se for
ettle a case f full
value. Th herefore, the gross settlemment is some amount less than full valu ue. When pa arties settle liability
th a
cases wit a general release of all claims, wi e-item damag
ithout any al locations for specific line ges, it
becomes challenging to determine how much of the gross se
t f ettlement amo should be allo
ount, if any, s ocated
for future medical dam mages. In con ntrast, workers’ compensa are
ation cases a based on no-fault princ ciples,
creating th es es: als,
hree measure of damage indemnity, past medica and future medicals. e
In Big R Towing, the pa
T d
arties secured a court-app proved allocat tion of future medical damages based o the on
merits of the case, theereby removin the questi of how th allocation in this liability case might differ
ng ion he y
from the allocation in workers’ comp
a w pensation cas ses, where th y
here is clearly defined guid dance. The se ettling
tle
parties in Big R Towing did not sett using a br road, generall release. Ins pecifically inc
stead, they sp cluded
as a mea d ble
asure of good and valuab considerat o
tion Benoit’s obligation to properly pro otect and con nsider
’s ed ase
Medicare’ interests. This remove Benoit’s ca from the realm of the tens of mill e lions of cases that
ng
settle usin broad, general release es. At this po oint, the settlling parties hhad agreed af ffirmatively to take
o
steps to consider an protect Medicare’s int
nd M t
terests (past and future) ). Their se elected mean forns
considerin and protec
ng cting Medicar erest was to s
re’s future inte submit the ag greement to t court and to let
the
the court make the de etermination. Once the fu uture cost of care was ide moving the co
entified, by m ourt to
decide the amount, an by showin the court that Medicare has not pro
nd ng t e ovided any fo orum with wh hich to
address these issues, the parties created a circumstance u
t , under which the result w y
was practically pre-
ordained. When thes conditions exist, Medic
se care’s preferr o
red means to protect its interests is to use o
Medicare Set Asides (“ “MSA”). In th case, it appears all the court had to do to comple the MSA p
he ete puzzle
was to ag gree that the medical testimony establis shed the speecific dollar am mount that wwould be need toded
cover the future surgerries.
me e
At the sam time, while the court did find that $5 52,500 repres tal
sented the tot future med es
dical expense and
ordered thhem to be set aside, if fun are to be set aside in accordance w currently enacted law and
nds with y ws
guidance (following tra A n
aditional MSA application in the work kers’ compen ext
nsation conte as a mea ans of
applying good faith standards of substantial compliance) only those future injury-related medical
s f ), e
expenses otherwise co
s overed by Me urt ake
edicare need to be set-as ide. The cou did not ma any distin nction
between Medicare cov vered and no on-Medicare covered exp s
penses. It is unclear whether the $5 52,500
represents the actual amount Med dicare would have otherw wise paid, or the amount medical prov viders
would cha e
arge a private payer. Sim ourt did not id
milarly, the co er
dentify whethe the future medical expe enses
ed
are going to be incurre within two years of the date of settle ement (i.e., p t’s
prior to Benoit actual Med dicare
entitlemen date), or whether alternate funding options exist, such as purc
nt w o chasing annui ities to cover some
of the future costs of care. Accord dingly, while the $52,500 may be the maximum am an
mount that ca be
und M
used to fu Benoit’s MSA, the fund ding and cust todial issues ( he
(i.e., who will administer th account) re emain
2
d e cal dicare $52,50 the
untouched by the court’s order. Unless all of the future medic expenses will cost Med 00,
mount of the MSA remains to be determined.
actual am M t
Nevertheless, the cour orders in Big R Towing are consiste with what the authors o this Practic Tip
rt’s g ent of ce
have bee teaching the settlemen community since 2006
en t nt y hat
6—namely, th 1) all set ttlements involving
s a ny
Medicare beneficiaries have to verify, resolve, and satisfy an past condit nts
tional paymen made, wh hether
arising in the workers compensat
s’ ty
tion or liabilit context, aand 2) Medic sts
care’s interes in remain ning a
secondary payer after settlement ne
y eeds to be ev ach ut he
valuated in ea case. Bu that is not th same as s saying
that Liability Medicare Set Asides are required in every case u
n SP
under the MS Act. And t hat
that is not wh the
Big R Tow t he tical for all pa
wing court is telling us. Th evaluation stage of eve ry case is crit ng
arties, includin the
ry
beneficiar and the age ency.
Reasonable Belt & Su uspenders or Self-Fulfilling Prophesy y?
Is Big R Towing somet
T thing that can be achieved in all cases as part of a s
n d standard settlement protoc or col,
is this a case of crea ating the Med dicare Set As ons in the se
side conditio ms
ettlement term and steps they s
negotiated Big R To
d? owing can be viewed as the logical re
e ophesy. Here the
esult of a sellf-fulfilling pro e,
parties went to the co s
ourt with a settlement for which part of the cons sideration was that Benoit was
ble
responsib for protect ting Medicare interests. The parties p
e’s presented evvidence that c clearly showed that
s
a measure of damages included fut c Jones Act, su damages are a
ture costs of care. Furthe r, under the J uch
part of the calculation for maintenan and cure.2 (At the ver least, the issue of whether such dam
e f nce ry mages
were part of the calculation for measure and cu was the o
t ure one on which the parties could not agree in
h
ng
negotiatin the settlem ment’s terms.) The parties presented evidence that if they w
d were to find future
e p
medical expenses as part of the ma nd Big
aintenance an cure that B R Towing owed Benoit the future ct, cost of
care would equal $52 2,500. They then left it to the court to make sure they met th settlement term
o o e he t
requiring Medicare’s innterests to be protected and considered .
We submit that the res may have been the same if the part
sult e taken the mat to federal court
ties had not t tter l
and instead had applie a future damages ana
ed d on g st
alysis based o identifying a future cos of care da amage
componen to the se
nt d
ettlement and on perman ng
nently shiftin the respo onsibility for the payment and
managem are
ment of that ca over to Me B
edicare. In Big R Towing, the parties th hemselves fo ound that there was
c y f
a future cost of care. While they argued over the cost of that care, m medical testim d
mony showed that
o 0. oit
amount to be $52,500 And, Beno was receiv ving SSDI be h
enefits, which once receiv ved for twentty-four
w n
consecutive months, would result in Benoit’s enr rollment in Meedicare Parts A and B. So it is likely that but
o
for the $5 s, ment would ha shifted the burden of p
52,500 set aside to pay for the surgeries the settlem ave e paying
for that ca to Medicare.3
are
ays
Take-Awa & Impact on the Sett tlement Community
Settling parties continu to grapple with these questions co
p ue e e
oncerning the use and pro SAs in
opriety of MS
ases. Until Co
liability ca cts oint
ongress enac legislation directly on po or CMS p orm
provides guidance in the fo of
regulation and/or policy memos, which would provide a uniform and standard m
ns d d means to con nsider
Medicare’ future intere
’s ests,4 parties should contin to docum
nue orts es
ment their effo to address these issue and
2
y d
Since they are not defined as Workers’ Co ompensation Pla of the United States under 4 C.F.R. §411.4 Jones Act cas are
ans d 42 40, ses
s
treated akin to liability cases for MSP Act pu es
urposes. A Jone Act case may consist of both e economic and noon-economic damages.
Economic damages may co wing component past medical expenses (often paid by the Jon Act
onsist of at least one of the follow ts: n nes
employer in the form of main ure
ntenance and cu and not recov medical expense wage loss; lo of earning ca
verable); future m es; oss apacity;
h
and loss of household servic ay
ces. Non-economic damages ma consist of at lleast one of the f onents: pain & su
following compo uffering;
mental angu uish; loss of inde s
ependence; loss of society; disfigurement; and p damage
physical harm. When affirmatively pled, each d
w ss
component would comprise a part of the gros recovery to a certain extent.
3
ce s s Medicare benefic
The authors of this Practic Tip note that since Benoit was not a current M ble d
ciary, it is possib that he would spend
e ure or
down and exhaust the entire amount for futu medicals prio to becoming a Medicare bene were the case, th the
eficiary. If that w hen
p
burden to pay for future in re
njury-related car would not ha ave shifted to MMedicare. Furth hermore, if this had been a w workers’
on are ve e
compensatio case, Medica may not hav approved the MSA anyway, as the fact pat eet
ttern fails to me its workload review
$ y
thresholds (gross settlement exceeding $250,000 when claimant merely possesses a reasonable ex xpectation of Me edicare
hs
entitlement within 30 month of settlement). See Memora andum from Tho m,
omas L. Grissom Director, CMS Center for Me edicare
nt,
Managemen to All Regio onal Administrattors, “Medicare Secondary Pa ayer-Workers Co ompensation (W WC) Frequently Asked
wer l
Questions”, question & answ No. 2 (April 22, 2003), available at www.cm ms.hhs.gov/WorkkersCompAgenc cyServices/ (last visited
s ate
February 11, 2011). But this does demonstra how the work esholds work in p
kload review thre practice.
4
here is no indication that such gui
To date, th rthcoming.
idance will be for
3
to memor eps d edicare’s future interests a part of sett
rialize for their files the ste taken to determine Me as tling a
ase. The Big R Towing court show us what steps can b taken to achieve Med
liability ca B g ws be dicare
complianc ce.
The rema urt s
aining question is whether obtaining cou approval is a practical s e em
solution to the MSA proble for
arties. The authors of this Practice Tip do not disput that under this fact patte future co
settling pa te ern, osts of
care and a future perm manent burden shift existed (assuming there would b future med
d be es
dical expense still
needed at the time Benoit becomes entitled to Medicare). Biig R Towing is analogous to the case w
s M where
the verdic identifies fu
ct uture medicals involving a Medicare b beneficiary. In that case, the condition are
ns
ripe for figuring out how to ensure Medicare does not bec
e d ary
come a prima payer, w which, in turn, best
he y’s ort, s
protects th beneficiary Medicare card. In sho the parties in Big R To owing agreed there was a future
ket
medicals damage buck that resulted in the court finding a f future cost of care exists. And, by req
f quiring
as a mate erial term of settlement th Benoit pro
hat t er s
operly protect and conside Medicare’s interests, de espite
the fact that such a phrase does not currently exist in the MSP Act, th parties brought to the court
p y he
conditions ripe to find that an MSA would do just that.
s t w
But before anyone starts pointing to this court as the creator of the Liabilit Medicare S Aside, we urge
e o s ty Set e
the settlement commu unity to take a deep breath and a deta the case-spec
ailed look at t cific facts in Big R
Towing. The authors of this Pract e
tice Tip have repeatedly pointed out t s
that the laws that could c create
Liability Medicare Set Asides are already in place.5 All it will t
M A take to make Liability Med dicare Set Asi ides a
legal requ uirement is Congress clarifying the MSP Act and reg gulations being put in plac to provide rules
ce e
y e ing
for liability cases. The Big R Towi court ask and answ
ked ons to
wered questio brought t it by the se ettling
w lly d s
parties, who specifical negotiated future costs of care as part of the s settlement. T The parties did not
settle this case for $15 50,000 using a general rele aims. Instead they set the table for the court
ease of all cla d, e e
to determ ch
mine how muc of the $15 ld ed
50,000 shoul be allocate for future medical exp penses. Onc thece
parties st tipulated that Benoit was going to bec come a Med dicare benefic t
ciary, all that remained w was to
he f o
answer th question of how much to set aside.
Were the settlement community to adopt the method used by the partie in Big R T
c m es Towing in all future
cases, the court system would likel grind to a halt. Every c
e ly ble to
case is capab of going t court to all locate
damages for future me edical expens uld
ses, but shou it? For t those cases w where the pa arties cannot go to
court, there needs to be a practica solution, at least until C
b al es
Congress give us the ans swer in the foorm of
s
laws, or specific regula ations are ado p e
opted. Any practical solutiion should be based on a good faith ef ffort at
al e
substantia compliance with currently enacted la aws and guiddance, as op pposed to arb ng
bitrarily carvin out
MSA allocations from gross settlements and creating oblig
c gations that m may not othe erwise exist. Until
Congress provides guidance, we submit the an
s s nswer is that every case r requires an e evaluation staage to
identify if future cost of care is a com
f he
mponent of th actual reco so, e
overy, and if s to ensure that the burd ofden
paying for and managing that care is not shifted over to Me edicare. As p part of this prrocess, the pparties
should do ocument their file as to what steps we taken to e
r ere ensure Medic care did not become a pr rimary
payer. Th result can best be achi
his ieved through a formalized process tha starts early; verifies, resolves,
h d at
and satisf fies past condditional payments made by Medicare; a asks the right question to ensure future
y and ns
c
costs of care are not im M nd
mproperly shifted over to Medicare. An above all, t that process has to educa the
ate
settling pa s
arties and has to be memo e documents.
orialized in the settlement d
Big R Tow wing makes the point crystal clear—se ettling parties should find a means of ensuring abs
s solute
Medicare compliance. Where the court is not an option, as w be the cas in the majo
c n will se ments,
ority of settlem
the partie need to ag
es gree on a form malized way to verify, ressolve, and satisfy Medicar obligations. We
re
have deve eloped such a formal approach to verify resolve, and satisfy Med
y, d ions, as set fo in
dicare obligati orth
r. d
our MSA White Paper We stand ready to as ssist the settl ement comm ng we
munity in doin so, and w will
t e c
continue to update the settlement community as this area of the MSP Ac continues t evolve, wh
s f ct to hether
egislation or court action.
through le c
5
tice Tips / Publish Works” at ww
See “Pract hed oup.com.
ww.garretsongro
4