We explain here Medicare liens and medical liens in personal injury cases and the obligation to pay back Medicare after a personal injury settlement.
How Medicare Liens Work in Personal Injury Cases
If you are injured in an accident and Medicare pays for some of your treatment, you will be obligated to reimburse Medicare for these payments if you bring a personal injury claim and get financial compensation for the accident.
What Law Gives Medicare Reimbursement in Personal Injury Cases?
Under two federal statutes, 42 U.S.C. §1395y(b)(2) and § 1862(b)(2)(A)/Section and § 1862(b)(2)(A)(ii) of the Social Security Act, the Medicare program may not pay for medical expenses for a tort victim when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.”
This federal law also unambiguously gives the Medicare program subrogation rights if it does make payments. The law provides: “The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment concerning such item or service under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iv).
The Nature of the Medicare Medical Lien
To enforce this right to reimbursement, a “Medicare lien” will attach to judgment or settlement proceeds that are awarded as compensation for the accident. This means that if you get a settlement, you will have to pay back Medicare before anything else gets taken out.
While you can get the lien reduced, paying back Medicare after a settlement is not optional. The only path around a Medicare lien is to negotiate the lien to zero. Have our lawyers done this? We have. Is it rare for Medicare to waive a lien? It is very rare. But it can happen.
How Do Medicare Liens Work?
At the root of it all is the Medicare Secondary Payer (“MSP”) statute, section 1862(b) of the Social Security Act, 42 U.S.C. § 1395y(b). The purpose of this law was to make sure that sure Medicare was not paying for medical bills that someone else should pay. The MSP gives Medicare the right to claim (i.e., a lien) reimbursement from any judgment or settlement proceeds that include compensation for medical bills paid by Medicare.
If a Medicare beneficiary receives a personal injury settlement, they will be required to reimburse Medicare for any payments made on their behalf. To enforce this requirement, the law gives Medicare an automatic priority lien against any settlement proceeds in personal injury cases.
Almost any party involved in the personal injury settlement or payment, including the attorneys, has the responsibility for complying. Any settlement or payment must be reported to Medicare within 60 days and their valid lien amount must be paid.
Medicare Actively Enforces These Liens
If a Medicare lien is not properly paid back after a settlement, the Medicare lien statute allows Medicare to come after pretty much everyone in the case. Medicare can file against the defendant, the plaintiff, or the plaintiff’s counsel.
If Medicare brings a lawsuit suit against a party to collect its lien, it may be entitled to a civil penalty of two times the amount owed. Additionally, Medicare can fine the “Responsible Reporting Entity,” usually the insurer, up to $1,000 for each day that they are out of compliance with Medicare’s reporting requirements.
That is some harsh medicine. It leaves insurance companies stone terrified.
How Do You Handle a Medicare Lien
So what should attorneys do to avoid these large penalties? First, when an attorney has been hired they should inquire whether the client is a Medicare beneficiary, and if they are, they should contact the Benefits Coordination & Recovery Center (BCRC) and report the case. After the BCRC is notified of the case, it will begin to determine what conditional payments it has made for the injuries and treatment related to the case. Based on this, they will issue a conditional payment letter containing detailed claim information to the beneficiary.
Keep in mind that this initial letter will not provide a final conditional payment amount because Medicare can and often makes changes while the beneficiary’s claim is pending. Is this an unfair and torturous rule? It is. But this is the way it is and there is no other path.
An attorney will not receive a formal recovery demand letter until there is a final settlement, judgment, award, or other payment reported to Medicare. Once this occurs, a final demand letter will be sent out regarding the Medicare lien amount.
This letter will make clear the timeframe you have to pay, conditional payments that were made by Medicare, the total demand amount, and information on applicable waiver and administrative appeal rights.
The Gun to Your Head
Once the final demand letter is issued, from that date interest will begin to accrue, but is only assessed if the debt is not repaid or otherwise resolved. If you fail to repay the debt, interest is due and payable for each full 30-day period the debt remains unpaid and any payments that are made will be applied to the interest first and then to the principal.
If you fail to respond to the demand letter within the specified timeframe, it can result in the referral of the debt to the Department of Justice for legal action and/or the Department of the Treasury for further collection actions. After the lien has been paid, Medicare will issue a letter usually called the “zero letter” that confirms the lien has been paid. Settlement proceeds should never be disbursed unless and until any Medicare lien is paid in full.
Maryland Law Firm Learns Hard Lesson About Medicare Liens
A Maryland malpractice law firm recently had to pay $250k for failing to pay off a Medicare lien. The firm had obtained a $1.15 million settlement for one of its clients in a medical malpractice case. This client happened to be a Medicare beneficiary for whom Medicare had made conditional payments. Medicare had been notified of the settlement and demanded repayment of its debts incurred. But the law firm apparently refused or failed to pay the lien off in full, even after an administrative finding had made the debt final.
The firm was ultimately forced to enter into a settlement agreement with the United States to resolve allegations that it had failed to reimburse the U.S. for the Medicare payments regarding this case.
Under the terms of the agreement entered into with the U.S. Attorney’s Office for the District of Maryland, Meyers Rodbell had to pay the $250,000 for the Medicare lien in the malpractice case.
The firm was also required to adopt certain policies for handling Medicare liens in future cases. They had to designate a person in the firm who would be responsible for paying Medicare liens, train that employee to ensure the firm would pay those liens on a timely basis, and review any outstanding liens with that employee every six months to ensure compliance.
No Medicare Liens in Wrongful Death Cases
Medicare cannot assert a lien on a wrongful death claim in Maryland. Why? Medicare says they make a claim only in wrongful death cases where the wrongful death statute provides payment for medical damages.
Maryland wrongful death claims are brought for the pain, suffering, and loss of economic support that a wrongful death beneficiary suffers from the loss of their loved one. They are claims for the victims’ loss and Medicare has no claim on those proceeds.
In states outside of Maryland, the rules can be different. The key is whether the wrongful death claim can recover medical bills. Medicare’s ability to enforce its right of reimbursement against a wrongful death settlement or verdict is going to depend on whether the state’s law allows for the recovery of medical expenses in wrongful death actions.
Survival Action Claims ARE Subject to Medicare Liens
There is a Medicare lien on a survival action claim in Maryland. So there is a potential lien if the estate of a Medicare beneficiary receives money in a settlement or verdict for medical bills that were paid by Medicare. In Maryland, this claim is part of survival action. A reasonable amount for attorney fees are subtracted from the amount of the lien. This is a key reduction but you also want to negotiate more.
Do you really have to pay back the lien on a survival action? Yes. Medicare is stone serious about its rights. Under the “received payment” provision in the law, Medicare can compel anyone in the chain – doctors, lawyers, insurance companies – to pay back the lien.
The law gives Medicare a “super lien” for reimbursement. This means that Medicare, Medicaid, and Medicare Part C plans now all have super lien rights.
This means they get their money first out of the plaintiff’s settlement before any other health care providers or the victim, regardless of any other claims or state law.
Maryland Law on Medicare Liens in Death Cases
This section is for lawyers trying to better understand the factual underpinnings of the thesis that there is no Medicare lien in a wrongful death case in Maryland. First, let’s back up a bit. Under the Medicare Secondary Payer (“MSP”) statute, when another payer (the “primary plan”) is available, Medicare, as the “secondary plan,” is not responsible for paying for the medical services. 42 U.S.C. § 1395y(b)(2)(A).
When the primary plan is unlikely to pay “promptly” for a beneficiary’s covered medical services, Medicare makes “a conditional payment” to ensure the beneficiary receives the services.” 42 U.S.C. § 1395y(b)(2)(B). “The scope of the beneficiary’s liability to Medicare ‘is ultimately defined by the scope of his own claim against the third party.’” Weiss v. Azar, II, Secretary United States Department of Health and Human Services, et al., 2018 WL 6478025 at P. 4 (4th Cir. February 7, 2019). See also Taransky v. Sec. of U.S. Dept. of Health and Human Servs., 760 F.3d 307, 315 (3rd Cir. 2014).
Medicare does not have a lien on a wrongful death beneficiary’s recovery when medical expenses are not claimed in the Complaint. See, e.g., Denekas v. Shalala, 943 F.Supp. 1073, 1080 (S.D. Iowa 1996) (holding Medicare could not recover from Plaintiffs as wrongful death beneficiaries because the Complaint did not include damages for their father’s medical expenses); Bradley v. Sebelius, 621 F.3d 1330, 1337 (11th Cir. 2010) (Medicare could not recover from the wrongful death settlement as it contained only ‘non-medical tort property claims,’).
“In Maryland, Medicare does not seek recovery from that portion of court awards that are designated as payment for wrongful death.” Weiss v. Azar II, 2018 WL 6478025 at p.7 (4th Cir. February 7, 2019). According to Medicare’s Secondary Payer Manual, “[w]hen a liability insurance payment is made under a wrongful death action, Medicare may recover from the payment only if the state statute permits recovery of these medical expenses.” MSP Manual, Ch. 7, § 22.214.171.124.1. This is critical to the interpretation of how this should play out in Maryland. This might not be true in some other jurisdictions. “If a wrongful death statute does not permit recovering medical damages, Medicare has no claim to the wrongful death payments.” Id.
In Maryland, a wrongful death action by its very nature does not include reimbursement for the decedent’s medical expenses. See Md. Cts. & Jud. Pro. Art. § 3-904(c);
The Key Case to Read If You Want to Settle Your Claim
The seminal case on this issue is Bradley v. Sebelius, an 11th Circuit opinion from 2010. This case involved Medicare’s appeal when a Florida probate court ruled that Medicare was only entitled to recover less than $800 out of a $22,000 lien in a wrongful death nursing home case. The probate court essentially divided the proceeds after the case was settled with the nursing home. Medicare argued that it was not required to follow the probate court’s ruling.
Medicare’s position was that the probate court did not rule on the merits of the case as to who gets what. The family paid back Medicare conditional payments anyway, probably because of the threats that come from the “super lien” provision we discussed above.
The 11th Circuit ruled that Medicare’s interpretation would put plaintiffs’ lawyers in the quagmire of having to file suit — and incur additional expenses — to get a ruling on the merits. In some cases, this is the tail wagging the dog because any recovery would be reduced by the costs of getting the case to trial. This is a good decision for plaintiffs, obviously.
2021-2022 Medicare Supreme Court Case on Tap
The case that the U.S. Supreme Court will hear next month to decide on the issue of compensation for future medical expenses and Medicaid liens is Gallardo v. Marstiller.
The Supreme Court will decide whether a state Medicaid program can go after a beneficiary’s compensation award for future medical expenses.
Right now, federal law permits Medicaid to go after compensation awards that a beneficiary receives for past medical expenses.
The court’s decision on this issue could have a major impact on the amount of reimbursement owed to Medicaid when a recipient settles a personal injury case.
Facts of Gallardo
The underlying facts are tragic. Gianinna Gallardo is a child who was hit and severely injured by a pickup truck as she was getting off her school bus in the afternoon. Sadly, Gianinna suffered a traumatic brain injury in the accident leaving her in a “persistent vegetative state” and requiring constant medical care. The Florida Medicaid program has paid over $900,000 for Gianinna’s medical expenses.
Gianinna’s parents brought a personal injury lawsuit against the driver of the pickup truck that hit her. That lawsuit was resolved in a settlement in which Gianinna and her parents received $800,000.
Gallardo Settlement and Future Medical Expenses
The settlement agreement stated that the $800,000 was compensation for pain and suffering, past medical expenses, future medical expenses, and future lost wages. The agreement allocated only $35,000 as compensation for “past medical expenses.” The amount of settlement compensation allocated to “future medical expenses” was not specified.
The $35,000 in settlement proceeds allocated to Gianinna’s “past medical expenses” was significantly less than the $900,000 in expenses actually incurred by Medicaid. Therefore, the Florida Medicaid agency sought reimbursement from the settlement proceeds allocated to future medical expenses.
Gianinna’s lawyers contested this effort. The case was eventually appealed to the U.S. Circuit Court of Appeals for the 11th Circuit. The 11th Circuit held that the applicable statute was broad enough to allow state Medicaid programs to seek recovery from compensation for medical expenses whether past or future.
Gianinna’s lawyers filed a Petition for a Writ of Certiorari asking the Supreme Court to hear the case. The Cert Petition was granted and the high court is scheduled to hear oral arguments in the case on January 10, 2022.
2023 Update: Supreme Court’s Ruling in Marstiller v. Gallardo
The U.S. Supreme Court in Gallardo has ruled since this post was originally written. The court held that state Medicaid programs may recover costs for future medical care. The decision has a major impact on how Medicaid liens are dealt with and how much reimbursement Medicaid can collect from personal injury settlements. Now, state Medicaid agencies will be able to take a much larger chunk out of settlement proceeds.
In this section, we will look at medical liens in personal injury cases. Medical liens differ from Medicare liens in that they involve regular health insurance as opposed to Medicare. This section explains how the health insurance company may have an interest in your case in some states….and why it is not quite as big of a deal as you may think.
Medical Liens in Injury Cases
Most car and truck accident victims wisely use their PIP, Med-Pay, or health insurance to help with the costs of medical treatment. You are generally not obligated to pay back your health insurer, generally speaking.
If you break your arm playing with your kids in your backyard, your health insurance company is not looking to get paid back. But in many health insurance contracts (and under a legal rule called subrogation) your insurance company may place a lien on your case that allows them to be paid back out of any settlement.
Calculating Medical Liens
In many cases, your medical lien is not as much as you think it will be. First, your insurance company is not paying the full freight for all of your medical bills. Let’s say you have $100,000 in medical bills.
Your health insurer is not going to pay the doctors $100,000 because they are going to say the bills are too high and we only accept so much for this type of treatment. So your bills might get cut by let’s say 25%. So now your lien is down to $75,000. Good and aggressive accident lawyers will then work hard to negotiate down your lien. How much? It depends on the case.
So, why it is unfortunate that you have to pay back your medical liens keep in mind that the insurance company is required to pay you back for all of your medical bills, not the reduced amount. So in most cases, it is still a winning hand for the injured victim on the issue of how much compensation they get versus how much they have to pay back with respect to the medical bills.
Also, and we can’t emphasize this enough, make sure you know your state’s laws with respect to liens. Some do not allow subrogation on medical liens in some cases regardless of what your medical insurance contract says.