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Defendants do not Call the Shots When it Comes to Medicare

By Matthew T. Stone, Esquire

On July 24, 2012, Judge Dickinson R. Debovoise, sitting in the United States District Court for the District of New Jersey, upheld a settlement agreement between Paul Robb and Jeffrey Sipler who had been injured while sitting on a bus rear ended by Mr. Robb. The parties had agreed that in exchange for $225,000, plaintiff would release the defendant from any and all claims arising out of the collision. While the enforcement of a settlement agreement is not ground breaking, Judge Debovoise’s opinion confirms that Medicare provisions cannot be unilaterally incorporated into a settlement agreement under the guise of a legal mandate.

Following the agreement between the parties in Sipler v. Robb, defendants drafted and forwarded a proposed release for plaintiff’s signature. However, in addition to the agreed upon terms of the agreement, defendant’s proposed release added several new terms, including: 1) a prohibition on plaintiff seeking reimbursement from Medicare for his injuries; 2) a requirement that plaintiff “set-aside” a certain portion of the settlement proceeds to cover any future medical care. Apparently, these added terms were never discussed prior to the sending of the proposed release. Of course, plaintiff objected to the terms of the settlement and sought to enforce the agreement as originally discussed.

Defendant argued that he was bestowed with the authority to defend the rights of Medicare, and thus to ensure that the plaintiff did not recover a sum from settlement to be used for medical treatment, and then seek the same amount from Medicare. To be sure, the Medicare Secondary Payer statute requires Medicare to be reimbursed once the government receives notice that a third-party payment has been made for the same item or service, for example, a recovery in a civil lawsuit. Further, the statute authorizes the government to bring an action whenever reimbursement is not made. 42 U.S.C. §1395(y)(b)(2)(B). Indeed, the Court noted that independent of the suit before it, the plaintiff was not permitted under the Medicare statute to seek payments from Medicare for medical treatment to the extent they were already provided for in the settlement.

The Court, however, did not believe that an injured party’s obligations under the statute were synonymous with requiring all settlements in civil cases to reflect that obligation. Further, the settlement agreement between the parties was a binding contract which defendant was attempting to breach by refusing payment unless non-agreed upon conditions were met. Moreover, there was nothing in the “$250,000 for a release” that provided any guidance as to the purpose of that sum. That is, it was not apparent whether that amount was for the pain and suffering of the plaintiff or whether it was in fact meant to compensate plaintiff for his past and future medical expenses. In the case of the former, Medicare would not be implicated.

The take away is from this decision is two-fold. First, settlement agreements are not required to outline parties’ obligations under Medicare. And second, though hardly in need of a reminder, once a settlement agreement is reached, conditioning the provision of consideration on extra-contractual terms is a breach of that agreement subject to an enforcement proceeding.

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