Impact of Medicare liens on settlements

An article on Medicare Reimbursement Problems was recently published in For the Defense.  One of the authors has a copy of the article posted on his firm website.  The article details the issues, but unfortunately no easy solution is offered.  The authors say that for now, the "only workable solution" is to put money in reserve for the estimated Medicare reimbursement.

More on Medicare Liens

There's a good article in the Jan. 2005 issue of For the Defense, titled "The Revised Medicare Secondary Payer Act", by Thomas C. Regan and Seamus M Morley of Pitney Hardin in New Jersey.  Thanks, guys.

The essence of the article is that since the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066, and particularly Section 301 of that statute, all defendants settling cases in which Medicare has paid any portion of the plaintiff's medical expenses must take steps to protect themselves against the statutory Medicare lien.

Steps that the authors recommend include the following:

1.  Determine through discovery whether or not the plaintiff's medical expenses have been paid by Medicare.

2.  Do not agree to settlement language that purports to establish that the settlement is made for pain and suffering only.  Plaintiff's counsel may be trying to circumvent the Medicare lien, and doing so places the defendant at risk for the reimbursement or double the settlement.   There may also be tax reasons behind plaintiff's counsel's request for such language, but agreeing to such a provision is ill-advised.

3.  Include language in the settlement agreement and release that plaintiff is solely responsible for payment of all outstanding medical liens.

4.  The authors suggest even holding back the amount of the Medicare lien and making the payment directly to Medicare. 

5.   Finally, the authors suggest indemnification language in the settlement agreement so that the defendant is protected from unreimbursed payment of the Medicare lien.  (However, this remedy may not be worth the paper it is written on.)

I am surprised the authors did not recommend including Medicare's Coordination of Benefits Department as a payee on the settlement draft (in whatever language CMS requires).  I'd be interested in hearing from the plaintiff's counsel's perspective why that is unfair, unreasonable, or generally a bad idea.

Perhaps if CMS is named as a payee on the settlement draft, that gives CMS more leverage than usual in negotiations over the settlement of the Medicare lien.  However, it seems to me that as long as the defendant specifies at the outset of negotiations that Medicare has to be named as a co-payee due to its statutory lien, plaintiff's counsel will be in a position to factor the appropriate Medicare reimbursement into his settlement evaluation.   

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Traps for the Unwary

I just received a copy of "Traps for the Unwary", 5th Ed., published by the Massachusetts Bar Association (to which I belong), and edited by Kevin G. Kenneally and James E. Harvey, Jr.  I've gotten several of the previous editions and have long admired this work.

The Introduction explains that it is a compilation of some laws that will help attorneys recognize and avoid traps that may be lying in wait for them, and focuses mainly on general civil practice. 

This is an excellent idea, and should be emulated by every Bar association, because there are such pitfalls in every jurisdiction.  I am starting a category for this blog called "Pitfalls for the Unwary" to collect such laws that I come across. I am going to call them pitfalls, as the term "traps" to me implies an intent to catch prey. Maybe if I can gather a sufficient number of local pitfalls, it will be a catalyst for a similar Bar publication in this area. 

Some of the Traps identified in the Mass. Bar Assoc. book are not limited to Massachusetts.  Here is an example:

B. Medicare liens.  Under federal law, the Medicare program is subrogated to claimant's cause of action or rights to recover under workers' compensation, automobile or liability insurance or against self-insurers.  42 U.S.C. 1395y(b), et seq.

See Traps, at p. 51.  This is also noted in a section on settlements:

There may be liens on the recover a plaintiff receives in a personal injury case, for example, workers' compensation . . ., Blue Cross, welfare department, hospitals . . . , and prior attorneys . . . .  Medicare liens on personal injury settlement proceeds are created automatically by regulation and do not require notice to the recipient or to counsel.  42 U.S.C. sec. 1395y(b), et seq.  It is advisable to inform clients of the amount of the liens before settlement, so the clients can calculate their net recovery in order to make an informed decision on accepting the settlement offer.  An attorney who charges a fee for negotiating liens, over the agreed upon contingent fee, may be committing a violation of the Consumer Protection Act against the client.  Doucette v. Kwiat, 392 Mass. 915, 917, 467 N.E.2d 1374 (1984).

Traps, at p. 68.

That's food enough for thought for now.

For more on medicare liens, click here.

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