Proposed Rule on Liability MSAs – Delayed, Delayed, Withdrawn

When Shakespeare wrote Much Ado About Nothing, it could very well have been about the often debated and still unresolved issues surrounding liability settlements involving Medicare beneficiaries.  

For over a decade the government has been telling us that guidance was forthcoming regarding what to do with liability settlements involving Medicare beneficiaries.  Guidance has been repeatedly delayed, with the last update giving a due date of June of 2022. It was only this week that the notice was changed to reflect a withdrawal of the proposed rule (making it the second time the proposed rule was formally withdrawn).  The official notice of withdrawal can be found here. 

The Medicare Secondary Payer statute and its potential application to liability settlements is an ongoing concern regarding future medical expenses. The statute, found at 42 U.S.C. §1395y(b)(2)(A) states:  

Payment under this subchapter may not be made… with respect to any item or service to the extent that…(ii) payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self‐insured plan) or under no fault insurance.  

Many commentators also point to the May 25, 2011, letter from CMS Region VI as indication that CMS expects some level of compliance from parties to a liability settlement. The letter stated that “the law requires that the Medicare Trust Funds be protected from payment for future services, whether it is a Workers’ Compensation or liability case. There is no distinction in the law.”  

Medicare compliance brings a high degree of apprehension to many parties, as failure to comply with the Medicare Secondary Payer statute can bring substantial penalties. In order to recoup payments, Medicare can sue the employer, insurance carrier, injured party, and their attorney. Essentially, any party that pays or receives payments is fair game.  If litigated, Medicare is entitled to collect double damages. 

What challenges defendants and plaintiffs alike is how to demonstrate compliance to show that the burden of payment has not been shifted from the primary payer (the liability settlement) to the secondary payer (Medicare) in violation of the statute. Unlike workers’ compensation, which benefits from having CMS memoranda covering Medicare Set Asides as a method of demonstrating compliance, there has never been any guidance, formal or informal, as to how to do so on a liability case.  

A good analysis of this can be found in the case of Aranki v. Burwell1, a medical malpractice settlement wherein the court rejected an attempt to mandate a Medicare Set Aside on a liability settlement, stating that it would not do so since no law or regulation required a Medicare Set Aside as part of an injury settlement.  

While some commentators are already writing articles on what the withdrawal of the proposed notice may mean, I believe it means… absolutely nothing. CMS has been publishing notices and rolling the due date out since 2012. Unless and until such time as formal guidance is issued, parties to liability settlements involving Medicare beneficiaries should continue doing what they have done for the last decade. That means evaluating each case on its own merits and determine how best to comply with the Medicare Secondary Payer statute. 

Disclaimer:  The opinions expressed in this article are solely those of the author and do not reflect the opinions of Arcadia Settlements Group, its parent company or its affiliates.  The opinions expressed herein are based on information publicly available but should not relied upon or construed as legal advice.