Medicare soon to go after liability settlements

Steve Korris Jun. 4, 2010, 8:00am

WASHINGTON - By finally enforcing a law requiring the reporting of all injury payments, Medicare can begin getting reimbursed for payments made to individuals who later settled liability claims.

Next year, Medicare managers will also require a report on every injury claim. Medicare can recover from plaintiffs, plaintiffs' lawyers, defendants and insurers, which could mean a windfall for the program.

The Medicare managers will require plaintiffs' lawyers to explain to clients that settlement negotiations must protect Medicare's interest.

Lawyers will discuss what these changes could mean at a meeting in Philadelphia on Tuesday, June 8.

HB Litigation Conferences will present sessions on Medicare reporting, negotiating and settling.

Other sessions will review recovery from workers compensation and bankruptcy.

The uncertainty lawyers face is reflected in the topics for the conference sessions on best practices.

The session for defendants will ask, "What can the defendant require? How does defense counsel best protect his or herself and the client? When does the burden pass to plaintiff's counsel?"

The session for plaintiffs will ask, "What should you change about your intake procedures? Will a Medicare lien influence whether a complaint is filed? What forms should you be using?"

A Medicare fact sheet for attorneys leaves little uncertainty.

"It is in your client's best interest to keep Medicare's claims interest in mind during the negotiation and settlement process with the third party," it says.

"Medicare must be notified when the possibility exists that another insurer may have the responsibility of primary payer for your client's health care costs," it says.

A lawyer must provide a client's name and Social Security number, an injury report and insurance facts to a coordination of benefits contractor, or COBC, in Medicare secondary payments, or MSP.

"Upon receipt of this information, the COBC will apply it to your client's Medicare record, assign the case to a Medicare contractor, and inform you and your client of the applicability of the MSP program and Medicare's recovery rights," the fact sheet says.

Both lawyer and client must sign a release of claims data. If a client has already settled, the lawyer must send Medicare a copy of the agreement indicating the date and the amount.

The lawyer must also supply the name and telephone number of the insurer. If the lawyer has a policy number, a claim number and an adjuster's name, Medicare will expect those too.

The fact sheet says, "If monies are available through personal injury, med-pay or another form of coverage, indicate the total coverage amount and an itemization of benefits paid."

Finally, the lawyer must itemize fees and costs.

According to Medicare's secondary payment manual, the law requires recovery from settlements regardless of any stipulation for disbursement of proceeds.

"That includes situations in which the settlements do not expressly include damages for medical expenses," the manual says.

"The fact that a settlement has been made between the beneficiary and the liable party does not necessarily bind Medicare to that settlement," it says.

"If the liability insurer was aware of Medicare's interest, but Medicare was not consulted in the settlement, Medicare may pursue the balance of its claim, over and above any amount granted to it in the settlement, against the liability insurer," it says.

Medicare allocates a liability payment to non-medical losses only when a payment is based on a court order on the merits of the case, it says.

If a court designates amounts for pain and suffering, Medicare won't claim that those amounts relate to medical services.

The manual says, "When a claim is identified in which litigation either has been or may be undertaken by the beneficiary, the Medicare lead contractor should contact the beneficiary and the beneficiary's attorney and advise them of Medicare's interest as soon as possible, to protect Medicare's claim."

The lead contractor must also notify the insurer of Medicare's interest.

If a defense lawyer calls a lead contractor about a claim, the contractor must refer the call to the plaintiff's lawyer.

The lead contractor will build a file of 12 elements, including "specific information about the benefits paid on behalf of the beneficiary, broken out by contractor."

The manual provides a form letter, in use since 2005, delivering news that Medicare has a claim against proceeds from a settlement, judgment or award.

"Medicare's regulations require that you pay Medicare back within 60 days of your receipt of settlement or insurance proceeds," the letter says.

"If you do not repay this overpayment, Medicare has the authority to refer it to the Social Security Administration or Railroad Retirement Board for further recovery action, which may result in the overpayment being deducted from any monthly Social Security or Railroad Retirement benefits to which you may be entitled," it says.

According to the manual, those who aim to skirt the law by paying claims with their own funds instead of filing them with insurers won't get away with it.

An Internet posting by compliance consultant Sharon Griffin, of Medicare Allocations Inc., scouts the changing legal territory.

In any settlement, she wrote, Medicare can review an allocation to future medical expenses and set a higher amount.

She wrote that Medicare can require that an entire settlement be spent on future injury related expenses before it will cover injury related compensable services.

"Therefore, it is important for the plaintiff attorney settling a liability claim to be aware of the risk created for the client who has received a settlement for future injury related medical expenses and fails to educate the client regarding a federal statute that has been in existence for decades," she wrote.

"This also gives rise to another tangible exposure to the plaintiff attorney that might be brought in the form of a legal malpractice claim asserted by the plaintiff in the underlying claim who received those monies," she wrote.

"The individual who cannot show evidence of a consideration of Medicare's interest would seemingly be left in a precarious and exposed position," she wrote.

"All parties clearly have exposure to negative consequences by ignoring the obligations imposed under the MSP statute," she wrote.

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