Defense Digest

Florida Court Sheds Light On Keeping Medicare In The Dark

It is no secret that maximizing a client's recovery, or share of a recovery, is one goal that a plaintiff's attorney generally strives to accomplish. Therefore, it should come as no surprise that limiting the amount of a recovery that is disbursed to a lien holder is also on a plaintiff's agenda. Recently, Florida's Third District Court of Appeal examined a plaintiff's attempt to avoid paying a Medicare lien out of settlement proceeds and determined that, if a plaintiff did not satisfy the lien, the third party payer must reimburse Medicare, even though it has reimbursed the beneficiary or other party. See Pollo Operations, Inc. v. Tripp, 30 Fla. L. Weekly D 543 (3^rd DCA 2005).

The Pollo Operations case involved a typical slip and fall. The plaintiff, Edna Tripp, had incurred $37,000 worth of medicals bills as a result of her injuries. All of her medical bills were paid by Medicare. After settlement had been reached, counsel for plaintiff requested that Pollo, the defendant, write the settlement check directly to the plaintiff because plaintiff's counsel felt that Medicare would be prevented from seeking reimbursement for the lien if the proceeds were distributed in that manner. Despite the fact that the settlement agreement included language that the plaintiff would satisfy all remaining medical liens, the lower court ordered Pollo to deliver a check made out solely to the plaintiff.

Upon examining the issue, the Third District concluded that the trial court had ignored the fact that Liberty Mutual, Pollo's insurer, would be writing a check to cover the settlement proceeds. More importantly, the Third District found that the lower court's decision exposed Liberty Mutual to potential additional liability. After analyzing the Amendments to the Medicare Secondary Payer Statute (MSP), the Third District concluded that, if a recipient of a third party payment fails to pay Medicare within 60 days, as required by 42 CFR § 411.24 (h), then the third party, in this case Liberty Mutual, must reimburse Medicare, even though it has previously reimbursed the beneficiary or other party. See also 42 USC § 1395y.

The court, citing Health Insurance Assoc. of America v. Shalala, 23 F. 3d 412, 418 (D.C. Cir 1994), further determined that a release would not bar Medicare's right of recovery from Pollo and Liberty Mutual, as long as the release was obtained "with knowledge, actual or constructive," of the fact Medicare already paid for the plaintiff's losses. Therefore, based on Health Insurance Assoc. of America, the Third District concluded the trial court's directive would place Liberty Mutual in the position of trying to enforce the settlement agreement's indemnity clause should the plaintiff not use the proceeds to pay Medicare. The court further noted that, in most cases, the normal plaintiff likely would have spent the settlement proceeds prior to any successful enforcement of an indemnity clause, and as such, the trial court's directive was not only contrary to federal law but was unjust.

It is important to note that Florida Statute § 768.76 excludes Medicare benefits from being considered a collateral source. In this regard, the court noted that, had Ms. Tripp taken this case to verdict, the lower court could not have reduced her jury award by the amount paid by Medicare; however, her judgment would, nevertheless, have been subject to the Medicare lien. Furthermore, the court, citing Smith v. Travelers Indem. Co., 763 F. Supp. 554, 558 (M.D. Fla. 1989), noted that Florida's collateral source rule, which is aimed at avoiding a double recovery by plaintiffs, is pre-empted by the federal Medicare statute and any judgment a plaintiff receives would be subject to a lien.

While the court in this case set out to consider the appropriateness of the trial court's directive, the ruling was a clear message to insurers. When an insurer is aware of the fact that Medicare is due reimbursement, payment made directly to a plaintiff may subject the insurer to additional liability.

*Chris is an associate in our Orlando, FL office. He can be reached at (407) 246-0241 or cjahnke@mdwcg.com.