Primary payor status changes from liable carrier to claimant after settlement

By Guest Author Rasa Fumagalli, JD, MSCC, CMSP-F – Director of MSP Compliance Services

In Penelope Stillwell v State Farm Fire and Casualty Co., et al. (2021 WL 4427081), a plaintiff seeks to impose primary payor status on a post-settlement liability insurer via a qui tam action in federal district court. The United States District Court, Intermediate District of Florida, Tampa Division, in this recent decision dealt with Stillwell’s claim under the False Claims Act (FCA) and the MSP Act, which is the basis of the action that tom. The essence of the claim against the insurer, State Farm, was that “by failing to settle an amount in excess of expected medical expenses or to provide in the settlement an alternate mechanism to pay future medical expenses, the insurers failed discharged their primary-payor liability and remain primary payers for post-settlement medical expenses. U.S. District Judge Steven D. Merryday dismissed Stillwell’s suit with prejudice for failure to file a claim under the FCA and MSP.

The underlying case involved a negligence action in Indiana state court for injuries sustained by William Stillwell, a Medicare beneficiary, in a fall. Although the homeowners association, property management and landscaping company insurers reached a settlement agreement with the Stillwells for the lump sum of $200,000, the Stillwells refused to execute the settlement documents. as the settlement did not include a health insurance set aside to cover William’s expected expenses. future medical expenses estimated at $700,000. The Indiana District Court’s decision that the settlement was binding was upheld by the Indiana Court of Appeals. The terms of the settlement agreement reflected the insurers’ agreement to pay conditional Medicare payments directly from the settlement agreement. After settlement, CMS demanded reimbursement of $29,509.33 in contingent payments after deducting procurement costs.

After the losses in Indiana state courts, the Stillwells sued the insurers under the FCA arguing that the insurers failed to meet their primary payor liability since the settlement was less than future expenses. medical estimates. They also argued that insurers should remain primary payers of medical costs after the settlement and that their failure to report this liability to the Centers for Medicare & Medicaid Services (CMS) caused William’s doctors to incorrectly bill Medicare. The defendants argued that the Stillwells became primary post-settlement care payers after the settlement agreement was enforced. Challenges to the pleadings have also been raised.

In considering these arguments, the district court noted the absence of CMS rules for post-settlement futures in the liability settlements compared to the rules for the workers’ compensation settlements. The district court opinion went out of its way to explicitly point out that “CMS has decidedly avoided regulating private liability settlements that include a Medicare beneficiary.” He refused to impose such obligations since the establishment of such rules belongs to the legislative or executive power.

Stillwell also argued that the insurers concealed their primary payor status from CMS since they failed to report the settlement of the Total Plaintiff Payment Obligation (TPOC) under their mandatory reporting obligation. insurer under Section 111. The Court found no evidence to support this assertion since CMS had received notice of settlement based on resolution of contingent payments. Similarly, Stillwell’s assertion that insurers failed to complete Section 111 reporting of continuing medical liability (ORM) after settlement was unfounded as there is no reporting requirement. for civil liability insurers for medical expenses after settlement.

The Court also considered Stillwell’s contention that a party to the settlement must consider Medicare’s interests in choosing one of the following mechanisms: the creation of a Medicare Set-Aside, an allocation of a portion of the settlement for future medical expenses, payment of part of the settlement in the Medicare Trust Fund or the proposal of an alternative plan to the CMS. In reviewing these options, the district court noted that no law required the creation of a Medicare Set-Aside to cover future medical expenses in a malpractice case. Since a party can use the all settlement to pay for Medicare-covered treatment after the settlement, there was also no requirement to distribute the settlement funds. With respect to Stillwell’s assertion that the settlement should have included an amount to cover expected future medical expenses, the Court noted no substantial obligation to include this in a personal injury claim settlement. Under the terms of the settlement agreement, the Stillwells became primarily responsible for all future medical expenses related to the injuries. Because the Stillwells were responsible for post-settlement medical care, insurers had no MROs to report.

The remaining arguments in the case centered on whether Stillwell’s FCA is relying on a sufficiently alleged causation and conspiracy between the insurers to violate the FCA and submit false claims or statements to Medicare. The Court concluded that the claims were insufficient and warranted dismissal. Although Stillwell prevailed on his argument that his complaint was not a shotgun plea, his action was dismissed with prejudice for failing to assert a claim.

To take with

Since William Stillwell died before the second amended complaint was filed under the False Claims Act (FCA) and the MSP Act, his need for continued medical care after the settlement was moot. Rather, it appears Penelope Stillwell’s FCA may have been motivated by financial inducement as well as a desire to force the Court to provide guidance regarding consideration of Medicare’s interest in post-settlement injury care. in a liability settlement.

It’s clear the Stillwells didn’t understand that settling the case would make William the primary payer for all injury-related care after the settlement. Although his estimated future medical treatment is approximately $700,000, the liability settlements are compromise settlements that involve many more damage elements than those found in the workers’ compensation settlement. In light of this, it would be extremely rare for a liability settlement to include the full value of estimated future medical care or even to include an apportionment in the first place.

A discussion of MSP law and its potential impact on a regulation is a proactive way to avoid MSP confusion. Discussing the ramifications of MSP with injury victims prior to settlement is important to avoid such issues and avoid the need to be in federal district court after settlement.

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