In personal injury settlements, defense attorneys and insurers are always concerned with whether the plaintiff is a Medicare beneficiary and, if so, the potential consequences they may face including the risk of a future recovery action by Medicare to recover conditional payments made on behalf of the plaintiff. Federal law aims to make Medicare only a “secondary payer” as to medical expenses for which some other entity (e.g., a tortfeasor) bears responsibility. See 42 U.S.C. § 1395y(b)(2). Medicare may pay a beneficiary’s medical expenses if the responsible entity might not pay the expenses “promptly,” Id. § 1395y(b)(2)(B)(i), and Medicare is authorized to seek reimbursement, interest and penalties for any payment it makes that was the responsibility of the primary payer (the liability insurance carrier).
Before resolving liability cases or drafting a settlement agreement, defense counsel and insurers will often request that the plaintiff produce a conditional payment letter or final demand letter from Medicare to show the reimbursement amount owed to Medicare for medical treatment related to the accident. An ongoing dispute exists with respect to whether letters from Medicare are required before a settlement can be completed, which has resulted in a number of Pennsylvania decisions on the issue. The most heavily cited opinion in this area is Zaleppa v. Seiwell, 9 A.3d 632 (Pa. Super. Ct. 2010), a decision by the Pennsylvania Superior Court, which held that federal law does not permit defendants to assert Medicare’s right to reimbursement as a preemptive means of guarding against their own risk of liability. Click here for a discussion of the Zaleppa decision. Since the issuance of the Zaleppa decision, a series of Pennsylvania trial court opinions have reinforced the proposition that a defendant’s potential liability for a plaintiff’s Medicare lien does not provide authority for a defendant (a private entity) to assert Medicare’s right to reimbursement.
In two recent Pennsylvania state court decisions, the courts relied on Zaleppa in granting the plaintiffs’ motions to enforce settlement where the defendants sought to resolve the plaintiffs’ Medicare lien issues before paying the settlement funds. See Vincent v. Buck, No. 2011-CV-456 (C.C.P. Cambria Apr. 4, 2011), and Dailey-Console v. Barnwell, (C.C.P. Monroe May 18, 2011). In both cases, the releases did not contain any language requiring the plaintiffs to provide documentation regarding the Medicare reimbursement amount.
In Wimberly v. Katruska, (C.C.P. Allegheny May 23, 2012), defendant refused to pay the settlement funds until the plaintiff provided a letter from Medicare demonstrating that she had no outstanding Medicare liens. Plaintiff filed a petition to enforce the settlement. In response, defendant argued that the insurer was entitled to withhold the settlement funds until receipt of a letter from Medicare because it was the only way to protect against potential “double payments.” The court rejected the defendant’s argument citing Zaleppa, and the court issued a rule to show cause why plaintiff’s settlement agreement should not be enforced. The court noted that the defendant had the burden of proving that the payment of the settlement funds was conditioned upon receipt of the letter from Medicare.
In Zinsky v. Erie Ins. Exchange, (C.C.P. Dauphin County. Sept. 11, 2012), after receiving the executed release from its insured with respect to an underinsured claim, the insurance carrier refused to issue a settlement check until the insured provided a conditional payment letter from Medicare. In response to the insured’s attorney filing a petition to enforce the settlement, the court ordered the insurer to pay the settlement funds along with interest, court costs and attorney’s fees.
It appears that Pennsylvania trial courts will continue to apply Zaleppa and compel defendants to timely pay settlement proceeds to Medicare beneficiaries even where the plaintiff has an outstanding Medicare lien. Defendants can decrease the risk of a future Medicare recovery action by including hold harmless provisions in the release where plaintiff and plaintiff’s counsel agree to hold defendants harmless from any cause of action, including an action by Medicare to recover Medicare benefits. Obviously, a risk exists that Medicare could pursue the plaintiff, plaintiff’s counsel or the defendant’s insurance carrier for any deficiency.