“We must take Medicare’s interests into consideration …” This is a constant refrain uttered by settling parties and parties dealing with the payment of jury verdicts. There is ongoing confusion as to what Medicare’s interests are and when they need to be taken into consideration with respect to the Medicare Secondary Payer Act (MSPA).

The Superior Court of Pennsylvania’s decision in Zaleppa v. Seiwell, 2010 PA Super. 208, 9 A.3d 632 (2010), has weighed in on this critical topic. The plaintiff was injured in a motor vehicle accident, filed suit against the tortfeasor and secured a $15,000 verdict comprising future medical expenses and non-economic injuries. The defendant filed a post-trial motion requesting that the trial court either permit the defendant to add Medicare as a payee on the draft for the $15,000; or, alternatively, permit the defendant to pay the funds into the court until Medicare confirmed that there was no lien, or that the lien (if one existed) had been satisfied. The trial court denied the motion.

On appeal, the Superior Court acknowledged that under the MSPA, if a Medicare lien existed, the plaintiff, plaintiff’s counsel, defense counsel, and the insurer each had an obligation to reimburse Medicare. The Superior Court, though, noted that the obligation to reimburse Medicare was only triggered by receipt of a “recovery demand letter” issued by Medicare. The defendant had not received a Medicare recovery demand letter. Therefore, it had no obligation to take Medicare’s interests into consideration.

The Superior Court noted Medicare has a right to reimbursement immediately upon making payment. It alone has the right to enforce that right to repayment, which is separate and distinct from obligation to repay. The Superior Court viewed the defendant’s requests—to pay the funds into the court subject to confirmation of no lien and an alternative request to name Medicare as a payee on the draft—as an effort on the part of the defendant to pursue Medicare’s right to reimbursement on Medicare’s behalf. As noted above, a defendant has no legal standing to assert Medicare’s rights on its behalf.

The Superior Court affirmed the trial court’s denial of the defendant’s post-trial motion. The defendant was required to send payment of the judgment to the plaintiff.

What It Means to You

The Zapella opinion indicates that there is no obligation to take Medicare’s interests into consideration—either in settlement or in payment of a judgment—unless a recovery demand letter has been issued. The MSPA does not support withholding of settlement or judgment funds if a recovery demand letter has not been issued. There remains many unresolved issues regarding the MSPA. Expect a steady stream of cases to be decided, that will expand on the Zapella opinion. Given the changing legal landscape involving the MSPA, counsel should be consulted if there is any question as to what obligations are owed to Medicare.