Posted On: July 26, 2009 by Tony Patterson

New Medicare Laws Impact Personal Injury Cases

When handling personal injury claims, plaintiffs’ counsel often address the resolution of subrogation liens, including those asserted by Medicare.  Under federal statutes, Medicare is entitled to reimbursement when an injured Medicare recipient receives benefits which are later recovered through a settlement or judgment.  New legislation has now given Medicare an effective – and harsh – means of recovering its subrogation lien.In 2007 the Medicare, Medicaid and SCHIP Extension Act (the “Act”) was signed into law, placing new and more detailed requirements on liability insurance companies in claims dealing with Medicare recipients.  This 2007 Amendment, effective July 1, 2009, is the counterpart to the 2003 Amendment, which focused on plaintiffs and their attorneys.  The 2007 Act increases the enforcement power for Medicare reimbursement by extending liability to insurers and adding damages, penalties and fines for noncompliance.

If Medicare is not contacted early, the process of resolving these subrogation liens can be arduous and time consuming.  Furthermore, failing to address a Medicare lien can result in substantial losses to plaintiffs’ counsel and their clients due to penalties and fines.  When Medicare has not been properly reimbursed, the Agency can recover reimbursements from any party that received proceeds from the settlement or award, including plaintiffs, attorneys, and insurers, even if the insurer already paid the claim to the plaintiff.  The Act impacts plaintiffs in at least two ways.  First, Medicare can recover from plaintiffs and their attorneys if the lien is not properly reimbursed, and additional penalties can be assessed.  Secondly, insurers will now require proof of compliance with Medicare’s lien before paying a plaintiff, as that insurer can be liable to Medicare if the plaintiff does not properly comply with the Act.  The 2007 Amendments provide, in part, that insurers are subject to a fine of $1,000 per day for non-compliance for each individual with whom they are out of compliance.  42 U.S.C. § 1395 (2009).  This fine is in addition to the interest and double damages that can be assessed for failure to reimburse Medicare in a timely manner.  Id.  In addition to these changes, in 2006 the Center for Medicare and Medicaid Services approved a single, national Medicare Secondary Payer Recovery Contractor (MSPRC) to handle all claims.The effect of the Act is not limited to its impact upon plaintiffs, their attorneys and liability insurance companies.  Medicare can also recover reimbursements from any involved party that received proceeds from a settlement, judgment, award or other payment, including, but not limited to, beneficiaries, attorneys, providers, and suppliers.In calculating Medicare’s subrogation reimbursement, Medicare’s lien can still be reduced for a pro rata share of attorney fees and litigation expenses, known as “procurement costs”.   Medicare’s portion of these “procurement costs” is deducted from the gross lien to determine Medicare’s net recovery.  In addition, Medicare may agree to waive its lien, or a portion of it, in recognition of a plaintiff’s financial, personal and medical circumstances.When negotiating with Medicare, it is important to remember that while the Indiana Comparative Fault Act’s (Ind. Code § 34-51-2-19) lien reduction provision can reduce Medicaid liens, Pedraza by Pedraza v. Grande, 712 N.E.2d 1007 (Ind. Ct. App. 1999); In re Guardianship of Wade, 711 N.E.2d 851 (Ind. Ct. App. 1999), it cannot reduce Medicare liens due to federal preemption. For this reason, plaintiffs’ counsel is forced to negotiate with Medicare under the terms allowed by federal rules discussed above.In cases involving the need for post recovery treatment, plaintiffs’ net recoveries may also be reduced for future medical expenses anticipated to be paid by Medicare.  Although based on a statutory provision in effect for over 20 years (42 U.S.C. §§ 1395(y)(b)(2)(A)), Medicare has in the past 4 years begun requiring Medicare Set-Aside (MSA) arrangements for future medical expenses in cases which involve worker’s compensation settlements.  When a settlement pays for future medical expenses, Medicare may require a MSA arrangement funded with settlement proceeds to pay for future, injury related medical expenses covered by Medicare.The new Medicare statute means it is more important than ever to immediately get on top of plaintiffs’ liens and subrogations.  When handling a case involving a Medicare recipient, counsel should immediately notify Medicare, which can be notified by mail at MSPRC Liability, P.O. Box 33828, Detroit, MI 48232-5828.  While the Medicare claims process may seem difficult, MSPRC’s website (www.msprc.info/) provides instructions for resolving Medicare liens, including flow charts of the claims process.  In the end, waiting to notify Medicare until after the case is resolved will likely result in delaying the resolution of Plaintiffs’ claims. Parr Richey Obremskey Frandsen and Patterson has attorneys who are experienced in handling personal injury  claims involving Medicare liens.  If you have questions, please contact our office toll free at (888)532-7766.