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The Medicare Secondary Payor Act ("MSPA") defines the
federal government's rights to recover benefits it has paid in
the past or may reasonably be expected to pay in the future as a
result of injuries for which claimants are involved in litigation.
The MSPA provides the federal government with subrogation rights
for all amounts paid in the past and requires the plaintiff to
establish a Medicare Set Aside to protect Medicare from the payment
of future benefits. The MSPA includes stringent reporting
requirements for defendants involved in litigation with plaintiffs
who are, or may potentially be, Medicare recipients. The federal
government has a cause of action for double damages against the
attorney representing the plaintiff and the settling defendant for
violations of its requirements. This newly revised legislation is
wreaking havoc with many corporate defendants as they attempt to
navigate through the key provisions and requirements. As they do
so, corporate clients are looking to counsel for advice as to how
MSPA affects all stages of litigation-from conducting discovery to
determine whether a plaintiff is, or may potentially be, a Medicare
recipient, to drafting a Release that adequately protects the
client following settlement.
In the context of settlement, one concern is whether a defendant
is liable under the MSPA if a plaintiff fails to establish a
Medicare Set Aside for payment of future benefits. Unfortunately,
there are no clear guidelines dictating the need for a MSA in the
context of a liability claim. There is also no statute or
regulation specifying the circumstances under which a MSA is
required. Thus, a corporate client evaluating a potential
settlement is uncertain whether a MSA is required and, more
importantly, whether they are subject to liability in the event a
MSA is required, but the plaintiff fails to establish the set
aside. In most cases, this will be an impediment to reaching a
settlement since the defendant may be subject to a post-settlement
claim by the federal government to recover monies paid for the
plaintiff's future medical care.
Including hold harmless and indemnification language in the
Release was thought to be one potential solution for resolving the
potential risk for a settling defendant. The provisions would
specifically require plaintiff's counsel to hold
harmless and indemnify a defendant from third party claims arising
out of defendant's settlement payments to plaintiff, including
all potential claims by Medicare resulting from liability under the
MSPA. However, Florida Bar Staff Opinion 30310, issued on April 4,
2011, prohibits attorneys from agreeing to this type of provision
and deemed it unethical for an attorney to request the inclusion of
such provisions in a Release.
The basis for the Florida Bar's decision is Rule 4-1.8(e) of
the Rules Regulating The Florida Bar, which prohibits a lawyer from
providing financial assistance to a client, except in limited
circumstances. The Bar reasons that an agreement by counsel to hold
harmless and indemnify a defendant from third party claims is
tantamount to providing financial assistance to a client. Since
none of the exceptions apply, such activity is prohibited.
In addition to finding a plaintiff's attorney is barred from
entering into indemnification agreements on behalf of clients, the
Florida Bar opined that it is unethical for a defense attorney to
propose such a provision in a release. The Bar suggests that this
request could violate Rule 4-8.4(a), which provides that a lawyer
shall not "violate or attempt to violate the Rules of
Professional Conduct, knowingly assist or induce another to do
so, or do so through the acts of another."
For additional information regarding Medicare Set Asides in
general, and their application to liability litigation, please
refer to the following sites:
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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