CHARLOTTE, NC -
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According to a recent Pennsylvania Superior Court case, Zaleppa v. Seiwell, the inclusion of Medicare on a settlement check is contrary to Pennsylvania (“PA”) common law and federal statutory law. The Court in Zaleppa reasoned that including Medicare on a draft stands in the way of satisfying a judgment. Additionally, the Court made clear that a private entity may not assert a reimbursement right on behalf of the United States (“U.S.”) government. This ruling provides considerable clarification and guidance pertaining to Medicare’s federal reimbursement rights.
Zaleppa v. Seiwell
In Zaleppa, Phyllis Zaleppa (“Zaleppa”) was injured by Kristen Seiwell (“Seiwell”) in an automobile accident while driving in Pennsylvania. Seiwell admitted liability and the case was tried on the issue of damages only. The jury returned a verdict of $15,000, which consisted of $5,000 for future medical expenses and $10,000 for past, present and future physical pain and suffering, mental anguish and distress, embarrassment and humiliation, and loss of the pleasures and enjoyment of life. The jury did not identify any past medicals in its verdict.
In post-trial motions, Seiwell averred that the Medicare Secondary Payer (“MSP”) Act requires all parties in litigation to protect Medicare’s interests when resolving claims involving conditional payments made by Medicare. Therefore, she requested that the Court order: 1) Medicare be included as payee on the draft, or 2) Payment be deposited into Court pending notification from Medicare that all Medicare reimbursement claims were satisfied. The Trial Court denied Seiwell’s request and judgment was entered in favor of Zaleppa. Seiwell appealed.
Seiwell (“Appellant”) raised two issues on appeal:
1) Did the Trial Court err in refusing to include and identify…Medicare as payee…on the draft that satisfies the verdict, or
2) Did the Trial Court err in refusing to order payment of the verdict into Court pending notification from Medicare to the Court that the Medicare lien is satisfied?
The Court bundled Appellant’s issues and addressed one legal question: whether the MSP Act either requires or allows a private entity to assert the rights of the U.S. government regarding potential claims for reimbursement of a Medicare lien.
Appellant argued that she and her insurer could be held liable under the MSP Act for failing to ensure Medicare’s interests were protected in the case. As support, Appellant asserted that she and her insurer were considered a “primary plan” under 42 U.S.C.A. §1395y(b)(2)(B)(ii) of the MSP Act. Therefore, Appellant insisted she was required by the MSP Act to ensure Medicare reimbursement claims were satisfied before paying the verdict award.
In analyzing the issue, the Court found that MSP Act regulations require that a recovery demand letter be issued by Medicare to the “primary plan” in order to trigger that party’s duty to reimburse the Medicare trust. Through its analysis, the Court found “nothing” in the MSP Act that authorizes a primary plan to assert Medicare’s reimbursement right on behalf of Medicare. The Court therefore declared that the MSP Act does not require or allow a private entity, such as Appellant or Appellant’s insurer, to assert the rights of the United States government. Rather, only the U.S. government is authorized to pursue its own right to reimbursement. Furthermore, the Court held that to allow such a practice would interfere with Appellee’s (Zaleppa’s) right to collection of her award.
Practical Effects of Zaleppa:
Zaleppa clarifies that private parties may not assert the interests of the U.S. government in a post-trial motion or any phase of litigation. The practical effect of the ruling is that putting Medicare’s name on the check is not an automatic pass through the administrative process established by Medicare to identify secondary payer situations and ensure proper reimbursement to the Medicare trust fund. Check endorsement to Medicare is not authorized under federal law, and is not an efficient way to settle personal injury lawsuits. At the same time, in an effort to protect its interests, insurers and other responsible paying parties may consider other alternatives to ensure reimbursement occurs.
The good news from Zaleppa is that the current Medicare compliance solution still works very well. Where Medicare beneficiaries and their counsel implement a formalized process to verify and resolve Medicare’s reimbursement rights prior to completing settlement negotiations, and satisfy those reimbursement rights thereafter, insurers and their counsel and other parties who accept responsibility (if not liability) for making payments (through settlement, judgment or otherwise) need not put Medicare’s name on the check. Further, given Medicare reporting under Section 111 of the MMSEA (which becomes mandatory for liability settlements or judgments occurring on or after October 1, 2011), the settling parties must find a way to cooperate to resolve how Medicare compliance will be handled, and who will be handling what aspects of such compliance. Simply put, now more than ever parties settling cases involving Medicare beneficiaries need to know what roles to play, and who will be doing what to ensure that Medicare’s reimbursement rights are properly identified, resolved, and satisfied. And, the most effective tool to accomplishing this task is to start early. In sum, parties must work together so the process does not fall apart.
Garretson Resolution Group:
The Garretson Resolution Group (www.garretsongroup.com) will continue to closely monitor how this decision and others like it impact tort settlements and lien resolution. We will also investigate and report on any similar developments involving the Medicare Secondary Payer statute.
For further details regarding how the Garretson Resolution Group can assist with the resolution of healthcare reimbursement claims in liens in single event and mass tort settlements please contact Tate Johnson (tgjohnson@garretsonfirm.com, 513.794.0400 or 888.556.7526.) We would be honored to assist any parties determine their Medicare compliance obligations.
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