Medicare is entitled to reimbursement for any payments that are related to an injury that is otherwise covered by insurance, including self-insurance, because it operates as a “secondary payer.”
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 should be paid by someone else. So the statute gives Medicare the right to claim proceeds from the defendant who is paying the plaintiff’s medical bills as a part of the damages in a settlement or verdict. interest where a defendant/insurer is liable for a recipient’s medical expenses.
So under this law, Medicare will not pay for a beneficiary’s medical expenses when payment “has been made or can reasonably be expected to be made under a worker’s compensation plan, an automobile or liability insurance policy or plan, or under no-fault insurance.”
Medicare liens drive our clients crazy. What do I have medical insurance for if I have to pay them back? I get it. Believe me. If you have a heart attack, no one is coming to look to you for payment. But if you settle your case or get a verdict, Medicare wants its slice of the pie. To make matters worse, the lien amount claimed by CMS for reimbursement of Medicare conditional payments is often for treatment unrelated to the malpractice or crash. This is not really CMS’s fault. They don’t have the resources to collect and pour through medical records to apportion medical bills.
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 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 handled and paid off, Medicare is permitted to bring suit against the defendant, the plaintiff, or the plaintiff’s counsel. If Medicare is forced to bring suit against a party to collect its lien, in some situations it is 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.
What to Do with a Medicare Lien?
So what should attorneys do to avoid these large penalties? First, when an attorney has been hired they should inquire whether or not 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, they 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.
Settlement or Verdict First
Keep in mind that this initial letter will not provide a final conditional payment amount because Medicare can and often does make 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. Even if you plan to appeal the debt or the beneficiary wishes to request a waiver, you must ensure the debt is still paid within the specified timeframe or else you will still be responsible for the interest that has accrued. In the event that waiver or appeal is granted, Medicare will refund the amount you paid.
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. Be sure to keep copies of this letter as it can protect you or the client if Medicare attempts to add additional amounts at a later date. Settlement proceeds should never be disbursed unless and until any Medicare lien is paid in full.
Maryland Malpractice Firm Is Made an Example
The Medicare statute and regulations make clear that Medicare is able to make conditional payments for medical items or services for its beneficiaries, however, when an injured person receives a tort settlement or judgment, those payments must be paid back to Medicare or else the person injured and/or their attorney may be liable.
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 dollar 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 UnitedStates 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.
Why Does the Buck Stop with the Lawyer?
Why put the burden on the lawyer and make her responsible for making sure the lien gets paid? The reality is personal injury attorneys are in the best position to understand the rule and make sure Medicare is protected. Examples such as this are a good reminder of the obligation to reimburse Medicare after receiving settlement or judgment proceeds for clients as well as to wait to disburse settlement proceeds until a receipt of final demand from Medicare has been received.