Posted on: 3/8/2013
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A recent federal court opinion from Florida highlights the ramifications of settling parties’ failure to agree on the future medicals issue under MSP Act. If settling parties have not agreed on how to address the issue within the settlement release, they may not leave that issue open for the judiciary to address. The resulting opinion underscores the importance of addressing the future medicals issue proactively, before mediation, as opposed to asking the judiciary to “fill in the gap” with its own interpretation of the parties’ intent.
On February 7, 2013, the United States District Court, Southern District of Florida, Miami Division, issued an Omnibus Order in the Early v. Carnival Corporation case. The settling parties asked the Court to determine whether a liability Medicare Set-aside Arrangement (“LMSA”) was required as part of settling the claim. The Court concluded, after reviewing the evidence, that the parties, in fact, did not have a settlement agreement as they did not agree to every essential term.
Plaintiff Susan Early was allegedly injured while a passenger on one of Carnival Corporation’s ships. A claim was initiated, then (apparently) resolved. The mediator in the matter filed his report on November 21, 2012. That report stated that the parties had settled subject to the condition that the Court retain jurisdiction to enforce the terms of the settlement and determine the issue of a possible LMSA if one were needed. Early motioned the Court for Determination of Whether a Medicare Set Aside is Required. The terms of the settlement negotiations were:
1) Carnival will pay Early an undisclosed sum;
2) Each party will pay its own attorney’s fees and costs;
3) Early will execute a release for Carnival;
4) Carnival will be responsible for the mediator’s fees; and
5) The parties DISAGREE on whether an LMSA was required, but agree to submit the issue to the Court and to abide by its determination.
Early’s motion argued that an LMSA was not required under the Medicare Secondary Payer (“MSP”) Act. Carnival filed its response, urging the Court to conclude that an LMSA was required.
The Court begins by providing a succinct recitation of the MSP Act. Then, the Court describes how MSA analysis has emerged as means to address the future medicals issue. After detailing what actually constitutes a settlement in Florida, the Court turns to the question of whether the parties have an agreement to settle the claim.
The Court concludes that the parties agreed on four out of five essential terms. The term the parties could not agree upon was the LMSA issue, and asked the Court to fill in the blank on their behalf. The Court declined the opportunity to do so.
The Court distinguished this fact pattern from two others which appear routinely in other opinions addressing LMSA issues: 1) cases where the parties have a settlement agreement and agree that an LMSA is required, but cannot obtain review and approval of the LMSA from the Centers for Medicare & Medicaid Services (“CMS”); and 2) cases where the parties have a settlement agreement but disagree as to whether those terms included the creation of an MSA. Here, the parties did not ask the Court to enforce a settlement agreement; they asked the Court to assist with a critical term of a potential settlement agreement. While the Court noted the “conscientious and diligent” efforts of counsel to uncover the issue, it was not within the Court’s dominion to gap fill with respect to this essential term of the potential settlement agreement.
This case is another example of the LMSA issue derailing what is (otherwise) a perfectly acceptable settlement agreement. These issues should become much less obtrusive after CMS issues final guidance about liability settlements and future medical expenses under the MSP Act. That guidance is expected to be released later this year. Until then, the best approach is to proactively address the issue, and evidence exactly how you have arrived at your conclusion on the future medicals issue. That approach, coupled with the Court’s conclusion in Guidry v. Chevron, highlights the importance of utilizing a formalized approach to MSP compliance. When addressing future medicals issues under the MSP Act, a formalized approach will yield complaint results every time.
Having a formalized settlement process that integrates these core concepts will achieve efficiencies and enhance the effectiveness of settlement programs while ensuring closure on the file. Such a formalized settlement process should take into account the timing and coordination issues which may hinder successful LMSA analysis. Thus, screening a case up front to verify entitlement and identifying a claimant as an MSA candidate early on is the proper launching point for any LMSA analysis. As parties move towards resolution and identify the prospective gross award, they can then determine (consistent with CMS’s basic rules issued in the workers’ compensation settling) if a future medical allocation exists within the gross award, either in the form of a specific carve out or implicitly contained within the one undifferentiated lump sum.
The DRI MSP Task Force continues to track relevant judicial opinions and guidance from CMS in order to ensure compliance for you and your clients. We continue to stress the importance of utilizing a formalized approach in addressing the LMSA issue on every single claim, as that process will, in and of itself, ensuring compliance on the LMSA issue.
 Early v. Carnival Corporation, No. 12-20478-CIV-Goodman (S.D. Fla. February 7, 2013).
 42 U.S.C. §1395y(b)(2).
 The Court cites to a recent article published by the American Bar Association which was co-authored by John V. Cattie, Jr., DRI MSP Task Force Vice Chair. See also Medicare Set-Aside Arrangements Under the Medicare Secondary Payer Act, 42 The Brief, n. 10, Fall 2012.
 Guidry, et al. v. Chevron USA, Inc., Civ. No. 6:10-cv-00868, 2011 U.S. Dist. LEXIS 148942 (W.D. La. December 28, 2011).