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Medicare Set Asides Not Required in Personal Injury Cases, Holds NJ Court

A recent case from the Federal District Court of New Jersey is instructive for Medicare-eligible California residents who are considering a settlement in a personal injury case.

The New Jersey case arose after a truck driver, who worked for Trans Am Trucking, crashed into a bus in March 2006. Sipler was a passenger on the bus and sued Trans Am Trucking.

Shortly before the scheduled trial date, the parties verbally agreed to settle the case, with the trucking company agreeing to pay Sipler $225,000. In return, Sipler agreed to release the company from any other potential claims from the 2006 collision.

Thereafter, the attorneys representing the trucking company sent a proposed release of claims to Sipler. Although no other terms had been agreed upon in the earlier settlement discussion, the release included additional provisions, including:

  • A confidentiality clause
  • A clause prohibiting Sipler from claiming "reimbursement from Medicare for injuries arising" from the accident
  • A statement indicating "Medicare will not pay for any future treatment for injuries arising out of the accident"

Consequently, Sipler refused to sign the release and filed a motion with the court to enforce the original settlement agreement.

In this particular case, Sipler was eligible for Medicare, but none of his medical expenses had been paid by Medicare, as they were covered by an auto insurance policy and a group health insurance plan.

Therefore, the court considered whether, under the Medicare Secondary Payer statute, the settlement agreement was required to contain provisions indicating he would not seek payments from Medicare and that he would set aside part of the settlement to use "for future medical expenses arising out of the accident," referred to as a Medicare set aside.

The Medicare Secondary Payer statute provides that when a Medicare-eligible individual has private insurance that has paid or will pay for specific medical expenses, Medicare will not contribute to those expenses.

The court noted that Medicare set-aside agreements were not mandated by federal law in personal injury settlements. Such agreements are common in workers' compensation settlements; however, the court observed the circumstances of a personal injury settlement are distinguishable. Payments in workers' compensation cases are frequently capped by a statutory maximum, whereas personal injury cases can include noneconomic damages and "are not determined by an established formula."

As a result, the court reasoned, "to require personal injury settlements to specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements."

The court held, "the parties in this case need not include language in the settlement documents noting Mr. Sipler's obligations to Medicare or fashion a Medicare set-aside for future medical expenses." In other words, Sipler was not required to agree to the Medicare provisions added to the settlement by the trucking company. The court enforced the settlement as originally agreed upon by the parties.

Source: Sipler v. Trans Am Trucking, Inc., et al, No.10-3550(DRD)(DN.J. July 24, 2012 DeBevoise, S.J.)

Our firm handles situations similar to the one described in this post. If you would like to learn more about our practice, please visit our Los Angeles truck accident page.

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