Issue #4      February 28, 2005
 

CASE NOTE:  FLORIDA COURT OF APPEALS BLOCKS ATTEMPT TO AVOID PAYMENT OF MSP CLAIM FROM SETTLEMENT PROCEEDS

By John J. Campbell, Esq., CELA, MSCC

    In an opinion filed on February 23, 2005, the Florida District Court of Appeals struck down a ruling by the Miami-Dade County Circuit Court which permitted parties settling a third party liability (TPL) tort case to attempt to avoid repayment of a Medicare Secondary Payer (MSP) claim by having the settlement check paid to the plaintiff directly by the defendant instead of by the defendant's liability insurance carrier.  Pollo Operations, Inc. v. Tripp, Case No. 3D03-781 (Fl. App. 3d Dist. February 23, 2005). 

    The plaintiff, Edna Tripp, filed a "slip and fall" case against the defendant.  In mediation, the case settled for $55,000.  At the time, the parties were aware that approximately $37,000 of the plaintiff's injury related medical expenses had been paid by Medicare.  The settlement agreement, signed by the plaintiff, her attorney, the attorney for the defendant and a representative of the defendant's liability insurance carrier, Liberty Mutual Insurance Company ("Liberty Mutual"), contained the following provision:

[A]ll matters arising out of the above matter, including subrogation claims are hereby resolved as follows:

Plaintiff will execute appropriate releases and will satisfy all medical and related liens from the settlement funds.  Settlement includes any claim by the claimant for medical payments coverage.  Plaintiff will execute appropriate indemnity and hold harmless agreements consistent with protecting Defendant from any claim of medical lien.

    However, after the settlement agreement was signed, the plaintiff and her attorney came up with the idea that if the defendant, rather than the defendant's insurance carrier, wrote the settlement check for the full amount of $55,000 and delivered the check directly to the plaintiff, the parties could avoid having to repay Medicare.  This idea was apparently based on Thompson v. Goetzman, 315 F.3d 457 (5th Cir. 2002), aff'd en banc, 337 F.3d 489 (5th Cir. 2003), a case in which the United States Court of Appeals for the Fifth Circuit held that a payment by the defendant directly to the plaintiff did not constitute a "self-insurance plan" under the federal MSP statute, since the defendant did not have formal claims procedures in place similar to those used by an insurance company.  Thus, the defendant in Goetzman was held not to be a "third party payer" under the MSP statute and was permitted to completely avoid repayment of Medicare's considerable MSP claim in that case.

    The Florida District Court of Appeals reasoned that, since Pollo Operations, Inc. ("Pollo") had initially notified Liberty Mutual of Ms. Tripp's claim and Liberty Mutual participated in the mediation and settlement, Pollo could not be classified as either "uninsured" or "self-insured."  The Court went on to state that the trial court erred in not requiring the parties to stick to the original terms of the settlement contract; and by assisting the parties in disregarding Medicare's subrogation rights under the MSP statute.

    The Court noted Medicare's subrogation rights under the MSP statute and stated that "the MSP applies whenever a liability insurer pays a Medicare beneficiary based on a tortfeasor's legal liability."  The Court reasoned that "treating an obviously insured tortfeasor . . . as possibly uninsured or a self-insured tortfeasor and directing it to pay the Plaintiff directly in order to keep Medicare in the dark, is contrary to Federal law."  However, the Court also speculated in dicta that if Pollo had initially decided not to involve its insurance carrier at all, the parties' attempt to take advantage of the holding in Goetzman might have worked.

    The Court also devoted a great deal of its opinion to discussing how the lower court's "proposed restructuring" of the terms of the settlement agreement was "unjust."  The Court reasoned that the court-sanctioned avoidance of Medicare's claim would permit Ms. Tripp to enjoy a windfall.  Further, since the MSP statute would allow Medicare to obtain recovery of its claim from Pollo and Liberty Mutual, even after they have already paid out the entire settlement proceeds to Ms. Tripp, the trial court's order would leave Pollo and Liberty Mutual potentially exposed to duplicate liability to Medicare for repayment of its claim. 

    The Tripp case is somewhat disturbing, in that it completely omits any discussion or recognition of the amendments to the MSP statute contained in the Medicare Modernization Act of 2003 (MMA).  The MMA  effectively eviscerated Goetzman by clarifying that "[a]n entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part."  42 U.S.C. §1395y(2)(A)(ii).  The MMA also foreclosed future application of the Goetzman court's interpretation of the "120 day rule" as a bar to Medicare's right to reimbursement where a third party cannot be expected to pay "promptly."   42 U.S.C. §1395y(2)(B).

    Clearly, Congress intended to legislate Goetzman out of existence in passing the MMA's amendments to the MSP statute.  Brown v. Thompson, 374 F.3d 253 (4th Cir. 2004).  Through its lack of analysis of the effects of the MMA amendments on the holding in Goetzman, the Court arguably has opened the door for a parties to a future liability or worker's compensation case to attempt to rely on Goetzman and Tripp to avoid repaying Medicare by agreeing for the plaintiff not to notify its insurance carrier of the defendant's claim and for the plaintiff to pay any judgment or settlement directly to the defendant.  However, given the MMA's amendments to the federal MSP statute, it is doubtful such a strategy would succeed.    

    The Court did raise one last, very important issue to which worker's compensation and personal injury attorneys alike should pay careful attention.  The Court pointed out that "our Supreme Court suggests that the purposeful avoidance by an attorney of a pay off of a federal lien can expose counsel to potentially troublesome personal and ethical consequences." 

    The Court cited the case of The Florida Bar v. Sweeney, 730 So. 2d 1269 (Fla. 1998), in which an attorney was disciplined for not paying the plaintiff's outstanding hospital bill from settlement proceeds because of the attorney's belief that Medicaid would eventually pay.  In that case, the Florida Supreme Court held that such action constituted "an intended fraud on the State's Medicaid fund."  Sweeney, at 1272.  Thus, an attorney who participates in a plan as part of settlement to avoid repaying Medicare could similarly be treated as engaging in fraudulent conduct and risk possible suspension or disbarment. 

BIG NEWS!

The "National Alliance of Medicare Set-Aside Professionals" Launches the First Non-Profit Organization Dedicated to Serving the Medicare Set Aside Industry!

    On February 15, 2005, the National Alliance of Medicare Set-Aside Professionals (NAMSAP) announced its official launching.  NAMSAP is the first non-profit organization in the country dedicated to serving professionals in Medicare Set Aside practice.  For complete information about NAMSAP, visit their web site:   www.namsap.org

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