The question of whether a Medicare Set Aside (MSA) is required in a Jones Act and/or personal injury case continues to be without a definitive answer. However, in Sippler v. Trans Am Trucking, Inc., 10-CV-03550, the United States District Court for the District of New Jersey ruled in an unpublished opinion that a MSA is not necessary in a personal injury matter.

To recap: the Medicare Secondary Payer Statute (MSP) assigns primary responsibility for medical bills of Medicare recipients to private health plans when a Medicare recipient is also covered by private insurance. These private plans are therefore considered primary under the MSP. Medicare acts as the secondary payer responsible only for paying amounts not covered by the primary plan. The MSP bars Medicare payments where a payment has already been made or can reasonably be expected to be made by a primary plan. (1)

Medicare payments are subject to reimbursement to the appropriate Medicare Trust Fund once the U.S. government receives notice that a third party payment has been or could be made with respect to the same item or service. If an MSP reimbursement is not made, the MSP authorizes the government to bring an action against any entity which is required or responsible to make payment under primary plan and against any other entity that has received payment from that entity. Note that “any entity” includes the parties to a lawsuit and their legal counsel.

On September 29, 2011, the Centers for Medicare and Medicaid Services (CMMS) advised that all parties have significant responsibilities under the MSP to protect Medicare’s interest when resolving cases that include future medical expenses. A recommended method to protect Medicare’s interest is a set aside arrangement (MSA) that allocates a portion of the settlement for future medical expenses. The amount of the set aside is determined on a case by case basis.

This brings us to the Sippler matter. In Sippler the parties litigated the matter until they
agreed to a settlement. The settlement terms specifically provided for a MSA as well as other provisions to protect the rights of Medicare. Ultimately, Sipler’s counsel refused to accept the provisions related to Medicare and argued that Medicare’s rights did not need to be protected. The District Court agreed.

Specifically, the District Court held that no federal law requires an MSA in personal injury settlements for future medical expenses. The District Court held that while MSA’s are prudent in settlements for future medical expenditures in the workers’ compensation context, they are not required outside that context. The District Court further commented that to require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements. Finally, the District Court dismissed the September 29, 2011 advices of the CMMS described above by pointing out that “interpretation such as those in opinion letters, like interpretations containing policy statements, agency manuals, and enforcement guidelines lack the force of law.” Christensen v. Harris County, 529 U.S. 576, 587 (2000).

(1) A primary plan is defined by the MSP as a workman’s compensation law or plan, an automobile or insurance liability.