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A Federal District Court Approves Medicare Set-Aside

On July 28, 2011, the Federal District Court for the Western District of Louisiana in
Schexnayder v. Scottsdale Insurance Company, (2011 U.S. Dist. LEXIS 83687) approved a Medicare Set-Aside in a personal injury case brought in the District Court under its diversity jurisdiction.  The matter was settled and a Medicare Set-Aside specialist determined that the appropriate Medicare Set-Aside from the settlement was $239,253.84.  The matter was submitted to CMS who took no action, leaving the parties at a loss on how to obtain approval of the Medicare Set-Aside amount, which was a condition of the settlement.  The plaintiff and defendants made a joint application to the court for approval and the U.S. Magistrate ordered service to be made on the Secretary of Health and Human Services for an evidentiary hearing that was ordered to be conducted in order to determine approval or modification of the proposed set-aside amount.  Health and Human Services advised the court that it would not participate in the evidentiary hearing.  This left the court to take testimony and receive submissions based upon which Magistrate Judge Hanna made findings of fact that approved the set-aside amount. 

Obviously, the federal court can exercise its jurisdiction over the Department of Health and Human Services.  The parties to this litigation acted in the manner that has been advocated consistently, namely that the interests of Medicare be considered actively by both parties in a cooperative manner when reaching a settlement or, for that matter, paying a judgment.  Their cooperation allowed the federal court to exercise its jurisdiction over Health and Human Services and issue an order which, in all likelihood, will be binding upon the United States government, thereby relieving the parties of any further uncertainty with regard to Medicare issues.  This can only happen in the federal system, as state courts do not have jurisdiction over the United States government.  This may be yet one more reason to invoke the diversity jurisdiction of the court when appropriate so that these issues may be determined in a manner that satisfies the interests of all parties.  It is significant that CMS again declined to cooperate with the parties in reaching the Medicare Set-Aside amount and, it is further significant that the set-aside amount did not contain a reduction for procurement costs or attorney’s fees.  This appears to be in conformance with the regulations promulgated under the Medicare Secondary Payer Act.

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