By guest author Rasa Fumagalli, JD, MSCC, CMSP-F – Director of MSP Compliance Services
Medicare secondary payer (MSP) compliance settlement terms used by defendants are often too broad in nature. Recent opinion, Kupolati v. Village of Timber Creek Association, 2021 NJ Super. Unpublished. LEXIS 7 (App. Div. 5 Jan. 2021) and Abate v. Wal-Mart Stores, No. 1: 17-cv-288-SPB, 2020 WL 7027481 (WD Pa. 30 Nov 2020) (mem.), Highlight issues that can arise when MSP compliance issues are overlooked or misunderstood during settlement discussions. These cases highlight the need for collaboration between the parties with respect to the Medicare secondary payer‘s terms at the time of settlement.
In Kupolati, the New Jersey Superior Court, Appeal Division, was asked to consider the defendant’s appeal against the order of the trial court which allowed the plaintiff’s motion to enforce its settlement agreement with the Village of Timber Creek Association (Association). The Superior Court upheld the order of the court of first instance.
The underlying facts of the case show that the complainant was injured 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 discharge which waived any claim against the Association.
The general discharge that was sent by the defense included the discharge of past and future Medicare conditional payments under the Medicare Secondary Payer Act. However, the plaintiff’s lawyer objected to the general release, as it dealt with claims “existing or likely to accumulate, including any claim raised or which could have been raised in the context of a legal action, due and in any way arising from an event…. occurring on or about 03/20/2015 at the village of Timber Creek.
The terms of the defense also included a provision requiring the plaintiff’s attending physician to certify that she would not need any additional treatment or monitoring. This request was never discussed during the settlement negotiations.
The plaintiff sought enforcement of the settlement without the objectionable provisions while the defendant sought enforcement with the provisions. In granting the plaintiff’s request, the court of first instance took into account the “current practice” in matters of general releases. He found that the Respondent had failed to demonstrate that the inclusion of the attending physician’s certification of future treatment in the terms of an agreed release was standard practice. Likewise, the inclusion by the defense of a general discharge from a non-party insurer was not considered common practice.
On appeal, the respondent argued that the trial court should have heard evidence since there was a genuine question of fact as to the terms of the settlement or, failing that, had applied the respondent’s version of the terms of the settlement. The appeals court noted that the complainant had met her onus of establishing the agreement to settle the case through her attorney’s certification of her version of the settlement conference. The lawyer certified that the parties never discussed the doctor’s certification at 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 concluded that there was no real question of fact that would warrant a hearing.
The court then considered whether the objectionable provisions regarding the general release of the insurer and the doctor’s certification were in line with industry customs. The tribunal noted that an agreement can be supplemented with terms common to an industry “if each party knows or has reason to know usage and neither party knows or has reason to know that the other party has an intention incompatible with use “. (Second) reprocessing of Conts. § 221 (Am. Law Inst. 1981) In evaluating this argument, the court determined that the terms were not in accordance with industry custom since the defendant presented no competent evidence to support it. The court also confirmed the interest allowance of the court of first instance.
A review of the Decrease the opinion shows a similar motion to enforce a settlement agreement, although of defense. In Decrease, the plaintiff was offered the sum of $ 250,000.00 to settle her claim for the injuries she suffered when she fell from a ladder at Wal-Mart. Although the Complainant signed the Settlement Release, she asserted that she was never allowed to review the agreement and did not authorize its terms. The Court granted the respondent’s request after considering the evidence in the case.
The facts of the case show that the parties engaged in settlement discussions in October and November 2019. The settlement documents were signed in late November. Subsequently, the Centers for Medicare & Medicaid Services (CMS) issued a final conditional payment request that the plaintiff’s lawyer sent to the defense.
The complainant then sent an ex parte letter to the court alleging that she had been “intimidated” into signing the settlement release. In December 2019, the court held a conference with the parties to deal with the applicant’s correspondence. At the conference, the applicant was represented by a new lawyer. Her former attorney testified that the complainant was told of her net settlement after attorney’s fees and that the Medicare lien was deducted.. He also said he explained to her the language of release and his request for a written attestation from the attending physician that no further injury-related treatment would be required. This was requested so that Medicare’s interests were taken into account. He further noted that it is “typical for them to do this thing. We have encountered this in the past.
In granting the defendant’s motion to enforce the settlement agreement, the court determined that the plaintiff’s former counsel had express authority to accept the settlement offer in the matter. The terms of the settlement were also sufficiently specific and supported by adequate review. There had also been no evidence of fraud, coercion or error that would justify canceling the agreement.
The court then considered the provision of the contract which required the plaintiff to “justify and accept” that she “satisfied the interests of Medicare” by obtaining a written certification from her attending physician that was in accordance with the CMS memorandum dated September 30. 2011 (CMS Memo). This report had not been obtained since the applicant was still in treatment. In light of this, the Claimant argued that the Settlement Release was unenforceable and that a “required component” was missing. The court rejected this argument, noting that the essence of the deal was Walmart’s agreement to pay money in return for the plaintiff’s agreement to end the litigation and release the claims. He also reviewed the CMS memo, noting that it did not require a settling Medicare beneficiary to obtain a letter certifying the completion of treatment.
The compliance obligations of the Medicare secondary payer impact both parties to a settlement. Failure to resolve these issues before drafting a release can lead the parties to fight in court for the inclusion of Medicare-related settlement terms. Although the terms of settlement are typically written by defense, the MSP terms can consist of many boilerplate provisions that have no bearing on the actual settlement and their inclusion could be problematic for the Medicare beneficiary. Particular attention should be paid to the following main areas of MSP compliance with respect to settlement documents:
- Obtain an agreement on the ICD codes that will be declared in accordance with Article 111 Compulsory declaration of the insurer. The Section 111 Total Claimant Payment Obligation (TPOC) report will identify diagnostic trouble codes that are released as part of the settlement. Discussion and agreement between the parties regarding the date (s) of the accident and the correct diagnostic codes will help prevent any post-settlement MSP compliance issues.
Practical tip: Get a written agreement regarding the codes that will be reported by the defendant to ensure that unpaid treatment or injury claims are not incorrectly reported.
- The conditional payment reimbursement obligations in the release should be consistent with settlement discussions.
Practical Tips: A practitioner should keep in mind that the Interim Conditional Payment Numbers of the Benefit Co-ordination and Collection Center may change once the case is settled and reported with the details of the final settlement as well as when the defense completes the insurer’s mandatory report under section 111 in the Claim. Additionally, a practitioner should proactively identify any Medicare Advantage plans that may have made injury-related payments to avoid any unexpected post-settlement recovery claims.
- Settlement terms that address future injury-related treatment should be consistent with settlement discussions.
Practical advice: A unilateral requirement in the terms of the regulation that the applicant obtain a written certificate from an attending physician that the applicant has completed their treatment and no longer needs treatment is inappropriate. A better course of action is to have a discussion about the MSP Act and its potential impact on a settlement with the claimant before the settlement conference. This would allow the applicant to determine which course of action, if any, they prefer to take while understanding the risks / benefits of each approach.
- Watch for settlement terms that do not apply, such as the requirement that CMS review a Medicare liability layaway. Likewise, a settlement with an estate for a wrongful death action should never have boilerplate language regarding future medical examinations.
A proactive approach to MSP compliance will result in smoother regulations every time. Working with the other party on the terms of medicare compliance settlement will save a lot of time and potentially avoid any arguments about the applicability of the regulation. Here, “an ounce of prevention is better than a cure”.