Question: My client was in involved in a two vehicle accident in New York. Under state law, the first $50,000 of his past and future medical expenses combined with his lost wages can only be collected from his insurance company through no-fault benefits (as opposed to/from the tortfeasor - here, the other vehicle). If my client's case settles against the other vehicle for less than $50,000 and the combined amount of the settlement and the amount of no-fault benefits is less than $50,000, is that proof enough that the settlement did not include any allocation for future medical expenses (since the past and future medical costs in such a situation would necessarily have been paid by the no-fault carrier) so that I don't have to consider Medicare’s future interests?
Answer: Your question drives at the heart of the Medicare Secondary Payer (“MSP”) Act [42 U.S.C. §1395y(b)(2)] and its supporting regulations [42 C.F.R. §411 et seq.] We know that the MSP Act applies to workers’ compensation, automobile, liability, and no-fault claims and provides Medicare with a priority right of recovery when it has made “conditional payments.” We also know, based on regulations enacted by Medicare in the workers’ compensation context, that Medicare also has a right to NOT pay certain future medical expenses when the plaintiff has received compensation for future medical expenses in the form of a settlement/judgment/award (assuming other criteria are also met). Also, we know that, as of today, Medicare has not yet promulgated final rules and regulations addressing the issue of future medicals and liability settlements under the MSP Act, though we expect guidance to be coming later this year. With this foundation, let’s look to the specifics of your question.
Your question essentially asks when you have to take Medicare’s future interest into consideration. We can look at the proposed general rule (the “Rule”) from Medicare’s advanced notice of proposed rulemaking (the “ANPRM”) for guidance there.
The Rule states: “If an individual or Medicare beneficiary obtains a “settlement” and has received, reasonably anticipates receiving, or should have reasonably anticipated receiving Medicare covered and otherwise reimbursable items and services after the date of “settlement,” he or she is required to satisfy Medicare’s interest with respect to “future medicals” related to his or her “settlement” using any one of the following options.”
More simply, here is an equation you follow to determine when action is required:
“settlement” + future medicals pled/released = required action
Therefore, whenever you have a case that meets that simple equation, you would need to take Medicare’s future interest into account.
However, taking Medicare’s future interest into account does not always mean fully funding an MSA. In fact, Medicare has provided seven proposed courses of action a plaintiff could take to satisfy this issue, per the ANPRM.
Medicare’s right of recovery for your client’s medicals (both past and future) is limited to the gross settlement amount. So long as other coverage is in place and available to pay future medicals on your client’s behalf, up to the full amount of the gross settlement, and Medicare is not asked to pay for those future medicals by your client, then you would be able to say that an MSA is not needed.
Here, I would say that you need to take Medicare’s future interest into account since your fact pattern meets the simple equation of the Rule. However, due to the fact that you have $50,000 of no-fault coverage which would pay any medicals first until exhausted and the gross settlement is less than $50,000, then an MSA would not be needed here as the no-fault coverage would pay any injury-related medical bill up to the full amount of the gross settlement. You should be sure to document your file in the unlikely event that any questions arise at a later date.
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