Frank v. Gateway Insurance Co et al

Filing 42

FINDINGS OF FACT AND CONCLUSIONS OF LAW, AND ORDER : IT IS ORDERED that to the extent that Frank receives confirmation from Medicare of any conditional payments made by Medicare for services provided prior to the date of this order, Frank shall promp tly reimburse Medicare for such conditional payments. IT IS FURTHER ORDERED that Frank shall provide funding for $3,200.00 out of the settlement proceeds for payment of future medical items or services, which would otherwise be covered or reimbu rsable by Medicare, related to what was claimed and released in this lawsuit. IT IS FURTHER ORDERED that the fund for Franks future medical expenses shall be deposited into an interest-bearing account for the purpose of paying any future medical items or services that would otherwise be covered or reimbursable by Medicare that are related to what was claimed and released in this lawsuit. Signed by Magistrate Judge C Michael Hill on 3/13/2012. (crt,Kennedy, T)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
WARREN FRANK

*CIVIL NO. 6:11-0121

VERSUS

*JUDGE HAIK

GATEWAY INSURANCE COMPANY, *MAGISTRATE JUDGE HILL
ET AL
FINDINGS OF FACT, CONCLUSIONS OF LAW,
AND ORDER
Pending before this Court is the Determination of Need for, and Amount of
Medicare Set Aside for the purpose of complying with the Medicare Secondary
Payer Statute, 42 U.S.C. § 1395y(b)(2) and accompanying regulations [rec. doc.
36], which was filed by the plaintiff, Warren Frank (“Frank”), and defendants,
Terence Coleman, d/b/a Terence Coleman Trucking (“Coleman”) and Gateway
Insurance Company (“Gateway”) in conjunction with a settlement of all claims.
The parties consented to have the undersigned decide this motion, and Judge Haik
referred it to the undersigned to conduct all proceedings and enter judgment,
pursuant to 28 U.S.C. § 636. [rec. doc. 38].
Procedural Background
On December 7, 2011, the undersigned held a settlement conference in this
case, at which the parties agreed to a settlement of all claims, with the exception of
a possible future Medicare Set Aside. [rec. doc. 34]. On December 21, 2011, the

undersigned set a hearing on the Medicare Set Aside for January 24, 2012. [rec.
doc. 36]. A copy of the Order was sent to the United States of America through
the United States Attorney’s Office.
On December 19, 2011, Frank filed an Unopposed Voluntary Motion to
Dismiss defendant, Canal Insurance Company. [rec. doc. 35]. By Order entered
on December 28, 2011, Judge Haik dismissed Canal Insurance Company without
prejudice. [rec. doc. 37].
By letter dated January 20, 2012, from Assistant United States Attorney
Karen King, the Court was advised that the Government would not participate in
the hearing. Pertinent portions of the letter, a copy of which was entered into the
record as Court Exhibit 1, reads as follows:
CMS [The Centers for Medicare and Medicaid Services]
does not review or verify counsel’s determination of
whether or not there is a recovery for future medical
services or counsel’s determination of the amount to be
held to protect the Medicare Trust Fund except under
limited circumstances.
In this particular matter, CMS would neither participate or review the
parties’ determination of whether a set aside was needed or the
amount of the set-aside.

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On January 24, 2012, Judge Haik referred the Motion for Determination of
Need for, and the Amount of Medicare Set Aside to the undersigned for the
purpose of complying with the Medicare Secondary Payer Statute, 22 U.S.C.
§ 1395y(b)(2) and accompanying regulations. [rec. doc. 38].
At the hearing on January 24, 2012, the Court received into evidence
medical records, including a letter dated December 8, 2011, from Frank’s treating
physician, Dr. Louis C. Blanda, Jr. [Plaintiff’s Exhibit 1], and the Affidavit of Dr.
Blanda summarizing plaintiff’s treatment [Plaintiff’s Exhibit 3]. The Court also
received a letter from CMS and report with Payment Summary Form dated
January 4, 2012. [Defendant’s Exhibit 1]. Further, the Court received the
Affidavit of Robert Launey, PD, the pharmacist supplying medication to Frank,
summarizing the amount of his future medication costs. [Plaintiff’s Exhibit 2].
Subsequently, the Court issued an Order that plaintiff provide an affidavit
from Dr. Blanda explaining plaintiff’s projected future need for prescriptions, and
the duration of that need, for filing into the record. [rec. doc. 40]. On February
24, 2012, plaintiff provided an Affidavit from Dr. Louis Blanda dated February
16, 2012 with plaintiff’s projected future medical expenses. [rec. doc. 41].
Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010), is an allocation case in
which HHS sought to recover conditional payments it had made to or on behalf of
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a decedent out of settlement proceeds. The settlement proceeds were inadequate
to meet the value of the survivor’s claims and the full Medicare lien. A Florida
probate court determined the amount of the limited settlement proceeds to be
allocated to the medical expense recovery. There, as here, HHS was notified but
opted not to participate in the probate proceeding where the allocation was made.
Using principles of equity, the probate court reduced Medicare’s lien based
on the proportion of Medicare’s contribution to what the total settlement would
have been worth if adequate funds had been available. HHS challenged the
probate court’s allocation, citing language taken from the “Medicare Secondary
Payer Manual,” MSP Manual (CMS Pub. 100-05) Chapter 7, § 50.4.4. The district
court agreed with HHS. However, the court of appeals, in a de novo review,
reversed and held in pertinent part:
The Secretary declined to take any part in the litigation although at all
times her position was adverse to the interests of the surviving
children. The probate court made the allocation, finding that the
Secretary should recover the sum of $787.50. Yet, still, the Secretary,
citing no statutory authority, no regulatory authority, and no case law
authority, merely relied upon the language contained in one of its
many field manuals and declined to respect the decision of the
probate court.
In essence, the Secretary is asserting that its field manual is entitled to
deference under Chevron U.S.A. Inc. V. Natural Resources Defense Council
inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). The Supreme

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Court has stated that “agency interpretations contained in policy statements,
manuals, and enforcement guidelines are not entitled to the force of law.”

*

*

*

The Secretary’s position is unsupported by the statutory language of the
MSP and its attending regulations. The Secretary’s ipse dixit contained in
the field manual does not control the law.
*

*

*

There is a second reason that the Secretary’s position, as adopted by the
district court, is in error. Historically, there is a strong public interest in the
expeditious resolution of lawsuits through settlement. . . . Throughout
history, our law has encouraged settlements. . . The Secretary’s position
would have a chilling effect on settlement. The Secretary’s position compels
plaintiffs to force their tort claims to trial, burdening the court system. It is a
financial disincentive to accept otherwise reasonable settlement offers. It
would allow tortfeasors to escape responsibility.
Bradley v. Sibelius, 621 F.3d at 1338-1339 (citations omitted).
From the pleadings, the evidence and the stipulations of the parties, the
Court makes the following:
FINDINGS OF FACT
1.

Frank was injured in a workplace accident on June 24, 2010. At that time,

he was employed by Ranch Supply and was unloading merchandise off of a trailer
owned by Terence Coleman, d/b/a Terence Coleman Trucking (“Coleman”) and
insured by Gateway Insurance Company (“Gateway”). While Frank was standing

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on the trailer unloading the merchandise, he fell in a hole on the trailer, causing
him physical injuries.
2.

As a result of the accident, Frank underwent lumbar spinal surgery

performed by Dr. Blanda, an orthopaedic surgeon, on July 27, 2011. On
September 15, 2011, he was doing well. Dr. Blanda opined that Frank would
more than likely not need any further surgery. He stated that Frank’s future
treatment would consist of pain medications, anti-inflammatories, follow-up office
visits and approximately five to six more sets of x-rays to assess the healing of his
fusion.
3.

Frank filed suit on October 4, 2010, in the 13th Judicial District Court,

Parish of Evangeline, State of Louisiana, seeking to recover for the damages he
allegedly sustained as a result of the accident. Defendants, Gateway and Coleman,
removed the action to this Court on January 27, 2011, on the basis of diversity
jurisdiction under 28 U.S.C. § 1332. Liability and damages were contested by the
defendants. The claims against defendants were settled amicably after lengthy
negotiations. All of the issues in the matter were resolved, with the exception of
the future Medicare Set Aside. The terms of the Settlement Conference were
recorded by the Court on December 7, 2011. [rec. doc. 34].

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4.

Various medical information, primarily from Frank’s treating physicians,

were accumulated and a Payment Summary Form was prepared by the Medicare
Secondary Payer Recovery Contractor (“MSPRC”) for his past medical expenses.
[Defendant’s Exhibit 1]. The sum of these total charges was $27,135.50, and total
conditional charges were $4,352.67.
5.

In his Affidavit, Robert Launey, PD, the pharmacist supplying medication

to Frank, determined that Frank’s future potential medication expenses that would
be covered by Medicare and are related to the injuries claimed in this lawsuit
amount to between $700.00 and $1,000.00 for five to six more monthly
medication regimes. [Plaintiff’s Exhibit 2]. In his Affidavit, Dr. Blanda
determined that Frank’s future potential medical expenses for five to six more
office visits at $92.00 to $186.00 per visit, in addition to five to six more sets of xrays, totaled approximately $2,200.00. [Plaintiff’s Exhibit 3].
6.

CMS does not currently require or approve Medicare Set Asides when

personal injury lawsuits are settled. CMS does not currently have a policy or
procedure in effect for reviewing or providing an opinion regarding the adequacy
of the future medical aspect of a liability settlement or recovery of future medical
expenses incurred in liability cases.

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7.

In accordance with the Court’s Order, Dr. Blanda submitted an Affidavit as

to future medical expenses. [rec. doc. 41]. The Court finds the estimate of future
medical costs to be both reasonable and reliable.
8.

Based upon the medical records of Dr. Blanda (Plaintiff’s Exhibit 3), the

Court finds that Frank continues to have symptoms from his back condition which
were caused by the subject accident. Therefore, the cost of future treatment for
those symptoms, which is estimated by Dr. Blanda to be $2,200.00, shall be
included in the amount set aside.
9.

Based on the records from Pharmacist Robert Launey, the Court finds that

Frank will continue to need medications during his treatment by Dr. Blanda.
Therefore, the cost for future medications, which is estimated by Robert Launey to
be $1,000.00, shall be included in the amount set aside.
10.

Therefore, based on the information provided by Dr. Blanda and Mr.

Launey, and including future medical treatment and medications, Mr. Guidry can
anticipate $3,200.00 in future Medicare-covered items or services. The Court
finds that this amount adequately protects Medicare’s interests and should be
available to provide funding for future medical items or services related to what
was claimed and released in this lawsuit that would otherwise be covered or
reimbursable by Medicare.
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12.

Frank is aware of his obligation to reimburse Medicare for all conditional

payments made by Medicare for any medical expenses he incurred that were
related to the injuries claimed in this lawsuit. Although provided with notice of
the hearing, the United States opted not to participate and provided no notice of
any conditional payments for which it intended to seek reimbursement. Therefore,
the Court finds that there is no evidence of any conditional payments made by
Medicare before the time of the settlement, other than those recognized above.
13.

There is no evidence that Frank, his attorneys, any other party or any other

party’s representative, is attempting to maximize other aspects of the settlement to
Medicare’s detriment.
Based upon the foregoing findings of fact, the undersigned makes the
following:
CONCLUSIONS OF LAW
1.

Jurisdiction over the underlying litigation is based on diversity jurisdiction,

28 U.S.C. § 1332.
2.

Medicare may obtain secondary payer status under the MSPRC if payment

has been made, or can reasonably be expected to be made, under a workers’
compensation law of a state or under an automobile or liability insurance policy,
both of which are defined in the statute as a “primary plan.” 42 U.S.C.
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§ 1395y(b)(2)(A)(ii). A primary plan’s responsibility for payment can be
determined by judgment or settlement. 42 U.S.C. § 1395y(b)(2)(B)(ii), 42 C.F.R.
§ 411.22(b)(1-3).
3.

By virtue of the terms and obligations in the settlement of the parties’ claims

and the plaintiffs’ receipt of the settlement funds in conjunction therewith, Frank
will become an “entity who received payment from a primary plan,” and is
therefore responsible as a primary payer for future medical items or services that
would otherwise be covered by Medicare, which are related to what was claimed
and released in this lawsuit, in the amount of $3,200.00 To the extent there are
items or services incurred by Frank in the future that would otherwise be covered
or reimbursable by Medicare, that are related to what was claimed and released in
this lawsuit, Medicare shall not be billed for those items or services until the funds
received by Frank for that purpose through the settlement are exhausted.
4.

Frank is obligated to reimburse Medicare for all conditional payments made

by Medicare prior to the time of the settlement and for all medical expenses
submitted to Medicare prior to the date of this order, even if such conditional
payments are asserted by Medicare subsequent to the effective date of this order.
5.

The sum of $3,200.00, to be utilized by Frank out of the settlement proceeds

to pay for future medical items or services that would be otherwise covered by
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Medicare, reasonably and fairly takes Medicare’s interests into account in that the
figures are based on reasonably foreseeable medical needs (as opposed to the
standard of proof required by the substantive law that would be applicable if the
case were tried on the merits), based on the most recent information from the
treating physicians.
6.

Since CMS provides no other procedure by which to determine the

adequacy of protecting Medicare’s interests for future medical needs and/or
expenses in conjunction with the settlement of third-party claims, and since there
is a strong public interest in resolving lawsuits through settlement,1 the Court finds
that Medicare’s interests have been adequately protected in this settlement within
the meaning of the MSP.
Based upon the foregoing conclusions of law, the Court makes the
following orders:
IT IS ORDERED that to the extent that Frank receives confirmation from
Medicare of any conditional payments made by Medicare for services provided
prior to the date of this order, Frank shall promptly reimburse Medicare for such
conditional payments.

1

McDermott, Inc. v. AmClyde, 511 U.S. 202, 215 (1994).
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IT IS FURTHER ORDERED that Frank shall provide funding for
$3,200.00 out of the settlement proceeds for payment of future medical items or
services, which would otherwise be covered or reimbursable by Medicare, related
to what was claimed and released in this lawsuit.
IT IS FURTHER ORDERED that the fund for Frank’s future medical
expenses shall be deposited into an interest-bearing account for the purpose of
paying any future medical items or services that would otherwise be covered or
reimbursable by Medicare that are related to what was claimed and released in this
lawsuit.
Signed at Lafayette, Louisiana, March 13, 2012.

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