This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, September/October 2016 issue, @2016 by Steven J. Bruzonsky, Esq.
Are Medicare Set Asides Not Required?
In October 2013, CMS (Centers for Medicare & Medicaid Services) withdrew its Notice of Proposed Rulemaking to OMB concerning personal injury Medicare Set Asides. To date, CMS has given no indication that in the future it will restart the process of promulgating regulations concerning Medicare Set Asides. Also, our Medicare Region’s (San Francisco) practice is that it does not review or approve or even claim Medicare Set Asides in non-Workers Compensation personal injury or medical malpractice cases.
Arizona Association for Justice member Frank Verderame has reported his obtaining an Arizona Federal District Court Order in Aranki v Burwell, No. CV-15-0668-PHX-SMM, dated October 16, 2015, by Senior U.S. District Judge Stephen M. McNamee, holding essentially that there is no such thing as a Medicare Set Aside requirement in our 9th Circuit and San Francisco Medicare Region. Important quotes from Judge McNamee’s Order are set forth below:
"no federal law or CMS regulation requires the creation of a MSA in personal injury settlements to cover potential future medical expenses."
(Near the end of the ruling, Judge McNamee reiterated in no uncertain terms that there is no such thing as a Medicare set aside requirement, stating) "This case is not ripe for review because no federal law mandates CMS to decide whether Plaintiff is required to create a MSA. That CMS has not responded to Plaintiff's petitions on the issue, is not reason enough for this Court to step in and determine the propriety of its actions. There may be a day when CMS requires the creation of MSA's in personal injury cases, but that day has not arrived."
(In a footnote, Judge McNamee also points out that no process exists under the Medicare regulations to address the MSA issue. The footnote reads as follows) "In 2012, CMS published an advance notice of proposed rulemaking to consider whether it should implement a similar MSA review process for personal injury settlements as it has for workers' compensation. 77 Fed. Reg. 5917-02 (June 15, 2012). However, this report was merely a solicitation of opinion, and as of today no such process exists."
Plaintiff attorney Frank Verderame explains that: “This is a case where I lost the battle but won the war. Let me explain. I settled a medical malpractice case for a substantial amount of money. The malpractice insurance carrier for one of the defendants insisted that a Medicare set aside was required because my client was likely to need future medical care. Of course, I disagreed. They raised the set aside issue after we had reached an agreement, yet refused to close the deal because of that MSA issue. I filed a motion in the Maricopa County Superior Court, where the malpractice claim was pending, asking the court to enforce the settlement. The trial judge granted the motion but ruled that I had to put money aside in a trust account while I got confirmation from Medicare/CMS that a Medicare set aside was not required. As usual, Medicare/CMS refused to respond to my inquiries. Mind you, they did not ignore me, they actually had a lawyer write me a letter saying they had no obligation to respond. So, the trial judge entered an order directing me to file a declaratory judgment action to get the issue resolved in federal district court. That is exactly what I did. The government responded to my declaratory judgment action complaint with a motion to dismiss for lack of federal question jurisdiction, arguing that I failed to exhaust administrative remedies. This is the government's favorite way to send cases into a black hole. I argued that we had both federal question jurisdiction and mandamus jurisdiction. I also argued that it was not possible to "exhaust administrative remedies" because there was no provision in the law to resolve the MSA issue, and because all of the Medicare administrative procedures require a decision or "determination" to be made by CMS from which we would file an appeal to an administrative law judge. That is what happens with all other decisions or determinations concerning benefits. I argued that since Medicare sent me a letter refusing to respond on the issue there was no avenue to exhaust administrative remedies. The judge granted their motion to dismiss. So, I lost the battle. But, I won the war because the judge based his decision on the ultimate question raised in my complaint, to wit: is there such a thing as a Medicare set aside? As you can see from the attached ruling, the court said there is no such thing as a Medicare set aside. News of the decision has already hit some of the commentators on this area. Here's a link to the first one I know about: http://medicareinsights.com/2015/11/06/arizona-federal-court-dismisses-case-asking-whether-liability-msa-is-necessary/“
In personal injury cases, Arizona law does not permit evidence of collateral source payment of medical bills, so in such cases it is in our clients’ best interests to avoid Medicare Set Asides. On the other hand, Arizona law permits evidence of collateral source payment of medical bills in medical malpractice cases, so in such cases, if this will substantially increase the value of the case as there is sufficient malpractice insurance coverage, then you may want to include a Medicare Set Aside as part of the settlement or jury award.