Question
I represent an Indian person in a personal injury claim. The Indian Health Service paid the medical expenses. The amount paid by IHS is 88% of the auto insurance policy limits, which the insurance carrier is paying to my client and my firm. Is IHS entitled to 100% of what it paid for its subrogation claim?

Answer
Indian Health Services can recover the reasonable value of care provided from a liable third party tortfeasor. Thus if an injury is related to the tortious conduct of a third party, IHS will assert its rights under the Federal Medical Care Recovery Act (FMCRA), to assert reimbursement rights for injury-related medical care. Under the FMCRA, IHS has three years from the date that the action accrues to file a cause of action. However, it should be noted that under the FMCRA the statute of limitations is effectively tolled under 28 U.S.C. § 2416(c) until IHS knows or reasonably could have known that the injury was caused by a tortious third party as determined under state law. Thus the key is when the United States had knowledge of a potential claim which could then extend the statute of limitations period.

Presuming that the statute of limitations is still open, the next question becomes what recovery tools does IHS have to implement. IHS possesses both a subrogee/intervention right and an independent right of recovery to payments when a third party is responsible for payment for all or part of the same medical treatment for which IHS made payment. Any amount paid by IHS for medical care and services shall constitute a claim in favor of the U.S. against any third party for medical care or services provided to a veteran. Both HIS’ independent right and its separate right in subrogation (as well the corresponding statute of limitations) are governed by Federal law, but the determination of the underlying tort liability will still be governed by the applicable state law, which creates the property rights (liability) in the first place.

Does IHS have a lien against settlement proceeds? While there is no specific statutory authority providing for such a lien, there is no denying that IHS has an interest in third party scenarios through its right to intervene or to seek individual action against a third party. In situations where the IHS’ interest is not protected, the government may intervene in the third party action resulting in the settling parties, especially plaintiff’s counsel, losing control over the proceeding. This is especially so if the case is removed to Federal court. Even more threatening is the scenario where the government brings an independent cause of action against the third party (post-settlement) and the releasing parties, including their counsel, are pulled back into the fray as a result of the original release and applicable indemnification provisions. The releasing parties may not release a claim of the United States. By affirmatively notifying IHS and resolving any asserted interest, an attorney is assuring him/herself of a controlled outcome while at the same time avoiding any potential future issues for both themselves and their clients.

Michael D. Russell, Esq.

Question
I represent an Indian person in a personal injury claim. The Indian Health Service paid the medical expenses. The amount paid by IHS is 88% of the auto insurance policy limits, which the insurance carrier is paying to my client and my firm. Is IHS entitled to 100% of what it paid for its subrogation claim?

Answer
Indian Health Services can recover the reasonable value of care provided from a liable third party tortfeasor. Thus if an injury is related to the tortious conduct of a third party, IHS will assert its rights under the Federal Medical Care Recovery Act (FMCRA), to assert reimbursement rights for injury-related medical care. Under the FMCRA, IHS has three years from the date that the action accrues to file a cause of action. However, it should be noted that under the FMCRA the statute of limitations is effectively tolled under 28 U.S.C. § 2416(c) until IHS knows or reasonably could have known that the injury was caused by a tortious third party as determined under state law. Thus the key is when the United States had knowledge of a potential claim which could then extend the statute of limitations period.

Presuming that the statute of limitations is still open, the next question becomes what recovery tools does IHS have to implement. IHS possesses both a subrogee/intervention right and an independent right of recovery to payments when a third party is responsible for payment for all or part of the same medical treatment for which IHS made payment. Any amount paid by IHS for medical care and services shall constitute a claim in favor of the U.S. against any third party for medical care or services provided to a veteran. Both HIS’ independent right and its separate right in subrogation (as well the corresponding statute of limitations) are governed by Federal law, but the determination of the underlying tort liability will still be governed by the applicable state law, which creates the property rights (liability) in the first place.

Does IHS have a lien against settlement proceeds? While there is no specific statutory authority providing for such a lien, there is no denying that IHS has an interest in third party scenarios through its right to intervene or to seek individual action against a third party. In situations where the IHS’ interest is not protected, the government may intervene in the third party action resulting in the settling parties, especially plaintiff’s counsel, losing control over the proceeding. This is especially so if the case is removed to Federal court. Even more threatening is the scenario where the government brings an independent cause of action against the third party (post-settlement) and the releasing parties, including their counsel, are pulled back into the fray as a result of the original release and applicable indemnification provisions. The releasing parties may not release a claim of the United States. By affirmatively notifying IHS and resolving any asserted interest, an attorney is assuring him/herself of a controlled outcome while at the same time avoiding any potential future issues for both themselves and their clients.

Michael D. Russell, Esq.

Question
Abstract: There has been a considerable amount of commentary among personal injury practitioners on listservs regarding the McKinney v. PHA decision and what it means for attorneys in Pennsylvania as well as for practitioners throughout the country. The objective of this Practice Tip is to use McKinney to reference two familiar methods for determining allocation for past medical expenses, and illustrate how courts may not adhere to either due to a move toward a more equitable determination based on the thought that a settlement is a compromise for all.

A Memorandum and Order issued last week, on August 24th by Judge Schiller of the U.S. District Court, E. D. Pa. answered the question of how much the Department of Public Welfare (DPW) is to be reimbursed from personal injury settlements.

Answer
Some of the main points and key facts McKinney v. PHA are:

- A family filed suit against the Philadelphia Housing Authority claiming that the agency ignored complaints about mold in their housing unit that ultimately resulted in injury.
- A settlement was reached in June for just more than $11.9 million.
- DPW expended over $1.2 million to provide healthcare/ Medicaid benefits for the parties alleging injuries.
- The approved settlement only allocated for attorney fees, costs and amounts for those parties; there was no allocation for past medical expenses.

The Medicaid beneficiary argued for an employment of the 'ratio theory,' as derived from Arkansas Dept. of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), to determine allocation for past medical expenses by multiplying a ratio (the agreed settlement amount divided by case's true value) to the whole DPW lien.

DPW argued that state statute established a means to determination allocation, 62 Pa. C.S. §1409(b)(11) presumption of one-half of net or the actual Medicaid lien amount, whichever is less.

The Federal Court:

o Reasoned that the Ahlborn 'ratio theory' argued for by the Medicaid beneficiaries is not required to be used by courts in all cases;
o Bypassed the application and constitutionality of 62 Pa. C.S. §1409(b)(11) by his issuance of a court order to allocate the settlement proceeds;
o Found that 62 Pa. C.S. §1409(b)(11) ignores the reality of settlement, which by nature is a compromise for all parties, including DPW; and
o Based on the record, identified the factors and uncertainties leading the parties to settle, along with the reasonable portion of the settlement allocable to past medical expenses; attributing two-thirds of the total Medicaid lien as the portion of the settlement for past medical expenses.

Practice Tips: What does McKinney mean in light of Ahlborn and Tristani?

1. A new means of finding the sweet spot for Medicaid recovery?

The Court in McKinney found that Ahlborn did not require the 'ratio theory' be used in all events to determine allocation for past medical expenses. If the parties are moving toward settlement, we recommend the parties take into account the court's power to determine the parties' (including DPW's) equitable rights. Following McKinney, in Pennsylvania, should the matter of the Medicaid lien be litigated, the courts of competent jurisdiction are more likely to consider the equities of settlement along with the statutory recovery construct. If the record is sufficient, the court will also have the power to weight and consider factors. For settling parties, when working with DPW to identify its recovery rights, it will be even more important to properly document the file, including the bases for settlement, along with the pros and cons of litigation. Consistent with traditional recovery methodologies, information supportive of damages will still be highly relevant to determine, based on a good faith analysis, the reasonable portion of a settlement allocable for past medicals.

The Court in McKinney also confirms that which we already knew “ that Ahlborn was not intended to be a panacea for the Medicaid lien resolution process. Rather than seeking an Ahlborn-allocation hearing, which can cost time and resources, the parties may be well-served in working to identify settlement factors, duly recognizing that the 'black boarded' damage model (of recovery based on a pro rata share of settlement dollars when compared to total stipulated damages) may create one recovery pole star. But, state statutes, such as the 50% net presumption under 62 Pa. C.S. §1409(b)(11) creates another one. Using settlement factors (such as risks of litigation, reasons for settlement, etc.) may help the parties find an answer that recognizes the inherent benefits of settlement for all the parties, including the DPW. Failing to settle among the parties, a properly documented lien resolution process would provide a court of competent jurisdiction with the tools necessary to get the parties the rest of way, if needed, based on McKinney's "compromise" standard.

2. The Influence on Tristani

Settling parties and their counsel, by now well aware, especially in Pennsylvania, of the Tristani v. Richman, 609 F.Supp.2d 423 (2009) interlocutory opinion (since its release last year), have been eagerly awaiting its ultimate fate to be determined by the Court of Appeals for the Third Circuit. DPW third party recovery has created a flexible approach to cases in which a Tristani-type argument, essentially asking DPW to take a more proactive role in its own recovery based on an interpretation of the interplay of the federal Medicaid laws and those of Pennsylvania. When considering the impact of Tristani (noting that story has not yet been completely told), a portion of that opinion found that the 'one-half of net rule' for recovery in §1409(b)(11) is consistent with Ahlborn's holding. Now reading McKinney with Tristani, we can see a further refinement of a lien resolution methodology for Pennsylvania. Clearly, the 'one-half of net rule' no longer guarantees DPW full reimbursement in a case that settles. But that is still not the end of the lien story.

If it appears that the parties are going to settle, a court, if asked, may take the McKinney court up on its offer to use this new settlement tool - taking the nature of settlements and compromise factors into account to determine what portion of the settlement is attributable to past medical expenses. As a result, the settling parties, when dealing with the DPW (Medicaid) lien may be able to reduce that lien beyond a one-half of net standard. If the case proceeds to trial and results in a jury verdict, 62 Pa. C.S. §1409(b)(11) will still serve to identify the lien amount. The parties would presume that where a total Medicaid lien remains less than one-half of the jury award, DPW is likely to be fully reimbursed. However, where the lien exceeds the one-half amount, DPW's reimbursement is likely to be capped at one-half of net.

3. A national shift towards an Equitable Model

It appears that McKinney, when read with Tristani, and taking into account the United States' Supreme Court's 9-0 ruling in Ahlborn, is signaling a potential shift towards the equitable model that is inherent in all compromises.

Attorneys in North Carolina, Ohio and Florida will know that these states also have a statute for determining right to reimbursement based on gross settlement value. These statutes operate on the presumption, much like that in Pennsylvania, that the portion of a settlement allocated to past medical expenses equals the one-half of net proceeds or the actual Medicaid expenditures, whichever is less. When working with these statutes, however, equity also has to come into play, based on a reasonable allocation for past medical expenses.

The Garretson Firm Resolution Group will continue to closely monitor how McKinney may affect the resolution of Medicaid liens in Pennsylvania, and also, any decisions that result in similar developments among other jurisdictions.

Question
I am concerned that signing the agreement to represent the government's interest may create a conflict of interest if there is a dispute as to the portion of a settlement that represents the government's recovery. There may be issues as to whether some bills are causally related to the claim or whether the settlement was reduced because of the plaintiff's comparative negligence, etc. I would prefer to keep the government from intervening and would be willing to sign some acknowledgement of the government's interest but I am not comfortable signing their agreement to represent.

Florida Attorney

Answer
Signing the agreement means that the govt's claims will be addressed as part of the process. For example, if an attorney files suit, and then contacts TRICARE representatives, signing the agreement means the attorney would need to amend the complaint to include the govt's claim under 42 USC Sections 2651-53.

Further, depending on which version your state adopted, you are likely held to the same standards under ABA Model Rule 1.15(d), in which if you receive settlement proceeds and are aware of a just and valid third party claim (in this case, Tricare), then you have a fiduciary duty to notify and pay that third party.

So your concerns about conflict are addressed in the Code of Professional Responsibility if you are holding settlement proceeds in your IOLTA account (or once you do). If you are not yet there in your negotiations because the settlement funds have not been delivered, then your concerns can be addressed by adding language in the agreement to represent that all you are doing is protecting the govt's interests, but not at the expense of your client.

The problem: the govt cannot hire counsel to protect its reimbursement rights. It has the right to intervene. So if you do not sign, JAG will likely take the necessary steps to intervene. And once that happens, there will be no offset to TRICARE's reimbursement claim for attorney fees or expenses. It will be every party for itself. For that reason, we have recommended attorneys add the language they feel comfortable adding, send it back as a modified agreement, and then work out the details. To date, we have not had a denial of modified agreements, but that is also because we helped prep the Tricare representatives so they knew about the changes and were comfortable with them from a recovery standpoint.

Hope this helps.

My best,
Matt Garretson

Question
I have a client who had her bills paid by TRICARE. Is this treated the same as Medicare in that we have an obligation to notify TRICARE about the case and obtain a lien amount?

Thanks.
Maryland Attorney

Answer
The U.S. military's rights arise under the Medical Care Recovery Act (42 U.S.C. Sections 2651-53). The MCRA states that when the Federal Government provides treatment or pays for treatment of an individual who is injured or suffers a disease, the Government is authorized to recover the reasonable value of that treatment from any third party legally liable for the injury or disease. The statute provides an independent right of recovery, but only for those payments actually made. The statute does not contemplate any recovery for future payments to be made. (32 C.F.R. Section 757.14(a) and (d)).

Each service branch has a slightly different model agreement, but the basics are all here, namely, that:

1.the federal government has a right to assert a separate cause of action to recover for injury-related care paid by TRICARE/CHAMPUS on a conditional basis;
2.federal law precludes the service branch from being able to hire civilian counsel so they ask for counsel to sign an agreement, protecting the military's interests;
3.the primary benefit to the agreement is the access to medical records to help prove the case, provided there is reasonable advance notice (two weeks);
4.the primary drawback is the regular status reports (which is not a large time commitment, but is an added step to settling a Tricare case);
5.absent this agreement, the govt. can intervene in your action, causing more grief than it is worth (in not signing the agreement); and
6.there is nothing unusual about the language of the agreement. We can send relevant statutes for your review, noting the agreement is consistent with federal law.

Hope this helps.

My best,
Matt Garretson, Esq.

Question
Can you take an attorney fee off of a Workers' Compensation Medicare Set-Aside? The injured worker settled his Workers' Compensation case in 2005 with open medical benefits. There is a WCMSA for $35,000 that Medicare has approved. Can we take 20% of that as a fee?

Tennessee Attorney

Answer
Great question and one that is commonly asked by those of us that would like to be paid for the work we do. Before addressing your specific question, let me note that the MSA figure is a subset of the gross settlement amount, and attorneys are entitled to take their fee based on the gross settlement amount (depending on the terms of their retainer agreement, of course).

Now, specifically addressing whether you are entitled to take a fee from the MSA approved amount itself, we can look to the CMS Policy Memoranda for guidance. In the CMS Policy Memorandum dated May 7, 2004, sent to all Associate Regional Administrators, CMS addresses the question of administrative fees and attorney costs specifically associated with establishing Medicare set-aside arrangements. This memo included CMS' new (and presently enacted) policy:

"Administrative fees/expenses for administration of the Medicare set-aside arrangement and/or attorney costs specifically associated with establishing the Medicare set-aside arrangement cannot be charged to the set-aside arrangement... For example, if the settling parties submit a MSA proposal to CMS that claims that the injured individual will need $50,000 worth of work-related medical expenses that would otherwise be reimbursable under Medicare and the settling parties claim that it will cost $10,000 in administrative and attorney fees in order to both administer and establish the MSA, then CMS will only evaluate/judge the reasonableness of the $50,000 figure.

CMS will not evaluate whether or not the $10,000 in administrative and attorney fees are reasonable nor will CMS permit the settling parties to add that $10,000 amount to the $50,000 MSA amount. Therefore, if CMS approves that proposal for a $50,000 MSA, the settling parties' $10,000 in administrative and attorney fees cannot be charged to or against the MSA of $50,000 because CMS considers those costs to be a separate issue for the settling parties to negotiate."

So, in summary, any money used to establish a MSA cannot be used to pay for the administrative costs nor the attorney fees required to establish or administer the MSA. Since the MSA is a subset of the gross recovery amount, the attorney is entitled to take a fee. However, those proceeds must come from another part of the recovery other than the MSA as the only appropriate use of MSA proceeds is to pay for future injury-related care that would otherwise be covered by Medicare.

Hope this helps,
John V. Cattie, Jr., Esq.

Question
I have a case where the plaintiffs were involved in a wreck, lost their jobs, and declared bankruptcy (chapter 7) as a result. Medicare paid for all of the injuries resulting from the wreck. We would like to settle, but I am not sure what kind of priority Medicare would take in the bankruptcy court. Please let me know your thoughts. Thanks.

Tennessee Attorney

Answer
Thanks for your question. The entire settlement amount may be considered an asset of the Chapter 7 bankruptcy estate, depending on timing and disclosure issues. Timing issues refer to when the signature injuries occurred when compared to the time the debtor-client filed the bankruptcy petition. And disclosure issues refer to whether the settlement was listed as a contingent asset (even if not reduced to a judgment or payment) on the bankruptcy schedules. If it was not listed on the Schedules, the bankruptcy would need to be reopened so that the asset could be properly distributed among all creditors who filed a claim. (Medicare may not be the only issue to consider.)

Finally, the Chapter 7 trustee, if in possession of settlement funds will have a duty to reimburse Medicare should conditional payment reimbursement be involved within the meaning of the MSP statutes. Medicare also takes the position that timing is a critical factor in determining whether Medicare has a reimbursement right. In fact, any Medicare claims matters involving bankruptcy are automatically escalated to policy analysts for CMS (at the regional offices). So these cases get flagged by the MSPRC (lead contractor) for further review by Medicare policy specialists to identify (1) whether Medicare's right occurred before or after the petition is filed; and (2) what position, if any, Medicare will take.

From the trustee's perspective, because Medicare is not a general, unsecured creditor, and has priority claims status, in some cases, the Medicare reimbursement portion is not even sent to the bankruptcy estate.

Our team has a classification protocol to identify and address these issues, following a bankruptcy coordination methodology that has worked in both mass tort and single event cases. We would be happy to assist as you deem proper, and upon request by your client.

Best,
Kati Payne

Question
Should a lawyer sign an indemnification agreement with respect to Medicare reimbursement claims?

Answer
There are 8 states that will not permit attorneys to sign indemnification agreements.

Following these eight state ethics rules, attorneys in those states cannot agree to indemnify. The best attorneys can do is have their clients indemnify. The states are North Carolina, New York, Illinois, Indiana, Kansas, Missouri, Arizona and Florida, all of whose ethics bar committees have opined that attorneys signing hold harmless agreements along with their clients is a violation of Model Rules 1.8(e), creating an impermissible conflict of interest, in violation of Model Rule 1.7(a). The ethics opinions are building up. While we cannot opine on such matters, knowing there are 8 hot button states will help us to avoid unpleasant circumstances.

- Illinois State Bar Assn Op. No. 06-01, July 2006 WL 4584284
- Indiana State Bar Assn Op. No. 1 of 2005
- Kansas State Bar Assn Legal Ethics Op. KBA 01-05 (May 23, 2002)
- North Carolina State Bar Ethics Op. RPC 228 (July 26, 1996)
- Advisory Committee of the Sup. Ct. Missouri, formal Op. No. 03-05, 2003
- Florida Bar Ethics Op. No. 70-8, Revised (April 23, 1993)
- New York City Bar Inquiry Reference No. 10-12 (June 1, 2010)
- North Carolina RPC 228 (prohibiting lawyers from agreeing to personally indemnify the insurance company for unpaid liens.)
o RPC 228 quotes Rule 5.1(b). That rule is now 1.7(a), which provides that a lawyer whose personal interest is adverse to the client has a conflict of interest.

If an attorney agrees to be personally liable and later Medicaid sues the attorney based on the indemnification, you may have a legal claim against your client.

Sylvius von Saucken, Esq.

Question
If the last know exposure is prior to December 5, 1980, is the plaintiff required to notify CMS?

Answer
See answer below. If the plaintiff or plaintiff's attorney can show, by uncontroverted evidence that the last date of exposure occurred on or before the effective date of the MSP statute (Dec. 5, 1980), Medicare does not have a right of reimbursement, and the RRE does not have a duty to report. However, we have advised both parties to settlement that "wordsmithing" will not remove a duty where one exists, so plaintiffs have to be ready to stand by their screening process, and defendants must be able to reasonably rely on that process if they are to take the position no reporting need occur.

Answer: Provided you have a formalized screening process designed to prove the last date of exposure occurred on or before December 4, 1980, a Responsible Reporting Entity will not have a reporting obligation under the MMSEA. Medicare may have a recovery claim only where there was asbestos exposure on or after the effective date of the MSP statute, December 5, 1980. Medicare's claim would be for all Medicare reimbursed services on or after December 5, 1980, which are related to the liability settlement, judgment, or payment. Medicare's recovery claim is based upon specific Medicare reimbursed services rather than some percentage of the liability settlement, judgment, or payment. Further, Medicare has stated in liability recoveries, (but not Workers Compensation), that "If the asbestos exposure ended before December 5, 1980, Medicare will not pursue recoveries from asbestos liability settlements, since the MSP liability provisions were not effective until that date." However, please note that once a post-1980 exposure date is determined, Medicare requires that exposure claims are submitted based on the "date of first exposure."

Sylvius von Saucken, Esq.

Question
The vast majority of cases, at our firm, are asbestos exposure cases. Are defendants required to report when the last exposure alleged is prior to December 5, 1980?

Answer
Provided you have a formalized screening process designed to prove the last date of exposure occurred on or before December 4, 1980, a Responsible Reporting Entity will not have a reporting obligation under the MMSEA. Medicare may have a recovery claim only where there was asbestos exposure on or after the effective date of the MSP statute, December 5, 1980. Medicare's claim would be for all Medicare reimbursed services on or after December 5, 1980, which are related to the liability settlement, judgment, or payment. Medicare's recovery claim is based upon specific Medicare reimbursed services rather than some percentage of the liability settlement, judgment, or payment. Further, Medicare has stated in liability recoveries, (but not Workers Compensation), that if the asbestos exposure ended before December 5, 1980, Medicare will not pursue recoveries from asbestos liability settlements, since the MSP liability provisions were not effective until that date. However, please note that once a post-1980 exposure date is determined, Medicare requires that exposure claims are submitted based on the date of first exposure.

Sylvius von Saucken, Esq.

Question
I was wondering where Florida attorneys stand as to their liability for the payment/non-payment of clients ERISA liens? If a settlement is reached must we pay the lien? Are we required to hold it in trust? If we disburse to the client will we be liable to the plan? I am well aware of the Longaberger case in the 6th Circuit but was unable to find any controlling precedent in Florida. I am also aware of Florida's rule 5-1.1 regulating trust accounts (basically a copy of ABA MRPC 1.15) requiring disputed funds to be held in trust.

Also, if the plan language is well crafted what tools may I use to attempt to negotiate the lien down?

Answer
Thank you for the inquiry. Your questions hits upon several good points. First and foremost, if an ERISA plan is asserting a valid and legitimate reimbursement interest ("lien") in your client's settlement proceeds then arguably that interest should be satisfied. To have a valid and legitimate interest, the ERISA plan must have plan language which seeks an equitable right to reimbursement. ERISA plans are limited to seeking appropriate equitable relief. 29 U.S.C. § 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of said fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006). Thus it is important to make sure the plan is seeking an equitable remedy.

Some of the considerations for resolving this interest.

- Ethical Obligations. Florida Rule 5-1.1 and holding disputed funds in trust. An ERISA plan is no different than any other claimant.
- Client Contractual Considerations. If the interest is not resolved or the plan participant does not cooperate according to the terms of the plan, the participant may subject themselves to legal action and additionally they may face a future set off or complete loss of future benefits.
- Constructive Trust Consideration. The Longaberger case was not about imposing liability on the attorney as much as it was about the plan's equitable right. The Longaberger plan had a first priority right to the settlement proceeds. Because the attorney received a third of those proceeds the attorney was responsible for reimbursing the plan one third of its lien. The plan did not seek damages or a cause of action against the attorney but rather it sought the recovery of funds. While Longaberger is a sixth circuit case with very specific facts it certainly should serve as a cautionary tale to attorneys in every circuit.

In negotiating the reimbursement interest I would recommend a careful evaluation of the plan language. As mentioned above, the plan must have specific language to establish its right. Furthermore, equitable doctrines such as made whole and common fund may apply depending on the plan language and whether you are applying state or federal law (applicable law is based upon the funding of the plan; self-funded plans enjoy federal preemption while insured plans can be limited by state insurance law). Additionally, there can be other weaknesses in the plan language such as requiring third party liability or limiting the reimbursement to medicals recovered.

As a general matter I would encourage you to take a proactive approach and deal with the ERISA plan on the front end. It is important to remember that the plan's right of reimbursement does not come into existence until the settlement or verdict is reached. Prior to this time they only have a right to subrogate and this is the last thing that many of these plans and their agents want to get involved with. Because the interest is not "perfected" until settlement we take the approach that a case should not be settled unless the interest is resolved. If you were dealing with a self-funded ERISA plan with draconian language the only leverage you may have is the threat of walking away and thus the plan would receive nothing. If the case settles this opportunity is lost and the plan has an enforceable right.

As you can see this is a complex area of the law which is constantly changing. Because of this you may encounter a lien or a government benefits issue that demands experience and expertise not commonly available inside of a personal injury firm (such as healthcare billing and coding expertise). To ensure the proper evaluation and favorable resolution of such a matter, your client may require the consultation or retention of outside assistance to advise and address the issue. Your fee agreement should provide for this at your discretion, and stipulate that any reasonable costs may be passed along to the client. In this manner the cost can be placed on the client and both you and the client can be assured that the interest will be properly and efficiently resolved.

Thanks again and please let us know if you have any additional or follow up questions. Take care.

Michael D. Russell, Esq.

Question
When dealing with Medicare reimbursement in a liability claim, can the argument be made and does Medicare factor in disputed liability on the underlying case and also causation issues on damages as a means to reduce the amount which must be reimbursed? Also, if the client is doing poorly economically, will Medicare factor that in its final reimbursement amount?

Georgia Attorney

Answer
There are administrative remedies within the MSP Provisions that allow for either the compromise or waiver of Medicare's interest; however certain criteria must be met.

Compromises

CMS is given authority to consider the compromise of Medicare's claim under the Federal Claims Collection Act (FCCA) at 31 USC, 3711 et seq. and 42 CFR 401.613. The Medicare Secondary Payer Recovery Contractor (MSPRC) is not permitted to compromise a claim. Compromise requests must be submitted in writing to the MSPRC, who will forward the request to the appropriate CMS Regional Office for requests of (<$100,000) or Central Office for requests of (> $100,000) for consideration.

A compromise decision made by CMS is final and is not subject to appeal. That being said, if you are not in agreement with the CMS compromised amount, you do not have to accept it and can pursue other options. One option would be to reach out to the person at the Regional Office who made the decision and discuss the case with them; many times this is beneficial in getting them to see things your way. Another option is to decline the offer and pursue a waiver thru the MSPRC.

A compromise can be requested before or after settlement. If the request is post-settlement, settlement information must be submitted in writing before your request will be processed.

CMS uses the following factors to determine if a compromise or suspension of a claim is warranted. Whether or not a compromise will be granted depends on a number of factors and each matter is considered on a case-by-case basis.

1.Inability to pay - the cost of collection does not justify the enforced collection of the full amount of the claim;
2.If there is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or
3.Chances of successful litigation are questionable, making it advisable to seek a compromised settlement.

To request a compromise, you must specify the amount you want Medicare to accept. Submit in writing the reason for the compromise and how you determined the amount to be repaid. A full reduction cannot be requested. All compromise requests must be in writing and submitted to the MSPRC who will then forward it on to the appropriate CMS Regional Office.

Waivers.

The authority to consider a Medicare beneficiary's request for waiver on behalf of CMS, under 1870(c) of the Social Security Act and guidelines can be found in 20 CFR 404.506-509. It can only be requested after settlement and final determination has been issued by Medicare.

The MSPRC has the authority to consider a waiver requests under 1870 © of the Social Security Act. Waivers can only be requested after settlement and final determination has been issued by the MSPRC. All waiver requests must be in submitted in writing along with a completed questionnaire SSA-632K form. This questionnaire requests information regarding the beneficiary's monthly income, expenses and assets as well as the reasons for requesting a full or partial waiver. It is recommended that along with the completed questionnaire that you provide the MSPRC with a compelling story of the facts of the case.

CMS may waive all or part of its recovery in any case where an overpayment under Title XVIII has been made with respect to a Medicare beneficiary who is: without fault AND when adjustment or recovery would either defeat the purpose of Title II or Title XVIII of the Act (repaying Medicare would create a financial hardship), OR be against equity and good conscience for the beneficiary to repay Medicare.

"Without Fault" Standard. To determine if a beneficiary is "without fault," the lead contractor will consider four factors. These are:

1.The amount of out-of-pocket medical expenses incurred by the beneficiary;
2.Whether the beneficiary's assets are insufficient to pay Medicare;
3.The beneficiary's assets, monthly income, and expenses; and
4.The age of the beneficiary and whether he or she has any physical or mental impairments.

If you are pursuing a waiver based on the fact that your client incurred accident related out-of-pocket medical expenses include as much documentation as possible to support your argument Proper documentation of out-of-pocket medical expenses must be submitted before they can be considered in the waiver request.

"Defeat the Purpose" Standard. To "defeat the purpose of the Social Security or Medicare programs" means that a recovery against a beneficiary will cause financial hardship by depriving the beneficiary of income required for ordinary and necessary living expenses. An example of financial hardship includes a case where the beneficiary has spent the settlement or insurance proceeds and the only remaining income from which the beneficiary could attempt to satisfy the Medicare claim is from money needed to pay for his or her basic monthly living expenses.

"Against Equity and Good Conscience" Standard. The "against equity and good conscience" test considers, but is not limited to, the following factors:
1.The degree to which the beneficiary did not contribute to causing the overpayment;
2.The degree to which Medicare contributed to causing the overpayment;
3.The degree to which repayment would cause undue hardship to the beneficiary; and
4.Whether the beneficiary would be unjustly enriched by granting a waiver or was harmed by relying on erroneous Medicare information

If you or your client does not agree with the waiver determination you can request a re-determination of the decision. The re-determination request must be made in writing within 120 days of the date of the waiver determination.

If you have any questions please don't hesitate to contact me.

My Best,
Mary Skinner

Question
Mother, father and two children were in a serious accident. Mother has catastrophic injuries. Her bills exceed $175,000. The auto insurance policy limits are $25,000 per person and $50,000 per accident. Medicare has not paid any money for the mother's treatment at this point, but she has applied and will be on Medicare in August of this year at which time it is expected that Medicare will pay future costs relating to the accident.

I have two questions. First, am I correct that we are not required to report the settlement to Medicare, if we settle before October 1, 2010 according to your February 25, 2010 advisory?

Second, from your August 18, 2009 article on Medicare Set-Asides in liability settlements, my sense is that a $25,000 settlement in which future medicals are not specified, where the plaintiff has $175,000 in past medical, substantial pain and suffering, substantial past and future lost wages and other damages would not require a Medicare Set-Aside. Is this correct? My plan is to use the practice tips outlined in your August 18, 2009 article to convince defense counsel that a set aside is not required unless things have changed since August of 2009.

The mother also has an auto products defect case on file, but this is a long way off from settlement or trial.

Thanks for your assistance.
Texas Attorney

Answer
To answer your first question, the reporting to which you refer deals with defense reporting of the settlement to Medicare for MMSEA Section 111 purposes. This is different than the plaintiff reporting the settlement to Medicare as a part of verifying/resolving any conditional payments made by Medicare from date of injury to date of settlement. Let's assume your client becomes entitled to Medicare as of August 1, 2010. For MMSEA Section 111 purposes, if the case settles prior to October 1, 2010 and is to be paid in a lump sum (i.e., TPOC) as opposed to containing an ongoing responsibility to pay future meds (i.e., ORM), then defense does not have to report. However, if the settlement contains ORM, then the trigger date for those settlements is January 1, 2010 and defense would have to report for MMSEA Section 111 purposes. If the case settles on or after October 1, 2010, defense has to report, no matter whether the settlement is for TPOO or has ORM.

If the case settles on or after August 1, 2010, you would also have the obligation to verify and resolve any conditional payments made by Medicare from date of injury to date of settlement. Therefore, there are two aspects to Medicare reporting, one from the defense and one from the plaintiff and depending on when the case settles and the terms of the settlement determines who has to report.

With regards to your second question, the obligation to consider and protect Medicare's interests includes protecting its future interests. That means, you should ask and answer the question "Is a MSA appropriate under these case specific facts?" You are correct in your deduction that, based on your case specific facts, a MSA would not be appropriate and the guidance in the August 2009 MSA White Paper is as good today as the day it was published. Please let me know if you have additional questions.

My best,
John Cattie

Question
I have an 82 year old client who has a Medicare replacement policy with Healthnet of the Northeast. The client suffered a full rotator cuff tear in a MVA but it is very unlikely that surgery is needed. Causation is an issue. Insurance carrier wants language in the release that the client agrees to pay any future medical expenses from the settlement and that the client agrees not to submit any bills to Medicare for payment. The carrier claims that this is required under the Social Security Act. I have never encountered this before and am unsure as to how I should advise my client regarding signing this. Any guidance is appreciated.

Connecticut Attorney

Answer
Certainly, your fact pattern is one commonly encountered these days due to the vast amount of misinformation promulgated towards the insurance community regarding Medicare compliance under the Medicare Secondary Payer ("MSP") Act. Because of their new reporting obligations under Section 111 of the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007, found at 42 USC Sec. 1395y(b)(8)), insurance companies want to ensure that Medicare will not chase them for reimbursement of any interest, either past (represented by conditional payments made by Medicare from date of injury to date of settlement) or future (represented by payments made by Medicare for injury-related care post settlement). In their zeal for satisfying Medicare's interests, they often miss the forest for the trees.

Essentially, the carrier is insisting that, instead of billing Medicare for future injury-related care, a Medicare Set-Aside ("MSA") be established to pay for future injury-related care. Nowhere in currently enacted law or guidance from CMS are we told that a MSA must be established as a part of our third party liability settlements. The obligation under the MSP Act is to "consider and protect" Medicare's interests, both past and future. Many insurance companies fail to understand that considering and protecting Medicare's interests does not always mean that you pay Medicare money. In fact, in the third party liability context for MSAs, it rarely means that. What it does mean is that the settling parties should be documenting their files to show what steps have been taken to consider and protect Medicare's future interests, including MSA evaluations, letters from treating physicians indicating exactly what care the injured individual will require, and other items.

Another concept most insurance companies do not realize yet is that the obligation to consider and protect Medicare's future interests falls on the claimant as opposed to the defense. In short, the obligation to satisfy Medicare’s future interests via a MSA or any other vehicle is the responsibility of the claimant and claimant’s attorney, not the defendant. As support for that position, we can look to the federal regs at 42 CFR 411.46, which contains no language placing liability on the defense (unlike 42 CFR 411.24). Furthermore, evidence exists on the CMS website under the Intro to WC tab of the WCMSA site. See: this CMS page. If we look at the Future Medical Services portion in the final paragraph, we see that Medicare asserts that the liability to consider and protect Medicare’s future interests extends to those entities that RECEIVE a primary payment (as opposed to liability for conditional payments made date of injury to date of settlement as promulgated under 42 CFR 411.24 whereby Medicare may recover its conditional payment interest from any entity that MAKES/RECEIVES a primary payment).

To sum up, the insurance community appears to be receiving misinformation about Medicare compliance, and requires a re-education as to the appropriate scope of their obligations. For starters, I would forward to them our MSA White Paper supporting the proposition that MSAs are rarely appropriate in the liability context, and when they are appropriate, they are plaintiff oriented obligations to handle. Further, share with them the language of the CMS website about Future Medical Services. These tools should make the insurer more comfortable with the notion that it does not face exposure to Medicare on these future interest issues. Finally, I make myself available to you for a conference call to discuss these issues.

Sylvius von Saucken, Esq.

Question
In a situation where an injured party on Medicare has ongoing medical treatment associated with a personal injury claim or suit that may not settle for many months or a year or more, does requesting Medicare payment information prior to settling a claim or lawsuit start the clock running on interest owed on Medicare's lien amount for medical payments made by by Medicare? What benefit is there if any to requesting this information at the outset of a cae or before a case settles as opposed to waiting until after settlement occurs and thereby avoiding interst accruing on Medicare's lien amount?

Answer
The MSPRC (Medicare Secondary Payer Recovery Contractor) begins identifying claims for recovery when it receives notice of a pending no-fault, liability, or WC matter. However, it does not issue a formal recovery demand letter until there is a settlement, judgment or award. It is against the date of that formal Final Demand Letter that interest accrues. Resolving Medicare's interest in a settlement takes time so starting early will allow you to have an ongoing accounting of Medicare's interest in your case so starting early is crucial.

Sylvius von Saucken

Question
Regarding a plaintiff attorney's contractual obligation, can we tell our clients that, when a settlement payment comes in, we plan to process our attorney fees and hold the rest until the lien has been satisfied, or must the entire settlement amount, including our fees be held?

Answer
According to the Medicare contractors at MSPRC, they presume attorneys will take their fees and expenses from the gross settlement, prior to Medicare reimbursement. Having said that, if there is any concern that there may not be sufficient funds to cover that reimbursement obligation, we recommend you escrow the entire settlement, provided there are no needs-based government benefits(such as SSI and/or Medicaid) to protect.

Sylvius von Saucken

Question
What is the new submission process for WCMSAs?

Answer
Recently, the Centers for Medicare & Medicaid Services (“CMS”) announced a new submission process in development for Workers’ Compensation Medicare Set-aside Arrangements (“WCMSAs”). As CMS has previously suggested, it will be moving forward with the development of a web portal. Once introduced, this web portal will enable WCMSA submitters to submit WCMSA proposals electronically via the internet. The web portal should allow for WCMSA proposals to be viewed by CMS on a more expedited basis. Scheduled to be introduced in first quarter 2011, the web portal would provide submitters with a real-time receipt acknowledgement from CMS. CMS will announce further developments regarding the web portal at a later date.

GFRG will continue to monitor CMS communications and provide this new information to the settlement community as it becomes available. To view the CMS announcement in its entirety, click here

Question
What is the procedure for calculating life expectancies for MSAs?

Answer
The Centers for Medicare & Medicaid Services (“CMS”) recently announced a new procedure regarding how life expectancies for Medicare Set-aside Arrangement (“MSA”) purposes should be calculated. As of April 12, 2010, CMS will begin referencing the 2005 United States Life Tables recently published by the Centers for Disease Control (“CDC”) for Workers’ Compensation (“WC”) MSA calculations.

Practically speaking, the settlement community should begin referring to the CDC’s Table 1: Life Table for the total population, United States, when calculating a claimant’s life expectancy for MSA purposes. CMS will be applying this table for WCMSA proposals received on or after April 12, 2010 as well as any WCMSA case reopened on or after April 12, 2010.

GFRG will continue to monitor CMS communications and provide new information to the settlement community as it becomes available. To view the CMS announcement in its entirety, click here

Question
What is the Medicare Secondary Payer Enhancement Act of 2010?

Answer
Recently, Congressmen Patrick Murphy (D-PA) and Tim Murphy (R-PA) introduced HR 4796, a bill titled the “Medicare Secondary Payer Enhancement Act of 2010.” This piece of legislation purports to provide a seemingly less complicated approach to reimbursing Medicare for conditional payments made for injury-related care under the Medicare Secondary Payer (“MSP”) Act (42 U.S.C. §1395y(b)). Additionally, this bill purports to allow for less onerous requirements for entities obligated to report to Medicare under the recently enacted Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”).

If passed by Congress and signed into law, the Medicare Secondary Payer Enhancement Act of 2010 would provide for the following:

•Voluntary Calculation and Payment of Conditional Payments. Claimants and plans would be able to submit a payment to Medicare, calculated in good faith, as full satisfaction of any reimbursement obligation to Medicare for conditional payments made by Medicare if submitted within ninety (90) days of the anticipated settlement, judgment, award or other payment.

•Secretary’s Ability to Contest Amount of Payment. Medicare would have the ability to contest the payment made according to the above procedure within seventy-five (75) days of receipt of such payment from the claimant or plan if Medicare determines that the payment made was not the total amount owed by submitting a final demand to the claimant or plan for the remaining balance owed.

•Request for Final Demand for Reimbursement. The claimant or plan would be able to request a final demand amount from Medicare within 120 days prior to the expected date of settlement, judgment, award or other payment. Within sixty (60) days of receiving such final demand request, Medicare would provide that final demand. The claimant and plan would then have sixty (60) days from the receipt of that final demand from Medicare to provide payment as satisfaction of that final demand amount.

•Failure of the Secretary to Provide Final Demand for Conditional Payment. If Medicare failed to provide final demand as set forth above, the claimant or plan would not be liable for submitting payment to Medicare to satisfy any outstanding reimbursement claims asserted by Medicare.

•Right of Appeal. Medicare would establish a right of appeal and appeals process for the payment procedures set forth above, including review through an Administrative Law Judge and access to the U.S. District Court.

•De Minimus Threshold. There would be no reimbursement obligation when the settlement, judgment, award or other payment did not exceed $5,000.

•Reporting Requirement Safe Harbors. The MMSEA would be amended to allow Medicare the discretion not to apply the statutory $1,000 penalty for each day of noncompliance with respect to a responsible reporting entity’s reporting obligation. This section would also allow for the creation of safe harbors from penalties asserted under the MMSEA.

•Use of Social Security Numbers and Other Identifying Information in Reporting. The MMSEA would be amended so that responsible reporting entities would not be required to access or report social security numbers or health identification claim numbers (i.e., Medicare numbers) of claimants.

•Statute of Limitations. A three (3) year statute of limitation, measured from the date of reporting, would be established within which time the federal government must bring any action associated with compliance under the MSP.

•User Fee. Each person or plan that submits a payment to fulfill a MSP reimbursement obligation or each person or plan that submits a request for a final demand letter as set forth above would be subject to a $30 fee, payable to Medicare.

We will continue to follow the progress of this legislation, in addition of other pieces of legislation that may affect the settlement community. Please check www.garretsonfirm.com often for updates as well as new client advisories and practice tips. A copy of HR 4796 may be found by clicking here

Question
Regarding dollar reporting threshold of $5,000, in mass tort cases or where there are multiple settlements paid out over time, is the reporting requirement for $5,000 in aggregate or only for a single $5,000 payment or above?

Answer
The answer is that the reporting threshold is considered in the aggregate, but where exceeded, each payment is to be reported separately. For liability settlements, the threshold for settlements, judgments, awards or other payments on or after January 1, 2010 through December 31, 2011 is any amount up to and including $5,000. In response to your question about how the threshold amount is applied, Section 11.4 of Version 2.0 of the User Guide states that “Where there are multiple TPOCs associated with the same claim record, the combined, cumulative TPOC amounts must be considered in determining whether or not the reporting threshold is met. However, multiple TPOCs must be reported in separate TPOC fields as described later in this guide.” This section goes on to state that “The threshold dollar and date ranges apply to the date when the threshold is met (the most recent TPOC Date). The COBC will use the most recent TPOC Date supplied on the claim report when checking the threshold ranges. Timeliness of reports will be determined based upon the applicable date for the TPOC which caused the threshold to be met (the last, latest, most recent TPOC Date reported on the claim record).

Section 11.10.2 of the User Guide reinforces the above and states that “…the sum of all TPOC amounts must be used when determining whether the claim meets the applicable reporting threshold. Use the most recent, latest TPOC Date associated with the claim when determining whether the claim meets the interim reporting thresholds defined in Section 11.4.”

Section 11.5 of the User Guide provides a detailed description of how multiple TPOCs need to be reported. The definition as used in the User Guide references above for TPOC is the Total Payment Obligation to the Claimant. The TPOC refers to the dollar amount of a settlement, judgment, award or other payment in addition to/apart from ongoing medicals. A TPOC generally reflects a one time or lump sum payment. A complete definition of TPOC is in Section 2 of the User Guide.

Sylvius von Saucken

Question
We have been trying to reach a settlement of a medical negligence claim with substantial past medical expenses but relatively little in anticipated future Medicare-eligible expenses. The client has significant deficits but future needs primarily are for attendant care rather than the kind of medical care Medicare will pay for.

The defendant's insurer is insisting that we either set up a Medicare set aside trust or get a release from Medicare. Do you have any suggestions on how best to deal with this?

Missouri Attorney

Answer
Certainly, your fact pattern is one commonly encountered these days due to the vast amount of misinformation promulgated towards the insurance community regarding Medicare compliance under the Medicare Secondary Payer ("MSP") Act. Because of their new reporting obligations under Section 111 of the MMSEA (Medicare, Medicaid and SCHIP Extension Act of 2007, found at 42 USC Sec. 1395y(b)(8)), insurance companies want to ensure that Medicare will not chase them for reimbursement of any interest, either past (represented by conditional payments made by Medicare from date of injury to date of settlement) or future (represented by payments made by Medicare for injury-related care post settlement). In their zeal for satisfying Medicare's interests, they often miss the forest for the trees.

Nowhere in currently enacted law or guidance from CMS are we told that a Medicare Set-Aside ("MSA") must be established as a part of our third party liability settlement. The obligation under the MSP Act is to "consider and protect" Medicare's interests, both past and future. Many insurance companies fail to understand that considering and protecting Medicare's interests does not always mean that you pay Medicare money. In fact, in the third party liability context for MSAs, it rarely means that. What it does mean is that the settling parties should be documenting their files to show what steps have been taken to consider and protect Medicare's future interests, including MSA evaluations, letters from treating physicians indicating exactly what care the injured individual will require, and other items.

Another concept most insurance companies do not realize yet is that the obligation to consider and protect Medicare's future interests falls on the claimant as opposed to the defense. In short, the obligation to satisfy Medicare’s future interests via a MSA or any other vehicle is the responsibility of the claimant and claimant’s attorney, not the defendant. As support for that position, we can look to the federal regulations at 42 CFR 411.46, which contains no language placing liability on the defense (unlike 42 CFR 411.24). Furthermore, evidence exists on the CMS website under the Intro to WC tab of the WCMSA site. If we look at the Future Medical Services portion in the final paragraph, we see that Medicare asserts that the liability to consider and protect Medicare’s future interests extends to those entities that RECEIVE a primary payment (as opposed to liability for conditional payments made date of injury to date of settlement as promulgated under 42 CFR 411.24 whereby Medicare may recover its conditional payment interest from any entity that MAKES/RECEIVES a primary payment).

To sum up, the insurance community appears to be receiving misinformation about Medicare compliance, and requires a re-education as to the appropriate scope of their obligations. For starters, I would forward to them our MSA White Paper and Act Two articles (attached) supporting the proposition that MSAs are rarely appropriate in the liability context, and when they are appropriate, they are plaintiff oriented obligations to handle. Further, share with them the language of the CMS website about Future Medical Services. These tools should make the insurer more comfortable with the notion that it does not face exposure to Medicare on these future interest issues. Finally, I make myself available to you for a conference call to discuss these issues.

My best,
John Cattie

Question
What is the general consensus about providing a client's SS # to an insurance company "because Medicaid now requires reporting."

I was told the following: “Write a letter back to the insurance company asking them to put in writing that they will use the SS# for the sole purpose of running it through the CMS Query Access System. Additionally, ask the insurance company to put in writing that they agree not to disseminate the SS# to anyone or entity other than Medicare and also those they agree to indemnify your client for attorney's fees and damages should they breach these terms. If they agree to the terms, provide the SS# before settlement. Otherwise, provide the SS# after settlement as is required by the statute. This usually ends the conversation.”

Ohio Attorney

Answer
I agree completely. I would just add that in order for the insurance company (known as the Responsible Reporting Entity “RRE” for purposes of Section 111 Reporting”) to run the query system, they need four data points: Name; DOB; Gender; and SS# or Medicare #. I would suggest you provide these 4 pieces of information with exactly the same limited use language articulated below. I would encourage you to provide this in your very first communication with the insurance company. This will allow them to ping the query system right away, which tells them YES or NO as to your client’s Medicare entitlement (it tells them nothing else). Instead of relying on your client to tell you whether or not they are on Medicare, you can use the defendant to tell you (assuming you tell them to provide you with their results of the query search).

Additionally, if you wait until settlement time to provide this information, it will cause significant disbursement delays. If you refuse to provide the information, the insurance company will either not fund the settlement, or they will put Medicare’s name on the check which will cause a minimum of 10-12 week delay.

I would also note that these new insurer reporting requirements ONLY affect Medicare Parts A&B; not Medicaid or any other parts of Medicare (C&D).

Thanks,
Tate G. Johnson

Question
I represent the children of an older gentleman who died after sustaining serious bodily injuries in Texas. We put the insurance company on notice of a wrongful death claim which they settled. We did not bring a survivorship claim. Does Medicaid have a right of subrogation on the wrongful death claim?

Texas Attorney

Answer
We appreciate you reaching out to us with your question. Texas Medicaid's right of recovery is found at VTCA HRC §32.033 (see below). Texas Medicaid may have a right of recovery for the decedent's injury related care for which they paid. Additionally, they may have a Medicaid Estate Recovery claim for expenditures unrelated to the injury.

Please let me know if we can be of further assistance with either of these potential obligations.

My best,
Elizabeth Vish

Sec. 32.033. SUBROGATION. (a) The filing of an application for or receipt of medical assistance constitutes an assignment of the applicant's or recipient's right of recovery from:

(1) Personal insurance;

(2) Other sources; or

(3) Another person for personal injury caused by the other person's negligence or wrong.

(b) A person who applies for or receives medical assistance shall inform the department, at the time of application or at any time during eligibility and receipt of services, of any unsettled tort claim which may affect medical needs and of any private accident or sickness insurance coverage that is or may become available. A recipient shall inform the department of any injury requiring medical attention that is caused by the act or failure to act of some other person. An applicant or a recipient shall inform the department as required by this subsection within 60 days of the date the person learns of his or her insurance coverage, tort claim, or potential cause of action. An applicant or a recipient who knowingly and intentionally fails to disclose the information required by this subsection commits a Class C misdemeanor.

(c) A claim for damages for personal injury does not constitute grounds for denying or discontinuing assistance under this chapter.

(d) A separate and distinct cause of action in favor of the state is hereby created, and the department may, without written consent, take direct civil action in any court of competent jurisdiction. A suit brought under this section need not be ancillary to or dependent upon any other action.

(e) The department's right of recovery is limited to the amount of the cost of medical care services paid by the department. Other subrogation rights granted under this section are limited to the cost of the services provided.

(f) The commissioner may waive the department's right of recovery in whole or in part when the commissioner finds that enforcement would tend to defeat the purpose of public assistance.

(g) The department may designate an agent to collect funds the department has a right to recover from third parties under this section. The department shall use any funds collected to pay costs of administering the medical assistance program.

(h) The department may adopt rules for the enforcement of its right of recovery.

Question
I am pursuing a medical malpractice claim against a California nursing home and a VA hospital, both of whom were partly responsible for a single injury. The VA provided all care to fix the injury, on its own dime; it is now asserting a lien regarding this care. Am I reading 38 USC 1729 too narrowly if I argue that a medical malpractice liability insurer is not among the third-parties to whom this section applies?

California Attorney

Answer
You raise an interesting argument, but one that is not likely to be agreed upon by a court. Technically, the term third party is defined under 38 U.S.C. §1729(i)(3)(D) to include a “person obligated to provide, or to pay the expenses of health services under a health-plan contract.”

The definition of a health plan contract under 38 U.S.C. §1729(i)(1)(A) includes a contract, medical or hospital service agreement (under which services are provided). Depending on the long-term care agreement that had your client receiving treatment at the nursing home, the nursing home is likely to be considered a third party within the meaning of the statute.

Even if you could argue that the statute is intended to be read to exclude the nursing home, arguably, the statute itself is going to be broadly construed as a statute providing recovery by the United States of cost of care and services furnished to a veteran for non-service-related injuries as part of Congress’ power to raise and support armies. A state’s argument that the statute violated the U.S. Constitution (Tenth Amendment) failed based on this very same rationale adopted by the federal court (U.S. v. State of Md., 914 F.2d 551 (1990)).

A more intriguing challenge is the argument that the United States remains partially to blame for the injuries for which it now claims to be able to be reimbursed. Clearly, the United States is not a third party within the meaning of the statute. If, for example, the United States wishes to recover against the nursing home for the nursing home’s share of medical expenses the United States incurred, it might do so by intervening in a separate cause of action, depending on whether the statute of limitations remains open for it to do so. However, the United States should not be able to recover for any medical expenses it incurred for which responsibility lies at the feet of the United States, through its representatives.

Helpful?
Sylvius von Saucken

Question
I have a client who was involved in a serious automobile accident and is now paralyzed from the waist down. He will be in the hospital for months and his medical bills are already in excess of $500,000. Medicare is his primary health insurer and the no-fault Med Pay of $10,000 is exhausted. There is only $125,000 available from the tortfeasor and my client's underinsured motorist coverage.

I have heard that it is possible to affect a pre-settlement compromise with Medicare and/or CMS in these types of situations. However, despite extensive research, I cannot seem to find any information on who to contact or how to attempt to negotiate a settlement of Medicare's interest prior to settling the case. Is that possible and, if so, how can I go about doing this? Otherwise, I fear that Medicare will be entitled to all of the funds, less procurement costs, leaving my client with nothing.

Thank you so much for your time and your invaluable questions and answers forum!!!

Nevada Attorney

Answer
In order to request a compromise you must go through all the hoops in securing Medicare's conditional payments. The first step is reporting the case to the COB at 800-999-1118. They will assign the case to the Medicare Secondary Payer Recovery Contractor (MSPRC). Once the case has been assigned to the MSPRC you will need to provide them with the proper authorization and in return they will provide you with Medicare's conditional payments. It is at this point that you can move forward with your pre settlement compromise request. The request would be sent to the MSPRC who in turn will forward it to the appropriate CMS Regional Office.

To request a compromise, you must specify the amount you want Medicare to accept in writing and the reason for the compromise and how you determined the amount to be repaid. A full reduction cannot be requested. A compromise may be requested any time after it has been determined that Medicare has made conditional payments, before or after settlement.

CMS is given authority to consider the compromise of Medicare's claim under the Federal Claims Collection Act (FCCA) at 31 USC, 3711 et seq. and 42 CFR 401.613. The MSPRC is not permitted to compromise a claim. Compromise requests are reviewed and determined by CMS Regional Office. A compromise decision made by CMS is final and is not subject to appeal.

If you need further assistance please don't hesitate to contact me.

My Best
Mary Skinner

Question
I represent a man seriously injured due to the negligence of a state employee in a car wreck. Medicare has paid a lot of his medical bills and under federal statute has a right of subrogation. However, under R.C. 2743.02(D), recoveries against the state "shall be reduced by any collateral recovery received by the claimant"- construed to mean that the state is immune from subrogation claims from those entities which have paid the plaintiff's medical bills (see Community Ins. Co. v ODOT, (2001)92 Ohio St. 3rd 376). If the client receives no money from the state for the bills paid by Medicare, there is no money to satisfy Medicare's subrogation claim, other than whatever money is otherwise received from the state in settlement of the claim. Since non-economic damages in claims against the state are capped at $250,000, a claim against the state where Medicare has paid a significant amount may leave little or no money for the client if Medicare's subrogation claim must still be satisfied. The State is adamant that the U.S. Sup. Ct. Case of Alden v Maine supports its claim that insurance companies and Medicare may not maintain subrogation claims against the State of Ohio and that R.C. 2743.02 is not preempted by a federal law passed in the exercise of Article I, Sec. 8 authority is this correct?

Does the federal statutory right of subrogation for Medicare supersede the Ohio state law on this matter? Is Medicare still entitled to receive out of the proceeds of a settlement the amount it paid, despite the Ohio statutory and case law above? I think the answer to both questions is yes, but I'm hoping there are counter arguments supported by case law.

Thanks.
Ohio Attorney

Answer
Unfortunately Medicare is entitled to reimbursement for all injury related conditional payments made from date of injury to date of settlement, period. Having said that, I would highly recommend you consider one of several administrative remedies available to you and your client – Pre-settlement compromise, Post-settlement Compromise, or Post-settlement waiver. These remedies are great for situations where the client would end up with little or nothing if they had to pay back the entire conditional payment amount to Medicare. These are based on hardship and the general ideas of fairness and equity.

Please let me know if you need further information or would like our firm to assist.

Tate Johnson

Question
In Florida, do insurance providers argue for Medicare to be a payee on a settlement check just because there is a Medicare lien to be paid back out of a settlement?

Connecticut Attorney

Answer
Our firm has been seeing the fact pattern of the settling party putting Medicare’s name on the check more and more in recent weeks, not only in Florida but around the country. The reason for this increase is because those entities are misunderstanding their Medicare compliance obligations in light of the MMSEA. They believe that, by putting Medicare’s (or Medicaid’s) name on the settlement check, Medicare’s interests (as well as themselves) have been fully protected. This is neither the intent of the MMSEA nor is this the most effective way to protect Medicare’s interests. In fact, there is no legal requirement to put Medicare’s name on the settlement check as a payee. Medicare was not a party to the legal action, merely an entity entitled under the Medicare Secondary Payer Act to be repaid for conditional payments made from date of injury to date of settlement.

As evidence that it is not required under law to put Medicare’s name on the check, we look to Tomlinson v. Landers, 2009 WL 1117399 (M.D.Fla.). The case and memo are available here. This was an auto accident case which was being settled for the $100K policy limit where Medicare had made some conditional payments. The defendant added Medicare’s name to the settlement check without discussing this prior with the plaintiff. The plaintiff returned the check, asking that it be re-issued without Medicare’s name on the check. The defendant insisted that it had no choice under federal law (namely 42 CFR 411.24) but to put Medicare’s name on the check. The plaintiff assured the defendant that Medicare would be reimbursed out of the settlement proceeds and agreed to indemnify defendant for any Medicare claims. The defendant refused to remove Medicare as a payee on the check.

The court held that: 1) federal law does not mandate that a primary payer (i.e. the defendant) make payment directly to Medicare; 2) the defendant would not have violated federal law by omitting Medicare’s name from the check; and 3) a primary payer may be liable to Medicare if the beneficiary/payee does not reimburse Medicare for any amounts owed within 60 days. In the end, plaintiff prevailed as the parties failed to reach a meeting of the minds with regard to this issue of reimbursing Medicare and the settlement was rejected.

As a practical matter, we know that Medicare prefers that settlement proceeds not be sent to them until the final claim determination (i.e. final demand) has been calculated. The final demand is that conditional payment amount less procurement cost offset allowed by Medicare in that particular case. This calculation cannot be performed until the final demand is requested from Medicare and this cannot be done until the settlement has been finalized. Thus, putting Medicare’s name on the check is not only unnecessary, but impractical.

If you have more questions about Medicare compliance, please feel free to give me a call to discuss further.

My best,
John Cattie

Question
In Missouri, a hospital does not have a valid hospital lien on a wrongful death case. The wrongful death proceeds belong to the heirs. In our case, 120 days passed and the hospital filed a lien which is not being recognized by the liability carrier. The hospital then files a claim against the estate of the deceased. There are no assets in the estate.

What is the time limit for the hospital to bill Medicare? If the hospital admits it its claim against the estate that it doesn't intend to bill Medicare, is that binding? Does it prevent the hospital from later billing Medicare?

Missouri Attorney

Answer
Depending on the date of service, providers can have up to 26 months to bill Medicare. The lien is not binding; the provider can remove the lien at any time and then submit a claim to Medicare for a conditional payment. The provider cannot have a lien in place and also submit a claim to Medicare, the lien must be removed first.

If the provider chooses to bill Medicare, then it becomes the Medicare Secondary Payer Recovery Contractors responsibility to recover payment from the settlement for any injury related care that they have paid.

I hope this helps.
Mary Skinner

Question
By receiving "supplemental" interrogatories from defense firms; is there an obligation to report to Medicare to satisfy insurance companies' obligations? You already answered that plaintiffs do not need not sign authorizations. Can you list what information plaintiffs are required to provide. I can understand name, date of birth, HIC# and whether enrolled in Medicare and receiving Medicare benefits. Do we have to give Social Security numbers? How about answering whole series of questions re Social Security Disability? Questions re end state renal disease and Lou Gehrig's disease? Thanks for your help!

New Jersey Attorney

Answer
Thank you for reaching out to us with your question. There is much confusion surrounding the requirements under Section 111.

The information that the defense is allowed to obtain to determine Medicare entitlement includes the following:

• First letter of first name
• First six characters of last name
• Gender
• Date of birth; and
• Health Insurance Claim Number (HICN) OR the Social Security Number (Medicare prefers that the HICN be used, if available)

The above information is what the defense needs to query the Medicare system to determine whether the claimant is a Medicare beneficiary. The response that Medicare will provide to the defense will only include whether there was a match and the claimant is a beneficiary; or that there was no match. The defense will not receive information about when the claimant became entitled or why they are entitled. The defense is allowed to query the system as soon as they receive notice of a claim, but the trigger date for reporting is whether the claimant is a beneficiary on the date of the settlement.

There is additional information that the defense needs for the Section 111 reporting if there is a settlement with a Medicare beneficiary. This information does not need to be provided to the defense until there is a settlement. There is no reason why the defense needs information about a claimant’s disability or illness. This is protected information and is not required for Section 111 reporting. Click here to view the list of the data points that are needed for the query and also for the reporting.

Please let us know if you need anything further.

My best,
Marlene Wilson

Question
Here is the latest I am hearing from defense counsel. They are saying that “at the early stages of the case (and by mail or phone request, so they don't have to do it by written discovery) they call or write and ask for the full name, birth date, social security #, etc. of the plaintiff" because of the new Medicare reporting requirements.

What is this about? Is it legit? Does Medicare run the business of personal injury law practice now?

West Virginia Attorney

Answer
Insurers now have to report all settlements with Medicare beneficiaries to CMS in the quarter following settlement. In order to determine which settling claimants are Medicare entitled, they have to submit 4 data points to a Query system, which will simply tell them Yes or No as to Medicare entitlement. The four data points are Name, DOB, SS# or Medicare #, and Gender.

It is in your and your clients best interest to provide these initial data points as early as possible so that the insurance company (or self insured entity), otherwise known as the Responsible Reporting Entity (RRE) can search the query system and determine your client’s Medicare status well ahead of settlement. This will help move things along at settlement time. We also advise firms to stipulate with defense at the time of settlement as to the 50 or so data points they will ultimately report to CMS (Medicare) post settlement IF your client is Medicare entitled. The collaborating as to the injury information is critical to ensure the RRE is not reporting different injuries to CMS than what you/your client have satisfied in payment of the tort recovery obligation.

Assuming the insurance company is not requesting anything more than those 4 data points noted above, they are not overstepping at this stage of litigation. Some firms provide them with “limited use” language that says you are providing them for the sole purpose of determining Medicare entitlement so as to allow the RRE to find out whether they will have to report in accordance with Section 111 reporting requirements.

Please let me know if you want more detail, and I can provide offline. Additionally, our website has an entire section regarding MMSEA (Section 11 Insurer Reporting Requirements) and exactly what it requires of RREs (and more importantly what it DOES NOT require).

My best,
Tate G. Johnson, Esq.

Question
I have read with interest, your article on the Garretson Firm Resolution Group website regarding the Longaberger case and its meaning.

I do have a question - suppose in the liability case I did not seek medical expense recovery and settled the case for pain and suffering only. Would the plan still have a claim for reimbursement? I see the wording of the sample given in the article refers to "any recovery" but have any courts weighed in this aspect?

Thanks for your time.

Answer
That is a very good question. Courts have weighed in on this matter and generally they will defer to the express language of the policy and the fact that ultimate discretion will lie with the administrator in interpreting plan language. In using the words "any recovery" it is a pretty safe bet that this includes recoveries which do not specifically provide for past medicals. Many plans do not stop there and will actually have additional provisions that state that regardless of how a settlement is allocated they will still have a right of first recovery and the participant must not do anything to prejudice the plan's rights. Thus the allocation technique is most effective when dealing with plans that limit their rights to recoveries for medical expenses. This is less common but something that we still see. This discussion really emphasizes the importance of carefully evaluating the plan language.

While this may seem to be a bit unjust I believe that this type of issue will be fought out in the coming years. Particularly in the scope of the meaning of "appropriate equitable relief" (as designated by ERISA) and states which limit or prohibit the recovery for medical expenses.

Thanks for the question and please let me know if you have any follow ups.

Michael Russell

Question
What are the 50 data points?

Answer
The 50 data points are comprised of the following data categories:

1) Injured party data;
2) Primary plan data;
3) Injured party attorney data;
4) Incident data; and
5) Settlement data.

The particular data points to be reported will change depending on the case-specific facts, and may be as many as 131 data points in rare cases. For more information, including the detailed list of data points, visit our website at www.garretsonfirm.com.

Sylvius von Saucken

Question
Can a plaintiff's lawyer get into the QUERY ACCESS system? If so, how? If not, how do we develop a system that will satisfy carriers and our client?

Answer
The CMS Query Access system is a tool developed by CMS for use by those entities that have registered as an RRE. CMS recognized the difficulties an RRE would have in truly determining who is a current Medicare beneficiary versus who is not a current Medicare beneficiary. Since the reporting obligation under the MMSEA only ripens when the injured individual is a current Medicare beneficiary at the time of settlement, judgment, payment or other award, the RRE needed a way to know when it must report settlements to Medicare. Unfortunately, plaintiff attorneys do not have access to the Query Access System unless they are somehow registered as an RRE. Instead, the way you can develop your system that will satisfy carriers and your clients is to have a standard operating procedure in place at your firm for every case, understanding that formal verification / resolution of Medicare conditional payments remains a plaintiff obligation. To do that, we recommend enhancing your case intake to capture essential information about your client’s government benefits as well as capturing the data points which the RRE will have to report. Capturing this information up front will allow you to start the process of verification / resolution early while simultaneously assisting the settling party responsible for payment to satisfy its reporting obligation by showing that party, at time of settlement, you already started this process. In so doing, you will be moving the case towards settlement as opposed to having these Medicare compliance issues chill the settlement negotiations.

Sylvius von Saucken

Question
In our state, wrongful death awards belong to the family and are not subject to claims of the estate -- and the medical expenses incurred by the decedent prior to death are not part of the measure of damages. I am trying to discuss/communicate with MSCRP to get an acknowledgment that the insurance company can pay the settlement without having Medicare liability. Fax communication with MSPRC regarding this issue is going nowhere. Any pointers?

Answer
If a wrongful death statute does not permit recovering medical damages, Medicare has no claim to the wrongful death payments. When a liability insurance payment is made pursuant to a wrongful death action, Medicare may recover from the payment only if the State statute permits recovery of these medical expenses. Generally, if the statute permits recovery of the deceased's medical expenses, Medicare may pursue its payments, even if the action fails to explicitly request damages to cover medical expenses. Thus, in that event, even if the entire cause of action sets forth only the relatives and/or heirs damages and losses, then Medicare may still recover its payments. When State law permits a full recovery of medical damages but limits the amount of the recovery which is payable to creditors as a result of past medical expenses, Medicare may recover against the entire tort recovery, up to the full amount of past Medicare payments. However, when state law limits the amount of the past medical expenses that may be recovered from the tortfeasor and responsible insurer, Medicare may recover only up to that amount (or the amount of the settlement, if the settlement is less than or equal to Medicare's claim.)

Unfortunately, you will still need to report the case to Medicare and provide them with the documentation advising them they do not have any interest in the settlement based on your state’s WD statute, which includes providing them with a copy of the statute. You might also refer them to their own policy under the Medicare Secondary Payer Manual, Section 50.5.4.1.1- Wrongful Death Statutes, which is where the above instructions are derived.

Sylvius von Saucken

Question
Are the Medicare Supplemental Insurances (such as AARP) medical bills included in the subrogation when we pay back Medicare? If not, am I assuming correctly that we are required to contact such insurance provider for their subrogation?

Thanks.
Charleston Attorney

Answer
The MSP Statute is intended to cover reimbursement for Medicare’s program (including Parts A and B). Recent (2003) regulations now may include Medicare Parts C and D. However, supplemental coverage would not be included in your Medicare conditional payment summary, so you are quite correct – you would contact the insurance provided to determine their reimbursement right, noting the Medicare Parts A and B might have covered as much as 75% of many medical bills (depending on the client’s adjusted gross income), but the supplemental coverage would have made co-pay and other payments. For example, the Medicare Part A deductible is $1,100 for 2010. Where your client, as a Medicare beneficiary, would have been responsible for a deductible or co-pay, depending on the terms of the supplemental coverage, this may be the part of the injury-related medical expenses you are looking for.

Sylvius von Saucken, J.D.

Question
Does Medicare presently have the power to assert a claim against a tortfeasor and / or its liability carrier? The tortfeasor settled a BI claim with a liability carrier. Now they want to withhold payment until the Medicare lien is resolved. I am concerned about its exposure. Should we disburse funds without resolving the Medicare lien, which we have no intention of doing given our and our client's exposure? I was under the impression that the tortfeasor / liability carrier had no exposure to Medicare until July 1, 2010. Am I incorrect in this assumption?

Georgia Attorney

Answer
Yes, CMS has a direct right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency, or a private insurer that has received a third party payment, 42 CFR 411.24.

We have seen an increase in the number of liability carriers that want documentation from the plaintiff that Medicare's interest is being protected. It has always been that in the event that reimbursement is not made to Medicare as required by 42 USC 1395y(b)(2)(B)(I), action may be brought against any entity responsible for payment (and may collect double damages from insurance companies), or any entity that has received a third-party settlement. Under 42 CFR 411.24(g), this includes attorneys whose fees are paid from settlement proceeds.

The tortfeasor / carrier always had exposure, however since the MMSEA act the defense seemed to have been awakened to the fact that they can be held liable if Medicare is not reimbursed.

CMS has recently issued an extension of the first reporting date from April 1, 2010 to January 1, 2011. Any settlements made on or after October 1, 2010 will be reportable.

Mary Skinner

Question
Your blog / posting concerning subrogation was most informative. It leads me to a question, if you don’t mind.

My client is receiving $12,000; $3,000 of that is medical subrogated by BCBS. In her Chapter 7 bankruptcy (now discharged) she listed the possible PI claim as exempt property to the maximum we could exempt (about $20,000).

Although we never listed BCBS as a creditor, case law holds that in a no-asset Ch 7, creditors who were not noticed are discharged. (I have a lovely 5th Cir opinion on that.)

This brings me to my question. You wrote:

They can treat the subrogation carriers as creditors in a Ch 7 or a Ch 11; provided however, they put the settlement money into the estate.

“Into the estate” gives rise to my question: does that mean she cannot exempt the medical subrogation money? Is this over and above that $20,000 already “in the estate” and exempted? It would seem that she has already put all possible money into the estate by claiming the $20,000 exemption.

I really appreciate your help and thank you in advance.
Texas Attorney

Answer
Where you have listed the settlement proceeds on Schedule B and exempted it on Schedule C, my position is that provided the $12,000 represents your client’s gross settlement proceeds, you have already included the amount held back for medical subrogation.

If not, what is the client’s gross settlement amount, as that could bear on a determination whether the client identified the assets as belonging to the bankruptcy (Ch 7) estate. If it turns out that combined, the $3,000 subrogation amount is included as part of the exempt amount, I would feel comfortable paying BCBS out of the settlement proceeds exempted from the bankruptcy estate, if there is a contractual requirement to do so (outside of the bankruptcy context).

Sylvius von Saucken

Question
If one previously entered into an agreement with Medicare on past and future liens on various cases but the funding of the settlement occurs after 1/1/2010 are these new requirements applicable and will funding be delayed?

Answer
Your answer depends on the settlement terms. Our position concerning conditions precedent to settlement funding is that if the settlement agreement is complete before 1/1/2010, but the timing of payment, as an administrative matter occurs thereafter, that settlement should not be reportable. If, on the other hand, there is the potential of funds reverting back to the paying parties, or there is a condition, such as minor settlement approval, that if not met, would preclude any payment from occurring, in that case, when the final condition precluding payment has been satisfied, you have a reportable event under the MMSEA.

Sylvius von Saucken

Question
I settled a medical malpractice case involving a Medicare recipient. No claim has been received from Medicare. The insurance company wants to withhold part of the payment until I clear with Medicare. I understand that the only settlements after Oct. 1, 2010 are to be reported. Is this settlement still subject to a lien?

Puerto Rico Attorney

Answer
Yes, any settlement that involves a Medicare beneficiary must be reported and Medicare's interest protected and reimbursement made for any conditional claims they have made for injury related care.

Under the MSP laws (42 U.S.C. § 1395y(b)), Medicare does not pay for items or services to the extent that payment has been, or may reasonably be expected to be, made through a no-fault or liability insurer or through Workers' Compensation (WC). Medicare may make a conditional payment when there is evidence that the primary plan does not pay promptly, conditioned upon reimbursement when the primary plan does pay. Once the MSPRC has information concerning a potential recovery situation, it will identify the affected claims and begin recovery activities. Insurers/WC carriers (as applicable), beneficiaries, and representatives/attorney(s) are required to recognize the obligation to reimburse Medicare during any settlement negotiations.

The first step in the process of reporting the case to Medicare is to contact the Coordination of Benefits Contractor (COBC) at 1-800-999-1118.

The COB will then establish the record and forward it to the Medicare Secondary Payer Recovery Contractor (MSPRC). Once the case has been established you must send the MSPRC proper proof of representation in order for the MSPRC to release information regarding conditional payments for injury related care they may have made.

Medicare's recovery claim runs from the "date of incident" through the date of settlement/judgment/award. Medicare has both a direct priority right of recovery and subrogation rights based upon Federal law; Medicare's recovery claim is superior to the recovery claims of any other entities.

The reporting of settlements after October 1, 2010 is concerning Medicare, Medicaid and SCHIP Extension Act of 2007, or the MMSEA. The MMSEA statute (42 USC 1395y(b)(8)), the insurance company may have to report certain information to Medicare once a claim is settled. That reporting obligation arises in those cases where the injured individual is a current Medicare beneficiary at the time of settlement. The insurance company, generally referred to as a Responsible Reporting Entity or RRE, faces a $1,000 per day per claimant penalty under the statute if they are found to be out of compliance.

Regards,
Mary Skinner

Question
Thank you for your blog re Medicare liens. I hope I am reading 411.37 wrong. We have a client that has over $100,000.00 in Medicare bills. If we settle for the limits of $50,000.00, then we can only get procurement costs and the balance goes to Medicare? Would there be any money left for the plaintiff? Please tell me that I am reading this section wrong!

California Attorney

Answer
Unfortunately, you are not reading it incorrectly. If Medicare payments equal or exceed the amount of the liability insurance payment, judgment or settlement amount, then Medicare recovers the total amount of the settlement minus procurement costs.

Having said that, there are remedies with the MSP provisions that would allow for reduction of Medicare's reimbursement and enable the client to put some money in their pocket.

Waivers

A waiver can be considered based on Section 1870 (c) of the Social Security Act and 42 CFR 404.501-404.515. A waiver can be requested based on financial hardship due to the accident, or based on equity and good conscience. The request must be made in writing to the lead Medicare contractor only after settlement has been reached.

A waiver may only be considered after settlement has been finalized and proof of settlement has been forwarded to the MSPRC. If the beneficiary is deceased, a waiver can only be requested by a surviving spouse or a legal dependent entitled to benefits under Title II or Title XVIII of the Social Security Act. It should be noted that prompt repayment to Medicare will avoid accruing interest charges. You will retain your right to dispute, appeal, or request waiver of the debt.

Compromises

A compromise can be considered based on Federal Claims Collection Act and 42 CFR 401.613.

1. Litigative risk
2. Inability to pay
3. Cost to collect Medicare's claim will exceed amount of recovery

A compromise can be requested before or after settlement. The beneficiary, spouse, immediate family member, or attorney may request a compromise. If the request is post-settlement, settlement information must be submitted in writing before your request will be processed.

I hope this helps.
Mary Skinner

Question
A Medicare client was injured in auto/pedestrian accident and sought medical treatment at a local hospital. The hospital does not file a claim with Medicare. Instead, the hospital files a hospital lien against the injured client. Is the hospital obligated to file this claim with Medicare, or, can the hospital recover the full amount asserted in the statutory hospital lien?

Oklahoma Attorney

Answer
When a Medicare provider of services learns that a beneficiary received services that may be payable by a payer primary to Medicare, the provider is required to pursue payment from the primary payer for a period of 120 days following the date of treatment. At the end of the 120 day period, if the insurer has not made payment, the provider may choose to bill Medicare or continue to wait for payment from a future insurance settlement. If the provider chooses to bill Medicare, then it becomes the MSPRC’s responsibility to recover Medicare’s conditional payments if a settlement occurs at some point in the future. The provider of service is not required to send the bill to Medicare if they choose to pursue payment from a possible future insurance settlement.

That being said, a provider may either:

• Bill Medicare for payment and withdraw all claims/liens against the liability insurance/beneficiary’s liability insurance settlement (liens may be maintained for services not covered by Medicare and for Medicare deductibles and coinsurance); or

• Maintain all claims/liens against the liability insurance/beneficiary’s liability insurance settlement.

Additionally,

• If the provider bills Medicare, the provider must accept the Medicare approved amount as payment in full and may charge beneficiaries only deductibles and coinsurance.

• If the provider pursues liability insurance, the provider may charge beneficiaries actual charges, up to the amount of the proceeds of the liability insurance less applicable procurement costs but may not collect payment from the beneficiary until after the proceeds of the liability insurance are available to the beneficiary.


I hope this was helpful.
Mary Skinner

Question
When a third-party tortfeasor’s personal liability policy limits are insufficient to compensate the victim for his non-medical expense damages (i.e. past and future pain and suffering, physical impairment, disfigurement and lost wages)and pay the government's subrogation claim, whose claim to the homeowner's insurance proceeds have priority? Is this the victim or the governments’ responsibility? Must the victim first be made whole for his non-medical expense damages before the government can he or she recover medical expenses to pay for the victim's medical care? Or can the government deplete the available liability insurance monies in satisfaction of its subrogation claim and leave the victim wholly uncompensated for his non-medical expense damages? In other words, if payment of the government's subrogation claim will leave nothing to compensate the victim for his non-medical expense damages, does the government get it all and the victim get none? How are the answers to these questions different, if at all, if the victim settles with the tortfeasor before Tricare benefits have been paid to the health care providers?

Answer
TriCare derives the authority to assert a subrogation claim under the Federal Medical Care Recovery Act (FMCRA), 42 U.S.C. §§ 2651-2653, which authorizes recovery of the reasonable value of medical care furnished or paid for by the United States under circumstances creating tort liability for such medical care in a third party. 32 C.F.R. § 199.12(b).

Under the circumstances of your question, I would cite the case of Commercial Union Ins. Co. v. US, 999 F.2d 581 (C.A.D.C). The Court here stated that FMCRA is silent as to priority of government's right to recover from tortfeasor medical expenses it incurred on behalf of injured employee over injured employee's right to recover non-medical damages from tortfeasor. The Court also pointed out that 42 USC 2652(c) allows the injured party to recover damages for those damages not covered under FMCRA and giving the government priority would essentially render this section useless. Ultimately the Court held the interpleaded fund would be distributed on ratable basis, such that each claimant received share of fund proportionate to their share of total judgment figure, since FMCRA was silent on question of priority of claimants' rights and since “equity is equality.” While the circumstances of this case may vary from your question, the case certainly provides some guidance.

It is also worth noting that in a case where the injured party pursued the tort claim and the government passively waited for reimbursement, courts have required an equitable reduction in the government’s claim. Mosey v. U.S., D.Nev.1998, 3 F.Supp.2d 113. As a general matter, in our experience, the government is willing to take such matters into consideration and may adjust accordingly so the injured party receives some compensation.

If a settlement took place prior as mentioned in your second question, the priority determination would arguably be the same. Please let me know if you have any questions. Thank you for the question.

Michael Russell

Question
Does MMSEA require an updated verification process or one that you did earlier (a year ago or so)?

Answer
Great question, especially if there is a client who is not yet a Medicare enrolled beneficiary at the time you start negotiations. CMS (Medicare) advises that the RRE (insurer or self-insured, or payer of the settlement or judgment) needs to update their QUERY right up until a payment event (sign settlement agreement, receive court order) occurs.

Sylvius von Saucken

Question
What suggestion do you have when you have an injured worker who will likely qualify for SSDI within 30 months of a Workers’ compensation settlement, has a WC settlement of 110k being negotiated, has a physician who says that knee replacement will be needed, and a claimant who refuses to have knee replacement.....we want to reduce set aside amount.

Answer
The fact that the injured worker will qualify for SSDI within 30 months of the WC settlement does not necessarily mean that a MSA is appropriate. In fact, the 30 month period of time to which you refer is really linked to an injured individual’s “reasonable expectation” of Medicare entitlement, not SSDI entitlement. According to the CMS Policy Memos, a person possesses that “reasonable expectation” if one of the following 5 characteristics are true: 1) he/she has an open, active application for SSDI pending; 2) he/she has applied for SSDI, that application was denied and they anticipate appealing that denial; 3) he/she has applied for SSDI, that application was denied, and they are actively appealing the denial; 4) he/she is at least 62.5 years old; or 5) they possess an End Stage Renal Disease condition but are not yet a current Medicare beneficiary. If the injured individual does not meet the above mentioned criteria and is not a current Medicare beneficiary, then a MSA is not appropriate. In addition, when considering Medicare’s future interests, starting with the question what part of the settlement has been allocated to future costs of care will lead you to the right answer. Starting with what should the MSA amount be, is like the tail wagging the dog – you need to identify the allocation issues first (see 42 C.F.R. §411.46(d)(2)).

Sylvius von Saucken

Question
I understand that the defendant’s obligation to report is not until after the case settles (and only if it settles). Defendants are allowed (but not required) prior to settlement to access Medicare's Query Access system to find out if the claimant is Medicare eligible. Assuming they need to report at some point in time, the bottom line question is, does the insurance company (defendant) need an authorization signed by my client in order to access the Medicare Query Access System? Several companies are claiming they must have the authorizations signed by our clients before they can get the information from Medicare.

-Ohio Attorney

Answer
The defendant (RRE) does not need a release to obtain the five data points to perform the query function to obtain entitlement information. CMS has stated that their response to the RRE will only tell the RRE entitlement status. It will not provide the RRE with why the injured party is entitled, when the injured party became entitled or the SSDI status. The response will only tell the RRE whether there was a match and that the injured party is entitled or that there was no match.

We have seen many RREs requesting that a release be signed. This is absolutely not necessary for the query function or for the submission process.

My best,
Matt Garretson

Question
I am currently processing a settlement in which the client is a Medicare recipient. Nevertheless, he has never received Medicare covered medical treatment and has none planned. The defendant is insisting on a provision in the settlement agreement stating that the client agrees not to seek Medicare covered treatment for a period of 30 months. Is there anything in the MSP statute that supports this notion? I don't think so, but how should I respond? I cannot advise this man to forego covered treatment just for the convenience of a defense lawyer who does not understand the statute.

Answer
You are correct to believe that the MSP statute does not support the notion that a claimant must agree to forgo any Medicare covered treatment for the 30 month period of time post-settlement simply because the defense misunderstands its Medicare compliance obligations. Instead of having language in the settlement release speaking to a time period in which the claimant may not seek Medicare covered treatment, you should try to keep the release terms couched in currently enacted law under 42 USC §1395y(b) and the associated MSP federal regulations. Furthermore, you should feel comfortable enough to indemnify defense on any future cost of care issues which may arise from Medicare after the settlement. Despite their misguided perception, defense does not have any exposure to Medicare on future cost of care issues. That liability lies with your client and you. Therefore, providing indemnification on that issue provides them with a certain level of comfort while you are not agreeing to any more than the statute would require – that your client verifies and resolves any conditional payment reimbursement obligations.

Question
Is anybody sufficiently familiar with Colorado law to know OTOH whether they have an anti-subrogation statute like we do? Just hoping...

Colorado Attorney

Answer
Our firm focuses exclusively on healthcare compliance (we resolve liens for PI attorneys on a broad basis nationwide). From our research, CO does not have anti-subro currently. There has been a bill introduced that may take them in that direction.

See below:

House Bill 10-1168 Introduced

Proposed addition under Insurance Title of Colorado Statutes

Codifies Made Whole and Common Fund
If insurer disputes they must file motion and court decides

Subrogation is prohibited

Third party settlor cannot add insurer as co-payee on any settlement check

The bill introduced in the House seeks to eliminate all subrogation and permit reimbursement ONLY when the injured insured is made whole (fully compensated for injuries and damages). If the insurer disputes the argument of made whole they may motion the court with underlying jurisdiction to decide whether fully compensated. Such motion must be brought within 60 days after the insurer is notified that the recovery is exceeded by the damages. IF insured receives full compensation (made whole) then insurer MUST reduce for proportionate share of fees and expenses. Also any reimbursement MUST be applied to the lifetime cap of the policy.

Hope this helps. My best,
Tate Johnson, Esq.

Question
Our client is the surviving son of a woman who died in a nursing home after falling several times. We have reached a settlement and the defendant now asserts that Medicare has a lien on the proceeds for all amounts. Medicare might have paid for her stay in the nursing home, as well as for treatment for her repeated falls.

When decedent died, a probate estate was opened, and Medicaid forced the sale of her home to satisfy its interest for payments made. Medicare did not. In Missouri, it is the survivor who makes a claim for the death, and the jury is allowed to consider the loss of consortium, support, care, comfort, etc. The estate of the decedent is NOT the plaintiff, even if a probate estate was opened, as in this case.

Can Medicare now assert a lien against the survivor's interest when they knew or should have known that it had a claim against the estate of the decedent for the care it provided?

Thanks for your assistance!
Missouri Attorney

Answer
Yes. Medicare has a priority right to recovery for any injury related claims they may have paid. According to Medicare's policy MSP Manual 50.5.4.1, "a beneficiary’s death does not materially change Medicare’s interest in recovering its payments made on behalf of the beneficiary while alive. Upon death, the estate of the beneficiary comes into existence by operation of law.” An executor or administrator whose sole purpose is to conclude all business and financial matters that still remained at death manages it. Medicare’s interest in the outcome of a third party liability claim is one of these matters. Therefore, Medicare’s claim is properly asserted against the estate.

Having said that, unlike Medicaid, who can recover from the estate for all payments made, injury and non injury related. Medicare's seeks reimbursement only for claims that are from the date of injury thru the date of settlement, and only for the injuries attributed to your claim.

Mary Skinner

Question:
I have a PI case in which our client was in a Motor Vehicle Accident in 1995. We settled the case in 2000. Our office was proceeding through the process of getting a final repayment amount from Medicare. In 2001 Medicare quit communications with our office and our client. The attorney who was handling this case refunded the monies we were holding in our trust account to the client in 2004. In August, 2009 both our client and our office received a demand letter from CMS. Is there any kind of statute of limitations with regards to repaying Medicare if they let eight years pass before demanding money?

Arizona Attorney

Answer:
Under the statute of limitations (28 U.S.C. 2415), Medicare has six (6) years and three (3) months to recover Medicare’s claim. The statute of limitations begins at the time Medicare is made aware that the overpayment exists.

Medicare’s overpayment does not come into existence until a judgment award or settlement offer is accepted. It is at the point of settlement that Medicare’s conditional payments are considered to be overpayments. Medicare’s claim come into existence by operation of law 42 U.S.C. 1395Y(B)(2)(B)(I) when payment for medical expenses that Medicare conditionally paid for has been made by a third party payer.

In your situation, the date of settlement was 2000, the clock started ticking on Medicare's SOL when you notified Medicare of the settlement. Considering that you and your client have received a demand letter from Medicare, it must be addressed promptly to avoid collection efforts by Medicare, such as garnishment of your clients Social Security benefits and/or double damages for you.

Section 42 CFR 411.23 states that a beneficiary must cooperate in any action taken by the Centers for Medicare and Medicaid Services in recovering conditional payments. Failure to do so or not protecting the Medicare program during and after settlement negotiations may result in CMS taking action against the beneficiary to collect the mistaken payment.

In the event that reimbursement is not made to Medicare as required by 42 USC 1395y(b)(2)(B)(I), action may be brought against any entity responsible for payment (and may collect double damages from insurance companies), or any entity that has received a third-party settlement. Under 42 CFR 411.24(g), this includes attorneys whose fees are paid from settlement proceeds. Please refer to US v. Sosnowski, et. al. where judgment was entered against a beneficiary and his attorney for failing to reimburse Medicare after receiving settlement proceeds on a personal injury case.

CMS has a direct right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency, or a private insurer that has received a third party payment, 42 CFR 411.24.

Having said this, the best way to address the situation is to request a post-settlement compromise of Medicare's interest. When submitting your request, craft a compelling story; provide them with the facts of the case and supporting documentation for your argument. All post-settlement compromise requests must be in writing and sent to the MSPRC Medicare Contractor), they will forward your request to the CMS Regional office. The MSPRC contractor does not have the authority to compromise. The authority to compromise a Medicare claim is reserved exclusively for the CMS home office or regional offices. Any agreement for a compromise settlement under the Federal Claims Collection Act ("FCCA") may not be appealed.

I hope this was helpful. Should you need further guidance please contact me.

Mary Skinner

Question:
I am settling a workers’ compensation case for $100,000 and closing out medicals in a disputed claim. My client is 66 and on Medicare. Is it acceptable to have the Insurer fund a MSA with an amount that they "deem" sufficient (without CMS review) and agree in the settlement documents to supplement the MSA account if CMS later finds that more funds were necessary to be in compliance? Is this sufficiently protecting Medicare's interest?

Answer:
Current law (42 USC 1395y(b)) and guidance about the use of MSAs in Workers’ Comp settlements (via CMS Policy Memos) tells us that settling parties have to properly consider and protect Medicare’s interests at the time of settlement. Those interests are two fold, past interests and future interests. The MSA question arises as part of properly considering and protecting Medicare’s future interests. Unlike handling Medicare’s past interests, where Medicare may seek recovery from any entity that MAKES/RECEIVES a primary payment, when properly considering and protecting Medicare’s future interests, Medicare will only pursue any entity that RECEIVES a primary payment. Based on this, it is the claimant’s (and claimant’s attorney’s) responsibility to ensure that the MSA is properly funded and MSA proceeds are properly spent, not the insurer’s responsibility. While submitting a MSA proposal to Medicare is voluntary, that MSA must still properly consider and protect Medicare’s future interest. If those future interest issues are not handled appropriately, Medicare will look to your client and you, not the insurer.

Under your fact pattern, the insurer would fund the MSA with an amount it deems appropriate, and will agree to supplement that MSA should CMS later find that it was under funded. The penalty for failure to properly consider and protect Medicare’s future interests (i.e., properly funding a MSA when appropriate) is Medicare revoking the claimant’s Medicare card for a certain amount of time until Medicare determines, in its sole discretion, that its future interests have been satisfied. Practically speaking, that means your client would lose Medicare benefits and have to pay out-of-pocket for future care until Medicare restores their benefits.

Overall, I believe setting up the MSA for the amount determined by the insurer to be sufficient may sufficiently protect Medicare’s future interest, but only with the caveat that should Medicare revoke your client’s Medicare card in the future for failure to properly fund the MSA, then the insurer will be responsible for all injury-related medical expenses otherwise covered by Medicare until such time when Medicare restores your client’s Medicare benefits. Because the insurer has no liability to Medicare on these future interest issues, it really has no incentive to ensure the MSA is properly funded. Therefore, it will blindly accept the work product provided by the MSA Allocation house with whom it contracts and then fund the MSA for that amount, whether it is sufficient or not. Therefore, if the safeguard of subsequent funding by the insurer is built into the settlement docs, this may be a sufficient way of considering and protecting Medicare’s future interest. If not, your client may face significant problems with Medicare in the future without the ability to seek additional recovery from the insurer.

A more appropriate method for protecting Medicare’s interests would be for you to seek a plaintiff-oriented MSA Allocation that would provide a more realistic allocation amount for future injury-related care. Since the exposure to Medicare on future interest issues goes directly to your client and you, you should be “driving the boat” on the MSA issues as opposed to the defense. If the insurer is willing to supplement the MSA in the future should Medicare find the original MSA lacking, it should be willing to fund it appropriately from the start.


Hope this helps…
John Cattie

Question:
If a provider chooses to bill the liability insurance settlement, rather than submitting the claim to Medicare, does it have to reduce its lien by a pro-rata share of the "procurement costs?" The way the reg reads, it is ambiguous to me. Says they may collect their total charges up to the amount of the settlement less any applicable procurement costs. Does that mean if legal costs are 40% of the total settlement that every provider who chooses to file a lien has to accept a 40% reduction? Or does it mean their lien just doesn't attach to the part of the whole settlement that is going to the plaintiff's lawyer? EG, if a lien is $100,000, the settlement is $1,000,000 and the procurement costs are $400,000, does the provider get to collect $100,000 or $60,000?
Thanks in advance for your input.

-Oklahoma Attorney

Answer:
Here is my understanding: The pro rata offset is applied to the full settlement amount, not the individual provider charge or “lien.” In other words, the providers may collect actual charges from the net proceeds to the client/beneficiary after the pro rata offset has been taken. In your scenario, the provider would be able to collect the actual charges of $100,000. It is important to note that the providers cannot seek or attempt to collect those charges until settlement has been made. Attempting collection prior to settlement is considered “billing the beneficiary” which is not allowed. Hope this helps…

My best,
Matt Garretson

Question:
I have been a solo practitioner 1969. I am a member of AAJ and represent plaintiffs in civil cases only. Recently, I received a “CMS questionnaire” from an insurer for the first time referencing the federal law and claiming that the law imposes mandatory reporting requirements on insurers with respect to claimants who receive compensation from liability insurance with respect to medical expenses or a release of medical liability for medical expenses. Basically, the questionnaire asks if the claimant has ever been enrolled in Medicare Part A or B and also whether the claimant has ever applied for Social Security Disability benefits. Is this truly a mandatory requirement now which must be honestly answered for all personal injury claimants before cases can be settled with a liability insurer? Thanks for your help in this matter.

Massachusetts Attorney

Answer:
You are not the only one getting such "CMS questionnaires" from an insurer. The reason you are receiving such a document from the insurer is because under the MMSEA statute (42 USC 1395y(b)(8)), the insurance company may have to report certain information to Medicare once a claim is settled. That reporting obligation arises in those cases where the injured individual is a current Medicare beneficiary at the time of settlement. The insurance company, generally referred to as a Responsible Reporting Entity or RRE, faces a $1,000 per day per claimant penalty under the statute if they are found to be out of compliance, so this obligation definitely has gotten their attention.

Therefore, in an effort to maintain compliance with Medicare, the RRE needs to determine if the injured individual is a current Medicare beneficiary. CMS has set up a Query Access system allowing an RRE to determine an injured individual's Medicare entitlement status based on the electronic submit of limited data. That data is as follows: 1) the person's Medicare number (aka HICN) or Social Security number; 2) the first letter of the person's first name; 3) the first 6 characters of the person's last name; 4) gender; and 5) date of birth. Using this limited information; Medicare will advise the RRE whether that individual is a Medicare beneficiary. If so, the RRE knows it will have to report the settlement. If not, absent contrary information, the case will not have to be reported unless that entitlement status changes to a 'yes' before settlement. If a case is reportable under the MMSEA, the RRE must report at least 50 data points to Medicare, and it can be as many as 131 data points. The RRE will not be in compliance with Medicare unless it reports to Medicare in a timely manner.

With regards to the request for Social Security information, the RRE is trying to determine whether the injured individual may require a Medicare Set Aside (MSA) to be established as a part of the settlement. Due to an abundance of misinformation currently in the marketplace, some RRE's mistakenly believe that the new MMSEA reporting statute obligates them to establish MSAs as a part of the settlement. While currently enacted law requires the settling parties to consider Medicare's interests, the use and propriety of a MSA in a liability settlement is really limited, and should be based on the case-specific facts. For more information about MSAs, I refer you to our MSA White Paper on our website.

To your question about whether is it required that you complete this "CMS questionnaire", I would say that it is not a requirement. However, practically speaking, until the RRE is satisfied that it is Medicare complaint, it will be very reluctant to settle a case, let alone disburse settlement proceeds. We advise plaintiff firms to cooperate with defense on these issues and help them to satisfy their reporting obligations by 1) providing the limited information mentioned above to enable the RRE to determine the injured individual's Medicare entitlement status, and 2) collaborate with the RRE on the data points to be reported to Medicare. We go as far as to suggest stipulating to the data that would be reported to Medicare as a part of the settlement agreement. We have seen that the MMSEA questions have had a chilling effect on the settlement continuum for those parties not willing to cooperate on these Medicare compliance issues. To that end, providing defense with appropriate information which is not overbroad is highly suggested.

For more information about MMSEA compliance, please talk with Marlene Wilson, our Director of MMSEA compliance. She can be reached at (866) 694-4446.

My best,
John Cattie

Question:
I enjoyed your informative seminar on Medicare. However; I was not able to get in a question but would appreciate if you could give me your thoughts. Your seminar and materials I have seen from your firm talk about dealing with Medicare through the MSPRC or CMS. We have received a subrogation and/or reimbursement interest letter from INGENIX on behalf of AARP MEDICARECOMPLETE PLUS that they are entitled to the same treatment and rights as Medicare. Is that true? Thanks.

Virginia Attorney

Answer:
Thanks for your question and your kind words. It was my pleasure to attempt to present some clarity with respect to the Medicare compliance questions. Health plans such as AARPMEDICARE COMPLETE PLUS plans are Medicare Part C plans. Although these plans often try to assert the same recovery rights as traditional Medicare Part A or B, Medicare Part C plans, for subrogation purposes, are treated akin to a private plan rather than traditional Medicare. That is because Medicare Part C is not covered within the meaning of the MSP statute (42 U.S.C. 1395y(b)). A very good summary of the laws that do apply to Medicare Part C is contained in the (attachment - click here) U.S. District Court’s ruling in Primax Recoveries v. Yarmosh (U.S.D.C. D. Ct Case No. 3:03CV01931), in which the Court holds that Medicare HMOs are not able to imply a private cause of action to recover funds paid under such plans (through bootstrapping the MSP statute). Instead, the Court held that there is no private cause of action for a Medicare+ Choice HMO (Part C) under the Medicare Part C statute (42 U.S.C. 1395mm(e)(4). Rather, the Court found the HMO’s remedy, if any, is under state contract law. Id., 790; see also Nott v. Aetna U.S. Healthcare, Inc., 303 F. Supp. 2d 565 (E.D. Pa. 2004).

To that end, one must look to the actual plan language itself to determine the plan’s reimbursement rights. Depending on the plan language (which could be strong or weak), the plan may have a right of reimbursement or it may not have a right of reimbursement. Thus, it becomes imperative to review the plan language as opposed to lumping Medicare Part C plans in with traditional Medicare when it comes to reimbursing for injury-related care.

I have copied John Cattie and Michael Russell on this email, each of whom works with me in addressing these issues. Should you have any further questions of John, Michael and/or me, please do not hesitate to ask.

Our best,
Sylvius von Saucken

Question
I have a client who has a large Medicare lien. We settled the case on the premise that a jury would have attributed 30% of fault to our client. After settlement we sent a letter to MSPRC advising of the settlement, our costs and expenses. The lien amount was only reduced by 10% with no reduction for our fees and expenses. I sent a letter of appeal citing the statutes which require reduction for procurement costs. We paid the full amount of the lien under protest to avoid interest charges. I just received a letter advising the full amount of the lien had been paid and the file was closed. I called to ensure the appeal was on file. I was advised the request for "compromise" had been sent to the regional office. She went on to advise that the regional office has no time limit by which these compromise requests must be processed. She also refused to give me any contact information for the regional office. Do you know if there is a time limit on this? I understood I had filed an "appeal" not a "compromise request" do I need to re submit an "appeal"? Any assistance would be appreciated. Thank you.

Kansas Attorney

Answer
Unfortunately, what you are experiencing is not uncommon. Under the current process, all correspondence is scanned in Detroit and put in "buckets" based on how the correspondence is either labeled or the language in the first one or two sentences of the letter.

When the MSPRC miscalculates the final demand amount then a request for "redetermination" must be made. Based on the facts you provided it appears that when you requested an "appeal" the MSPRC labeled your letter as a “compromise" and forwarded it to the Regional Office in Kansas City. The CSR you spoke with at the MSPRC was correct in that there are no time limits associated with a compromise request; however, it has been our experience that it usually takes approximately 30-60 days for a decision.

Although; this is an unfortunate situation all is not lost. I suggest calling the MSPRC again and ask to speak to a supervisor and explain the situation, that you want Medicare to make a "redetermination" of their final demand based on their error of not correctly applying the procurement offset. The MSPRC can and should pull your letter and work it at the MSPRC level, it does not need to be done by the Regional Office. Also request that she expedite your request due to their error. The timeframe for a redetermination decision is 60 days from the date of receipt.

Should you need the contact information for the Kansas City Regional Office, please contact me directly and I will be happy to provide you with it.

Regards,
Mary Skinner

Question
If a plaintiff is receiving Social Security Disability payments as a result of being disabled in a motor vehicle accident, and receives a settlement from the driver of the other vehicle to end the plaintiff's lawsuit, does the SSA have a lien on the lawsuit settlement?

Answer
Section 224 of the Social Security Act (42 U.S.C. 424a) requires that if an individual receives SSDI payments and workers compensation payments during a given month, his/her SSDI payments are reduced by a certain dollar value for that month based on a formula that takes into account work history and other factors for reduction. This statute, however, excludes by its operation and meaning third party settlements because the reduction is intended to avoid double payments to a Social Security Disability Insurance (under Section 223 of the Social Security Act) beneficiary where that person receives periodic payments in the form of SSDI and from a workers’ compensation or similar program. (See excerpt below).

In interpreting these rules, the Program Operation Manual System (POMS) directs SSDI case workers to exclude any third party settlements from these SSDI offset rules.

As a result, liability cases which have no workers’ compensation component to them are not off settable – so there is no SSDI offset for a liability case.

That is not, however, the same as saying there can be no SSDI reduction in a liability case. For example, 42 U.S.C. 1395y(b)(2) (aka The Medicare Secondary Payer Act) provides that Medicare beneficiaries are required to reimburse Medicare for injury-related medical expenses paid by Medicare on a conditional basis for which recovery has been made as part of a third party settlement. In that instance, where the beneficiary and his/her attorney fails to properly resolve Medicare’s statutory claims, SSDI benefits can be reduced as part of a Taxpayer Recovery Offset Program (TROP) initiative.

Overall, SSDI does not have a lien which attaches to liability settlements. As can be seen from a review of the statutes and regulations, SSDI offsets occur in workers’ compensation. cases because of the intent to avoid a payment for lost wages from SSDI, and a duplicate payment for lost wages from workers’ compensation. The same cannot be said of liability cases, in which a different paradigm and rationale for recovery exist. At the same time, any case involving a Medicare beneficiary must be handled with care, as following the MSP Act, plaintiffs’ attorneys have an affirmative duty to verify and resolve Medicare’s conditional payment reimbursement obligations arising from date of injury to date of settlement. Where those obligations are not met, the same fate might await a client’s SSDI payments, albeit for different reasons that SSDI offset.

Please let me know if you have any follow up questions. Thanks.
Michael D. Russell

Question:
How does Medicare handle expenses when they come off the top? Is there a dollar for dollar reduction or are expenses ignored and only % fee reduction applied?

-Missouri Attorney

Answer:
Medicare will recognize expenses even if they come off the top. The procurement reduction would not be in the form of a dollar for dollar reduction, but rather a pro-rata share reduction. The formula used by Medicare is as follows:

1. Amount of settlement $__________________
2. Medicare payments $__________________
3. Attorney fees $__________________
4. Other procurement costs incurred $__________________
5. Total procurement costs (lines 3 + 4) $__________________
6. Ratio of procurement costs to settlement (line 5 / line 1) _________________%
7. Medicare’s share of procurement costs (line 2 x line 6) $__________________
8. Medicare’s claim to be recovered (line 2 minus line 7)$____________________

It is important to note that if Medicare payments equal or exceed the amount of the liability insurance payment, judgment or settlement amount, Medicare recovers the entire liability insurance payment, total judgment or settlement payment up to the providers’ charges, minus the total procurement costs.

I hope that helps…

My best,
Carol Brown

Question:
Does anyone know if the 1/3 reduction for fees and costs is by regulation or statute? Someone just told me that Medicare is claiming that it is not automatic and depends of the settlement dollars.

NJ Attorney

Answer:
The procurement reduction is found in 42 CFR 411.37
TITLE 42 - PUBLIC HEALTH

CHAPTER IV - CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBCHAPTER B - MEDICARE PROGRAM

PART 411 - EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE PAYMENT

subpart b - INSURANCE COVERAGE THAT LIMITS MEDICARE PAYMENT: GENERAL PROVISIONS

411.37 - Amount of Medicare recovery when a third party payment is made as a result of a judgment or settlement.

(a) Recovery against the party that received payment (1) General rule

Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if (i) Procurement costs are incurred because the claim is disputed; and (ii) Those costs are borne by the party against which CMS seeks to recover.

(2) Special rule. If CMS must file suit because the party that received payment opposes CMS's recovery, the recovery amount is as set forth in paragraph (e) of this section.

(b) Recovery against the third party payer. If CMS seeks recovery from the third party payer, in accordance with 411.24(i), the recovery amount will be no greater than the amount determined under paragraph (c) or (d) or (e) of this section.

(c) Medicare payments are less than the judgment or settlement amount.

If Medicare payments are less than the judgment or settlement amount, the recovery is computed as follows: (1) Determine the ratio of the procurement costs to the total judgment or settlement payment.

(2) Apply the ratio to the Medicare payment. The product is the Medicare share of procurement costs.

(3) Subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.

(d) Medicare payments equal or exceed the judgment or settlement amount.

If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.

(e) CMS incurs procurement costs because of opposition to its recovery.

If CMS must bring suit against the party that received payment because that party opposes CMS's recovery, the recovery amount is the lower of the following: (1) Medicare payment.

(2) The total judgment or settlement amount, minus the party's total procurement cost.

My best,
Carol Brown

Question:
Libby,I enjoyed your seminar today and appreciate your speaking with me afterwards. As I stated, I have the following scenario:

- $400,000 in medical expenses
- $200,000 total available coverage
- 30,000 is the tortfeasor liability limits
- $170,000 is UIM limits
- TRICARE lien claim is $100,000
- VA lien is $67,000

Medicare lien (for amounts spent after SS Disability status) $_____?____

Questions:

1.My research suggests that TRICARE’s recovery is limited to a claim on the $30,000, not bases on $200,000 because the payment was for treatment by a non-military facility. Therefore; they are entitled to recovery only under FMCRA which does not seem to allow liens on UM/UIM benefits (recovery from person liable in tort, or his insurer). Although recovery under 10 USC 1095 would allow recovery of UM/UIM, (recovery from third party payers) that law does not apply since TRICARE's payment was not for treatment at a military facility. My resource, in addition to the plain language, is presentation material from the 2007 UBO/UBU TRICARE Conference. A Cornell Law Institute document also referenced the distinction.

The TRICARE rep has no idea what I'm talking about. Has your office addressed this issue before?

2.Do you have any suggestions about how to deal with all lien holders to best ensure my client gets a good portion of his settlement?

Thanks so much.
Charlotte Attorney

Answer:
Michael Russell, an attorney in our office, recently addressed your first question for another attorney:

I believe the analysis to this question is actually twofold. First and foremost, you are correct in your assertion that the United States does NOT have a right to the proceeds of first party insurance proceeds under the Federal Medical Care Recovery Act [1(a)., 42 U.S.C.A. 2651(a)]. The Court in Government Employees Ins. Co. v. Andujar, 773 F.Supp. 282, held that the United States did not have a direct right to UM proceeds under FMCRA. The FMCRA only gives the government the right to recover from the tortfeasor. In this case neither the injured party nor their insurer, were considered tortfeasors and thus the government did not have a right to recover on any settlement from the Uninsured/Underinsured motorist portion of an auto policy.

While, there is no direct right under FMCRA there MAY be a right under the express terms of the insurance policy and applicable state law. This second prong of the analysis requires an evaluation of the policy itself. If the government can qualify as an "insured" or "third party beneficiary" under the terms of the policy then they will have a right to these proceeds. In the aforementioned Andujar case the Court looked at the specific provisions of the policy. Because it was determined that GEICO's automobile policy could not be interpreted to include the government as an "insured" (policy actually specifically excluded the government from this classification), the Court held that the government could not recover the proceeds under this alternative theory. Thus in your case I would recommend that you obtain the policy for further analysis. If and when you obtain the policy, we would be more than happy to review the express provisions and determine whether the government could be considered an "insured" with potential rights to the proceeds.

For your second question, I consulted with one of our analysts. Medicare is always first. Their recovery right is strongest. They may compromise due to the policy limits or other extenuating circumstances but they will not compromise for the sake of VA and TRICARE. For reductions from VA and TRICARE, the analyst said he has had more luck securing reductions from the VA. He recommends starting there. He said VA and TRICARE each have a compromise process. Ask the caseworker at the VA and TRICARE for a compromise worksheet to fill out. Fill out that worksheet and write a letter (the compelling story I talked about yesterday) describing why you are requesting a reduction and why it's appropriate. In that letter you will need to include the information that is on the worksheet. The caseworkers at VA and TRICARE might have some additional tips...sometimes they can become your advocate.

I hope this helps!
Please let me know if you have any other questions.

My best,
Elizabeth Vish

Posted by Carol Brown

Question:
We have probably all run into the above problem, that is, when receiving a conditional payment summary or final demand from Medicare one or more of the line item charges include multiple diagnosis codes, of which, some, but not all, are related to the claim.

In simpler terms, because I’m not sure the above sentence is structurally sound; say you have a fall where your client suffers a broken hip. You receive correspondence from Medicare and there is a line item charge for $100, with diagnosis codes related to fracture and, for example, diabetes. You have no way of knowing how much of the $100 is related to your case and how much is not since there is just one charge and multiple diagnosis codes.

So, naturally, you call Medicare. Ever helpful, they say, “Sorry, we can’t parse the charges out, you owe the entire $100.”

Now, this can’t be the law. Because after all, while Medicare has a claim for reimbursement, its only claim is for payments related to your case. Not for unrelated charges (such as diabetes in the example). And, it seems to me, that since Medicare has the claim, it must bear the burden of proving its claim. It can’t just say “too bad, pay the entire charge.”

How has anyone dealt with this issue, and has anyone had any success? I’m looking to see what others are doing in this regard.

Thanks,
Pennsylvania Attorney

Answer:
By way of background, typically this issue is a result of a provider’s billing practices. If a provider billed these charges together, they typically show up in Medicare’s system together and then end up as one line item, whether the charges are related or not. As of our latest understanding of Medicare’s system, it does not allow for separation of these line items. There are appeal options to dispute claims pulls including the ability to request a hearing before an ALJ, but this is akin to your compromise request approach and can be time consuming. The viability of this approach would obviously depend on the amount of non-incident related included in the claims.

Carol Brown

Posted by Sylvius Von Saucken

Question:
I have 2 questions for you about Medicaid. I have tried researching and have come up empty handed. Question 1: Medicaid. Do we have a duty to notify Medicaid of a potential lien in an asbestos case in Michigan? Is there a pre 1980 rule like in Medicare? I could use authority for this? Question 2: IRS. If we believe a client has an IRS lien, do we have a duty to notify the IRS? This lien is more than 10 years old, and there does not appear to be a judgment, but we want to cover ourselves. Thanks so much for your time.

-Michigan Attorney

Answer:
With respect to Medicaid, there is no pre-1980 rule as “1980” is relevant to the year in which the Medicare Secondary Payer statute was passed. With respect to Medicaid, the rules concerning “notice” are all governed by the state Medicaid statute. Many of those state statutes have been changed in the recent years (after Ahlborn) to require affirmative notice to the state when settlement occurs.

To answer your question, I’ve compiled the following summary:

1. MCLA §400.106(4) (eff. 11/24/04) places an affirmative duty on a Medicaid beneficiary and/or his/her representative (counsel) to notify the MI Dept of Community Health and Casualty Unit (Medicaid tort recovery unit) anytime a settlement is pending for which injury-related medical expenses were paid for by Medicaid. (See below)

M.C.L.A. 400.106

Michigan Compiled Laws Annotated Currentness
Chapter 400. Social Services
The Social Welfare Act (Refs & Annos)
County Department of Social Services

400.106. Medically indigent individual defined; other definitions; actions wherein state department and/or Medicaid contracted health plan have right to recover expenses, notice, settlements, priority for recovery against proceedsSec. 106. (1) A medically indigent individual is defined as:

(3) An individual receiving medical assistance under this act or his or her legal counsel shall notify the state department when filing an action in which the state department may have a right to recover expenses paid under this act. If the individual is enrolled in a Medicaid contracted health plan, the individual or his or her legal counsel shall provide notice to the Medicaid contracted health plan in addition to providing notice to the state department.

(4) If a legal action in which the state department, a Medicaid contracted health plan, or both has a right to recover expenses paid under this act is filed and settled after November 29, 2004 without notice to the state department or the Medicaid contracted health plan, the state department or the Medicaid contracted health plan may file a legal action against the individual or his or her legal counsel, or both, to recover expenses paid under this act. The attorney general shall recover any cost or attorney fees associated with a recovery under this subsection.

(5) The state department has first priority against the proceeds of the net recovery from the settlement or judgment in an action settled in which notice has been provided under subsection (3). A Medicaid contracted health plan has priority immediately after the state department in an action settled in which notice has been provided under subsection (3). The state department and a Medicaid contracted health plan shall recover the full cost of expenses paid under this act unless the state department or the Medicaid contracted health plan agrees to accept an amount less than the full amount. If the individual would recover less against the proceeds of the net recovery than the expenses paid under this act, the state department or Medicaid contracted health plan, and the individual shall share equally in the proceeds of the net recovery. As used in this subsection, “net recovery” means the total settlement or judgment less the costs and fees incurred by or on behalf of the individual who obtains the settlement or judgment.

Posted by Matthew Garretson

Question:
Evidently, defense firms are now trying to say the new Medicare laws require them to put Medicare’s name on the settlement checks “to protect their clients from liability.” Is anyone else seeing this? How would you handle it?

-Arkansas Attorney

Answer:
While it is never a good thing to have Medicare’s name on the check, if it happens Medicare’s process is as follows: All parties must endorse the check. Once Medicare issues its Final Demand, the check is then sent to Medicare Secondary Payer Recovery Contractor (MSPRC) for deposit. MSPRC will issue a separate check, minus Medicare’s claim amount, to the attorney after a five-day waiting period; or send MSPRC a separate check for only Medicare’s claim amount, along with the multi-party check. Medicare will deposit the check made out to Medicare and endorse the multi-party check. The multi-party check will be immediately returned to the attorney.

We are seeing more and more of this as defendants reacts to the new MMSEA Statute that (beginning next year) requires them to report all settlements with Medicare beneficiaries to Medicare (see www.garretsonfirm.com and see MMSEA section). This puts defendants on Medicare’s radar (if the claimant doesn’t pay the Medicare reimbursement claim (a/k/a Medicare lien). So, we have some defendants now either a) putting Medicare’s name on the check; or, b) saying “we’ve got a settlement, but we will not make payment until we have proof that Medicare’s reimbursement claim has been satisfied. You might consider informing the defendants that CMS has clarified in several recent town hall meetings that CMS’ recovery practices have not changed on account of the new MMSEA statute. Furthermore, CMS has published several “user guides” and interpretative “alerts” and at no time have they stated that putting Medicare’s name on the check is a requirement. See http://www.cms.hhs.gov/MandatoryInsRep/Downloads/RevisedSection111022309.pdf. “The new Section 111 requirements do not change or eliminate any existing obligations under the MSP statutory provisions or regulations.”

I hope this information helps.

My best,
Matt Garretson

Posted by Mary Skinner

Question:
I am trying to estimate the amount of a Medicare lien. Does anyone know whether Medicare pays for home nursing care or home pharmacy infusion services?

Pennsylvania Attorney

Answer:
If a patient needs skilled nursing or rehabilitation care at home, either Medicare Part A (following a minimum three-day hospital stay) or Part B (no hospital-stay requirement) can cover it. The care may be provided in the patient's home or anywhere else he or she stays. If a patient meets the requirements to qualify for home care, Medicare can cover skilled nursing care and physical and speech therapy as needed while the patient recovers from an illness, condition, or injury. Medicare also covers needed medical supplies and equipment.
Medicare doesn't generally cover non-medical at-home care and assistance, including meals and housekeeping. However, if a patient is getting Medicare coverage for skilled nursing or therapy at home, Medicare generally pays for limited visits by an aide from a home care agency to help him or her with personal care. If Medicare covers skilled care for the patient, it can also cover the services of an occupational therapist to help him or her relearn how to accomplish daily personal care and household tasks safely.

As for the home pharmacy infusion services Medicare Part B, there is some coverage for certain therapies administered using durable medical equipment (a mechanical or electronic external infusion pump). Unfortunately, only a select few therapies are covered and only under very specific conditions. These include some anti-infective, some chemotherapy drug, some inotropic therapies (e.g., dobutamine), some pain management and a few other therapies. For parenteral and enteral nutrition therapies, there can be coverage in Part B only if the need for the therapy is documented to be for at least 90 days and other coverage criteria are met. There may be coverage for intravenous immune globulin (IVIG) for primary immune deficiency patients but the supplies and equipment are not paid for. More specific information can be obtained by contacting the Medicare entities called Durable Medical Equipment Medicare Administrative Contractors (DME MACs). The coverage criteria for home infusion that all contractors follow are found from a DME MAC.

For home nursing visits needed for beneficiaries receiving infusion therapy, there can be Medicare Part A coverage under Medicare’s home health benefit only if the patients are serviced by a Medicare-certified home health agency, as well as considered to be homebound and in need of intermittent (not 24 hour) home nursing.

My best,
Mary Skinner

Posted by John Cattie

Question:
My question concerns the threshold requirement of Medicare Set Asides (MSAs).

CMS states, "Also, any previously settled portion of the workers compensation claim must be included in computing the total settlement amount."

When a C&R settlement is entered into, typically there are no "previously settled portions" (at least in California). So, would one be prudent or required to use the previously paid Temp Disability & Perm Disability Advances, in addition to previously paid medical treatment to ascertain the low threshold for submitting a MSA to CMS?

Thank You,
California Attorney

Answer:
When computing the total settlement amount for CMS submission purposes, we can look to the CMS Memo dated April 25, 2006 for guidance. That Memo tells us that “CMS will only review new WCMSA proposals for Medicare beneficiaries where the total settlement amount is greater than $25,000.” Furthermore, CMS stresses this is a CMS workload review threshold, not a substantive safe harbor amount. When computing the total settlement amount, CMS tells us “that the computation of the total settlement amount includes, but is not limited to, wages, attorney fees, all future medical expenses (including prescription drugs) and repayment of any Medicare conditional payments.”

You have accurately noted that CMS tells us that “any previously settled portion of the WC claim must be included in computing the total settlement amount.” So, if the claim being settled today also had components that were settled previously, it is appropriate to include those amounts when computing the total settlement amount for CMS submission purposes. Though previously paid Temp Disability & Perm Disability Advances would not necessarily be deemed to be a “previously settled portion of a WC claim”, it would be proper to include those amounts for the limited purpose of calculating the total settlement amount for CMS submission. Based on the language of the Memo, such payments would fall under the “but not limited to” provision.

It is important to note, as CMS stresses in its Memos, that the thresholds provided are workload review thresholds, not substantive safe harbor amounts. This means that if the total settlement amount fails to reach the threshold, it means that CMS would not review/approve a MSA proposal in that case. However, it DOES NOT mean that a MSA does not have to be done. MSAs are appropriate in those workers comp cases involving: 1) a current Medicare beneficiary or a person possessing a “reasonable expectation” of Medicare entitlement within 30 months of settlement; 2) a settlement that closes future meds, effectively shifting the burden of future injury-related care from the carrier to Medicare on a permanent basis going forward; and 3) that individual does, in fact, require future injury-related care otherwise covered by Medicare. Finally, please note that submission of MSA proposals to CMS for review and approval is voluntary, not mandatory.

My best,
John Cattie

Posted by Mary Skinner

Question:
Over three years ago we settled a Fen Phen claim for a client that was not eligible for Medicare yet. Even though they were not eligible, out of caution we submitted to CMS/Medicare a listing of all of our Fen Phen clients (including this client) to confirm that liens did not exist. Medicare did not respond in regard to this client's status.

The settlement included a future payment if the client had heart valve surgery before a specified date. The total value of the settlement, including the settlement guarantee, was less than $200,000.

The client has since then had heart valve surgery. We learned post-surgery that he started using Medicare in the last year or two and that Medicare paid for the surgery.
Given these facts, are we still obligated to hold this post-settlement payment from a client that was not Medicare eligible at the time of settlement and contact Medicare?

-Texas Attorney

Answer:
Although your client was not Medicare entitled at the time of settlement, he was entitled when he received the settlement for surgical guarantee. Having said that, you will need to open a record with Medicare, using the surgery date as the date of incident and reimburse Medicare for any injury related claims they may have paid.

Regards,
Mary Skinner

Posted by Matthew Garretson

Question:
Is there priority among liens? For example, if there is an ERISA "lien" and a federal (military) lien, is there priority among the liens? Our client switched insurance during treatment and has these two liens and a state hospital (statutory) lien. It would seem that the statutory liens take priority over the contractual or ERISA lien. Any thoughts?

-Arizona Attorney

Answer:
The following statement, recently made by the Texas Supreme Court in the context of an ERISA lien dispute, is a concise illustration of the priority of liens:

“The three varieties of subrogation—equitable, contractual, and statutory—represent three separate and distinct rights that, while related, are independent of each other. Independent, however, does not mean co-equal. We generally adhere to the maxim that “equity follows the law,” which requires equitable doctrines to conform to contractual and statutory mandates, not the other way around. Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy.” See Fortis Benefits v. Cantu, — S.W.3d —-, 2007 WL 1861000 (Tex.) (Jun 29,2007).

Statutory liens – such as Medicare, Medicaid, or VA/military liens, should have first priority. Following this are contractual liens such as ERISA liens, which must be based upon contractual terms, so long as those terms do not run afoul of statutory language. After that are equitable liens (not in the context of Sereboff v. Mid Atlantic, which also uses the term to describe a contractual lien which meets the definition of “equitable relief”) founded not in contract or statute, but mere principles of equity.

In our practice, which heavily revolves around lien resolution, we have always taken the stance with ERISA lien holders that while their lien may be valid, it must take a back seat to statutory governmental liens held by Medicare and Medicaid. It has also generally been our practice that among statutory liens, Medicare and VA/military liens generally have first priority since they are federal, then Medicaid as pursued by the state government, and finally hospital liens which, although statutory, are also private and take a back seat to public funds.

I hope this information helps.

Posted by Mary Skinner

Question:
My client slipped and fell and injured her shoulder resulting in a Medicare lien of over $18,000. We lost on MSJ and the tortfeasor paid her a nuisance of $2,500 not to appeal the case. I have applied for a waiver of that and am holding that amount in trust.

The attorney who referred the matter to me never processed the med pay of $5,000. The insurance company is willing to pay that now, but wants to put Medicare on the check. Is there authority that Medicare doesn't have a claim to this money? If so, could you refer me to that so I can process this for my clients?

-Ohio Attorney

Answer:
Medicare has a right to recovery.

The regulations regarding Medicare's right to reimbursement on conditional overpayments in liability situations can be found under 42 CFR s411.23, 411.24, 411.26, 411.37, 411.50, 411.52, and 411.54. It is important to note at this point that "liability insurance" means insurance (including a self-insured pan) that provides payment based on legal liability for injury or illness or damage to property. It includes, but is not limited to automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners' liability insurance, malpractice insurance, product liability insurance and general casualty insurance.

These regulations also established that Medicare would be secondary to no-fault insurance, which is defined as "insurance that pays for medical expenses for injuries sustained on the property or premises of the insured." This insurance includes, but is not limited to automobile, homeowners, and commercial plans. This insurance is sometimes called "medical payments coverage," "personal injury protection," or "medical expense coverage." (42 CFR ss411.50)