In a recent order by the United States District Court for the Eastern District of Arkansas, the court approved the parties’ Liability Medicare Set Aside (“LMSA”) amount to cover the plaintiff’s future medical treatment for accident-related injuries that would otherwise be covered by Medicare.  The plaintiff had sued seeking damages associated with a permanent and disabling injury to his right hand while working as a truck driver aboard a floating barge.  The parties reached a settlement agreement where plaintiff agreed to compromise and discharge all claims against defendant in the liability suit and all claims under the Longshore and Harbor Workers’ Compensation Act, 33 U.S.C. § 901 et seq., against the employer and workers’ compensation carrier in exchange for a total payment of $1,000,000.00. 

The plaintiff was a current recipient of Social Security Disability benefits, and therefore, he was Medicare eligible.  To protect Medicare’s interest in the settlement, the parties agreed to establish an LMSA and retained the Garretson Resolution Group to determine an LMSA amount to cover the future cost of plaintiff’s accident-related medical treatment.  The proposed LMSA was submitted to CMS for approval, but CMS refused to review it due to “workload issues.”  Instead, the parties filed a motion with the court to review and approve the proposed LMSA.  The court approved the proposed LMSA finding that the parties had reasonably considered and protected Medicare’s interest in the settlement and that the LMSA amount fairly and reasonably took Medicare’s interest into account. 

It seems likely that CMS will refuse to review the majority of LMSA’s submitted for third-party liability settlements.  By having a court review and approve a proposed LMSA, parties can obtain some assurance that the amount set aside is sufficient and meet their good faith obligations.

Date of Decision: August 9, 2011
Smith v. Marine Terminals of Arkansas et al., No. 3:09-CV-00027 (E.D. Ark. Aug. 9, 2011).