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By Bill Altreuter

In court the other day to update the judge on the status of a settlement. The hang-up is getting the proposed Medicare Set-aside agreement approved. This is a pretty new thing in personal injury work, although in the Comp realm they've been dealing with it for nearly ten years. If a plaintiff is Medicare-eligible, or about to be (in other words, old, about to be old, or on SSI Disability), a fund to provide for medical expenses going forward has to be set up so that Medicare isn't on the hook for expenses that ought to be paid by some other responsible party, like Comp, or a tortfeasor. (Actually, it's not all that clear that the MSA thing applies to tortfeasors, but it looks like it will soon.)

It is a complicated and time consuming process, and not many people are proficient at it yet, although it has been going on in Comp long enough for there to be consultants who can handle most of it. The proposed MSA has to reflect the projected costs, and justify why some costs are included and others not, and then the Centers for Medicare and Medicaid Services (CMS) have to okay the plan. Typically the insurance company that is settling the claim buys some sort of annuity, but funds can be paid into a dedicated account and self-administered by the claimant.

There are a lot of questions about this set-up, and not a lot of answers. If, for example, someone doesn't spend all of the allotted money in a given year does it roll over into the next? (Probably yes, but why?) If CMS does not approve a proposed plan is there a review process? This is a big issue, since the process effectively gives somebody in Medicare approval authority over a settlement agreement that the parties themselves don't even have.

As soon as I learned about this new wrinkle my first thought was that it could screw up a lot of otherwise good settlements because the time it takes to get approval is cooling off time for the plaintiff. It also seems to me that it will effectively drive up the cost of settlements, since a fairly strict accounting of expenses which had previously been spitballed is now required in more cases. In situations where a life-care plan was called for we've seen this sort of thing for some time, but now we're having to do it in cases that resolve in the low-to-mid six figures.

This work has never been as easy as it looks, and the MSA thing is making it even harder. That means more expensive, and more expensive means that practitioners have to be more risk-adverse, and that means, I think, that there are a lot of people who may have legitimate claims that aren't going to be worth taking. That bothers me.

Full post as published by Outside Counsel on January 13, 2010 (boomark / email).