By Jennifer A. King and Michele Sheets
Medicare now requires group health plans and insurers to report settlements and judgments involving Medicare beneficiaries.[1] Failure to do so subjects the insurer to a penalty of $1,000 per day per claimant.[2] The Medicare Secondary Payer (“MSP”) statute and regulations[3] require insurers, beneficiaries, and attorneys to reimburse Medicare for conditional payments it makes for a beneficiary’s treatment when another insurer is responsible to pay for such treatment.[4] Medicare may bring suit against the insurer, beneficiary, and beneficiary’s attorney to recover conditional payments, and insurers may be liable for double damages.[5] Thus, attorneys representing beneficiaries and insurers should familiarize themselves with Medicare reporting and reimbursement requirements to properly advise their clients of Medicare’s procedures and the risks of failing to comply.
Overview of Medicare Reporting and Reimbursement Requirements in Liability Cases
This article focuses on liability cases involving Medicare beneficiaries. Medicare pays secondary to insurance plans (“primary plans”), including workers’ compensation plans, automobile or liability plans, self-insured plans, and no-fault plans,[6] with a responsibility to pay for a beneficiary’s treatment.[7] A responsibility to pay is triggered by a judgment or settlement.[8] Medicare may make conditional payments for such treatment, provided the primary plan, or entity receiving payment from a primary plan (i.e. beneficiary and attorney), reimburses Medicare.[9] When a primary plan could be responsible for payment, the beneficiary’s attorney must notify the Medicare Coordination of Benefits Contractor of the claim.[10] Medicare communicates to the beneficiary, and any party authorized by the beneficiary, regarding amounts paid for treatment through Conditional Payment Letters and the Final Demand Letter.[11] Medicare requires reimbursement within sixty days of the Final Demand Letter, or interest will begin to accrue.[12]
The standard of care for lawyers is underdeveloped in this area. However, the following practices appear prudent in liability cases involving Medicare beneficiaries.
Counsel for Medicare Beneficiaries
The beneficiary’s attorney should alert the Medicare Coordination of Benefits Contractor at the onset of the case[13] to ensure Conditional Payment Letters and the Final Demand Letter are issued, so that the beneficiary, attorney, and insurer know how much Medicare will require for reimbursement. The beneficiary’s attorney should also remind the beneficiary that he or she is responsible for reimbursing Medicare from any settlement or judgment.[14] If Medicare is not reimbursed, the beneficiary remains liable for the amount of the lien or conditional payment.
To minimize the reimbursement amount, the attorney should consider and discuss with the beneficiary the 25% fixed rate option, available in certain liability cases settled for $5,000 or less.[15] This option will allow the beneficiary to reimburse Medicare 25% of the settlement instead of following the traditional recovery process.[16] The beneficiary’s attorney should also consider and discuss with the beneficiary the option to request a waiver of overpayment. An overpayment is an amount paid to a provider or a beneficiary in excess of amounts due and payable under the governing statutes and regulations.[17] A waiver may be granted in cases where there is financial hardship or where recovery of the overpayment would violate the principles of equity and good conscience.[18]
The attorney should also be aware of the option to self-calculate the final conditional payment, available in certain liability cases settling for $25,000 or less.[19] This option could expedite the settlement process because the parties would not need to wait for Medicare to determine the reimbursement amount.[20]
To dispute the amount of reimbursement Medicare seeks, the beneficiary must follow an administrative procedure, which includes filing an appeal within 120 days of receiving the Final Demand Letter.[21] Failure to follow the administrative procedure could result in a waiver of the beneficiary’s appeal rights.[22]
Counsel for Insurers/Self-Insured Providers
In addition to a lawsuit brought by Medicare to recover conditional payments, an insurer’s failure to timely reimburse Medicare could result in a penalty of double damages.[23] Thus, the insurer’s attorney should determine through discovery whether the plaintiff is a Medicare beneficiary.[24] The attorney should obtain the beneficiary’s birth date, social security number, and Medicare Health Insurance Claim Number, which the insurer should then provide to Medicare so Medicare can conduct a search of its database to verify whether the plaintiff is a beneficiary.[25] Also, the insurer’s attorney should alert the Medicare Coordination of Benefits Contractor of the case if the beneficiary’s attorney failed to do so.
As a means of protection in the event Medicare sues the insurer to recover conditional payments, the insurer’s attorney should consider and discuss with the insured the use of indemnification language, or language verifying the plaintiff is not a Medicare beneficiary, in the settlement agreement.
Attorneys and insurers should also consider issuing a separate check to Medicare as part of the settlement to ensure reimbursement, or including Medicare as a payee on the settlement check to the plaintiff.
The attorney should remind the insurer to report claims as required by Medicare. Reporting entities (consisting of workers’ compensation plans, liability insurers, self insurers, and no fault insurers, among others)[26] must report information related to the beneficiary, injury, and insurance plan to Medicare.[27] Depending on the manner in which the insurer registers to report, reporting takes place either quarterly, or within forty-five days of the date the settlement was executed or the judgment was entered.[28] Failure to comply with reporting requirements may result in a penalty of $1,000 per day per claimant.[29]
Conclusion
If Medicare is not reimbursed or notified within the statutory and/or regulatory time periods, your clients may face post-settlement or post-judgment damages and penalties. Clients who are subjected to Medicare penalties and damages could look to you, the attorney, to bear the cost of those penalties and damages through claims for legal malpractice. The tips and information provided in this article will help attorneys practicing within this area of the law avoid these types of potential legal malpractice claims.
Jennifer A. King is a Partner at Burford & Ryburn, LLP who has a professional liability defense practice. Jennifer frequently counsels clients on how to avoid legal malpractice claims, and gives advice regarding best practices for lawyers. Michele Sheets is an Associate with Burford & Ryburn, LLP with a general trial practice. Michele has performed extensive research regarding the Medicare Secondary Payer statute and regulations and has been a lecturer and article contributor on the subject.
[1] Medicare, Medicaid, and SCHIP Extension Act of 2007, codified at 42 U.S.C. §§ 1395y(b)(7), (8).
[2] 42 U.S.C. §§ 1395y(b)(7)(B), (b)(8)(E).
[3] Id. § 1395y(b)(2); 42 C.F.R., Part 411.
[4] 42 U.S.C. §§ 1395y(b)(2)(A), (B); 42 C.F.R. § 411.24(g).
[5] 42 U.S.C. § 1395y(b)(2)(B)(ii)-(iii); 42 C.F.R. § 411.24(g); but see Haro v. Sebelius, 789 F. Supp. 2d 1179, 1195 (D. Ariz. 2011) (“The court finds no statutory support, either expressly or in the legislative history, to support the Secretary’s [of Health and Human Services] assertion that she has a direct cause of action, pursuant to 42 U.S.C. § 1395y(b)(2)(B)(ii), to recover a reimbursement claim from an attorney that has received payment from a primary plan and has passed it along to the beneficiary.”) (emphasis added).
[6] 42 U.S.C. § 1395y(b)(2)(A); 42 C.F.R. § 411.21; 42 C.F.R. § 411.50(b).
[7] 42 U.S.C. §§ 1395y(b)(2)(A), (B).
[8] Id. § 1395y(b)(2)(B)(ii); 42 C.F.R. § 411.22(b).
[9] 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24(g).
[10] Medicare Secondary Payer Recovery Contractor, Reporting a Case to the Coordination of Benefits Contractor (COBC) in Liability Insurance, No-Fault Insurance & Worker’s Compensation Cases, at 4, www.msprc.info/forms/reporting_a_case.pdf (last visited Jan. 23, 2012).
[11] Id. at 6-7; Medicare Secondary Payer Recovery Contractor, What to Know About Conditional Payment Letters, http://www.msprc.info/forms/What%20to%20know%20about%20Conditional%20Payment%20Letters.pdf (last visited Jan. 27, 2012); Medicare Secondary Payer Recovery Contractor, “Proof of Consent” vs. “Consent to Release,” at 5, www.msprc.info/forms/POR%20Powerpoint.pdf (last visited Jan. 27, 2012).
[12] 42 U.S.C. § 1395y(b)(2)(B)(ii); What to Know About Conditional Payment Letters, supra note 11, at 5.
[13] See Reporting a Case to the Coordination of Benefits Contractor (COBC) in Liability Insurance, No-Fault Insurance & Worker’s Compensation Cases, supra note 10, at 4 (regarding what information is required to report a case).
[14] 42 U.S.C.A. §1395y(b)(2)(B)(ii); 42 C.F.R. §411.24(g).
[15] Medicare Secondary Payer Recovery Contractor, Fixed Percentage Option, www.msprc.info/forms/Fixed%20Percentage%20Option%20Information.pdf (last visited January 24, 2012).
[16] Id. at 3.
[17] 42 U.S.C. § 1395y(b)(2)(B)(v); 42 C.F.R. § 411.28; Medicare Financial Management Manual, Ch. 3, § 10, www.cms.gov/manuals/downloads/fin106c03.pdf (last visited Jan. 26, 2012).
[18] Medicare Secondary Payer Recovery Contractor, FAQs, www.msprc.info (last visited Jan. 26, 2012).
[19] Medicare Secondary Payer Recovery Contractor, Option to Self-Calculate Your Final Conditional Payment Amount Prior to Settlement, at 2, www.msprc.info/forms/SelfCalculatedFinalCP.pdf (last visited Jan. 26, 2012).
[20] See generally id.
[21] Fanning v. United States, 346 F.3d 386, 399-401 (3d Cir. 2003) (court lacked jurisdiction to consider beneficiaries’ complaint regarding Medicare’s efforts to obtain MSP reimbursement when administrative appeal process was not followed); Haro v. Sebelius, 789 F. Supp.2d 1179, 1189 (D. Ariz. 2011); Medicare Secondary Payer Recovery Claim Process Overview, www.cms.gov/MSPRecovClaimPro/ (last visited Jan. 25, 2012); Medicare Claims Processing Manual, Ch. 29, § 220.
[22] Fanning, 346 F.3d at 400-01 (court lacked jurisdiction to consider beneficiaries’ complaint regarding Medicare’s efforts to obtain MSP reimbursement when administrative appeal process was not followed).
[23] 42 U.S.C. § 1395y(b)(2)(B)(iii).
[24] See, e.g. Seger v. Tank Connection, LLC, No. 8:08CV75, 2010 Wl 1665253 (D. Neb. Apr. 22, 2010) (allowing discovery related to Plaintiff’s Medicare enrollment, including Medicare Health Insurance Claim Number and social security number).
[25] See id; CMS MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting, Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation User Guide, Version 3.3, at Ch. 13, www.cms.gov/MandatoryInsRep/Downloads/NGHPGuideV3.3.pdf (last visited Jan. 26, 2012).
[26] 42 U.S.C. §§ 1395y(b)(2)(7), (8).
[27] CMS MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting, Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation User Guide, supra note 25, at app. A.
[28] Id. at 105-06.
[29] 42 U.S.C. § 1395y(b)(8)(E).
