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HOW MUCH MUST BE SET ASIDE FOR MEDICARE IN A THIRD PARTY LIABILITY CASE?

by Thomas D. Begley, Jr., CELA

Once a Medicare Set-Aside Arrangement (“MSA”) has been considered, the next question is how much is necessary to fund it. If future medicals have been plead or claimed and future medicals are specifically released in a Release signed in connection with the third party liability (“TPL”) settlement, then it is likely that Medicare’s interests must be considered. That raises the question as to how to calculate the amount of the settlement intended for future medical care. It is unlikely that the Centers for Medicare and Medicaid Services (“CMS”) would accept a figure agreed upon by the parties absent court testimony and a court finding.

It is important to remember that in a TPL case, the award seldom pays 100 cents on the dollar for future medicals. Issues in these cases, such as disputed liability or causation, policy limits, statutory caps and derivative claims, often mean that TPL cases are resolved for less than the full measure of damages sustained. The Garretson Resolution Group recommends a starting point for a maximum amount may be identified through review of a plaintiff’s life care plan and other evidence of the dollar assigned to particular damages other than future medicals. These would include procurement costs, liens, pain and suffering, loss of future earning capacity, etc. Garretson outlines a four-step process:

  1. Were future medicals plead or released as part of the settlement, judgment or award?
  1. Does the plaintiff require future injury-related care?
  1. Does the settlement award “compensate” plaintiff for future medicals based on objective decisional future medical allocation methodology?
  1. How much did the settlement award compensate based on objective decisional future medical allocation methodology?

By analyzing the settlement to figure out how much would be appropriate for future medicals and then determining the ratio of the plaintiff’s net proceeds to the total damages, a percentage for future medicals can be determined. This is the amount “compensated” for future medicals within the settlement or award. This would only be the amount necessary to set aside to satisfy CMS.

This approach is different from the traditional approach. The traditional approach to funding an MSA is to determine what the future medical costs to be paid by Medicare would be and set that money aside without regard to whether the plaintiff actually recovered that amount for future medicals. Under the Garretson approach, the only amount to be set aside would be the actual funds recovered by the plaintiff, which could be considerably less than the total future medicals.

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