New Jersey Court Determines Adequacy of Liability Medicare Set-aside

In DuHamell v. Renal Care Group East, Inc., et al. and Catherine Ney v. Renal Care Group East, Inc., et al., 2012 N.J. Super. LEXIS 201 (decided December 7, 2012, and released for publication May 16, 2013), plaintiffs DuHamell and Ney mediated their liability claims with the defendants.  During the mediation, the parties agreed to settle all claims pending a liability Medicare Set-aside determination by CMS.  Upon submission of the settlement terms to CMS, however, CMS informed the parties that it did not have the resources to review the proposed liability Medicare Set-asides.  CMS added that its letter declining the opportunity to review the matter was not a safe harbor (or a release) from the parties' obligations to protect Medicare. 

 

Given the response from CMS to their proposal, and because the settlement agreement provided that a CMS determination would be obtained before the settlement could be finalized, the plaintiffs believed they were unable to settle their claims.  With no recourse other than taking the claims to trial, the plaintiffs turned to the court and requested (1) confirmation that the proposed Medicare Set-asides appropriately protected Medicare's interests and (2) an enforcement of the settlement agreement.

 

While most of the settlement terms were kept confidential, the record does reveal that Ney proposed an MSA of $13,689.25 and DuHamell proposed an MSA of $114,246.00.  The court agreed to review the adequacy of the proposed MSAs in the interests of fairness and public policy.  The court opined that, "to require plaintiffs to force their case to trial when they have reached an amicable resolution outside of court runs contrary to New Jersey's strong public interests in encouraging settlements." Id. at *8.  After reviewing the plaintiffs' expert reports regarding the proposed set-aside amounts, the court found that Medicare's interests were appropriately protected and that the figures were both reasonable and reliable.  Thus, the plaintiffs' unopposed motion to enforce the settlement agreement was granted.

 

DuHamell joins the growing number of cases in which liability plaintiffs and defendants are turning to the courts to resolve the issue of whether a designated sum of money is sufficient to protect Medicare's potential future interests.  It should be noted that liability MSAs are not required.  If a Medicare beneficiary settles a claim and money is being paid, even in part, because of the future medical expenses that will be incurred, however, Medicare's future interest in settlement proceeds should be considered in some manner.  In an increasing number of cases, one or both parties are insisting on "approval" of designated Medicare Set-aside amounts from some type of governing authority.  Even though Medicare is not bound by state court judgments, with no established method for CMS review and approval of liability settlements and an inconsistency between Regional Offices as to whether review will be granted, parties are left with little alternative but to turn to the state courts for assistance.