The Importance of MSP terms during the settlement process

June 6, 2016 / 2 min read

Settlement language is an important aspect of Medicare Secondary Payer (MSP) claims that demands careful consideration. When settlements fail to address key MSP issues or neglect to reflect payer intentions, there can be trouble ahead.

The latest example is from a California case: Karpinski v. Smitty’s Bar, Inc., 2016 WL 1445338 (Cal. Ct. App., April 12, 2016). In Karpinkski, the insurer refused to pay the settlement until the plaintiff produced evidence that he had satisfied all lien obligations, including any Medicare conditional payment demand. Alternatively, the insurer was willing to release the funds if the plaintiff accepted a check with Medicare named as co-payee.

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The plaintiff, who had agreed to assume responsibility for any liens and hold harmless and indemnify the insurer as part of the settlement, moved to enforce the settlement agreement.

The court ruled for the plaintiff, deciding that the settlement did not specify that the plaintiff was obliged to agree to reimburse Medicare as a condition for the insurer to release settlement funds.

The court felt that if the insurer wanted to pay the settlement only after the plaintiff reimbursed Medicare, the insurer should have included that provision in the agreement. The court also noted that MSP does not require a plaintiff to reimburse Medicare before receiving settlement proceeds.

The California court also looked favorably upon a recent ruling from the Georgia Court of Appeals. That court held that public policy does not preclude a court from enforcing a settlement that does not include Medicare as a co-payee on the settlement check when a plaintiff agrees to reimburse Medicare and/or indemnify the released parties.

In Karpinski, the court enforced the settlement and ordered the insurer to make timely payment.

Practical Considerations

The court’s ruling in Karpinski underscores the importance of including settlement provisions that clearly delineate the parties’ obligations. Courts place significant weight on settlement terms and are reluctant to deviate from those stated outcomes and obligations.

There have been other recent decisions in which courts focused on the settlement terms, or lack thereof, when it came to Medicare. In Tomlinson v. Landers, 2009 WL 1117399 (M.D. Fla. 2009), the plaintiff objected to the insurer’s attempt to include Medicare on the settlement check. The court found that including Medicare as a co-payee represented an essential term of settlement never discussed by the parties. The court ruled an enforceable agreement had not been reached since there was “no meeting of the minds” on this critical settlement term. In Bruton v. Carnival Corporation, 2012 WL 1627729 (S.D. Fla. 2012), the court rejected the insurer’s inclusion of a Medicare Set-Aside provision as part of the settlement agreement when this was not discussed during settlement negotiations.

Karpinski and similar cases demonstrate the importance of discussing and agreeing to MSP terms during the settlement process. Then the parties should clearly incorporate those terms into the written settlement agreement. Insurers that fail to do so risk creating settlements that are unenforceable or enforced in an unintended manner.

Settlement language strikes again, new case proves clear provisions are critical

Practical Considerations