This article has been published in “The Advocate”, a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, September 2011 issue, @2011 by Steven J. Bruzonsky, Esq.
HARO V. SEBELIUS AND THE RESULTING SUSPENSION AND REVISION OF MEDICARE LIEN COLLECTION PROCEDURES
In Haro v. Sebelius, CV 09-134 TUC DCB, (D. AZ.) (May 5, 2011), Plaintiffs seek class action certification and a declaratory judgment that certain of Defendant Sebelius’ (Secretary of U.S. Dept. of Health and Human Services) CMS (Center for Medicare & Medicaid Services) Medicare lien collection practices are not authorized by Congress and are not a permissive interpretation of the statute [the Medicare MSP Statute,42 U.S.C. § 1395y(b)(2)(B)], and that these collection practices violate the Due Process Clause of the U.S. Constitution. The challenged collection practices are (1) requiring prepayment of the Medicare lien (within 60 days of receiving settlement proceeds) before the correct amount is administratively determined where the Medicare beneficiary either appeals or seeks a waiver of the lien claim; and (2) holding plaintiff attorneys financially responsible for Medicare liens if they do not hold or immediately turn over to Medicare their clients’ injury compensation awards.
On May 5, 2011, U.S. District Court Judge David C. Bury, issued his Order on summary judgment, certifying the class action, and enjoining Medicare (1) “from demanding payment of a MSP reimbursement claim with threats of commencing collection actions before there is a resolution of an appeal or waiver request”, and (2) “from demanding that attorneys withhold liability proceeds from their clients pending payment of disputed MSP reimbursement claims.”
The Court stated that the questions were answered as a matter of statutory construction, and that the Court did not reach Plaintiffs’ due process arguments.
The Court finds that “the Secretary’s application of the 60-day reimbursement requirement to support immediate collection activities against beneficiaries when the reimbursement claim is in dispute is neither rational nor consistent with the statutory scheme providing for waiver and appeal rights. - - - it unnecessarily chills a beneficiary’s right to seek a waiver or to dispute the reimbursement claim and reaches beyond the fiscal objectives and policies behind the 60-day (statutory) reimbursement provision.” However, once the waiver and appeal are concluded, the Court sustains Medicare’s agency discretion in charging 11.375% per annum interest retroactively back to the date of notice (the date of issuance of Medicare’s Final Demand Letter), and the Court notes that this is strong incentive for beneficiaries to pay the undisputed portion of the Medicare lien prior to expiration of the 60-day time period.
In regard to the question of direct action against plaintiffs attorneys: The Court states that there is no statutory authority, express or implied by legislative history, to support a direct action by Medicare against plaintiffs attorneys, “except to the extent they are end-point recipients of settlement proceeds”; that Medicare does not pursue reimbursement from the procurement (attorney’s fees and costs) portion of settlement proceeds; and that Medicare reduces its lien claim for procurement costs. Moreover, the Court notes that Medicare’s interests are (adequately) protected, in consideration of Medicare’s statutory subrogation rights; if the Medicare lien hasn’t been paid by the beneficiary from settlement funds, that then third party payers (generally insurance companies) must reimburse Medicare, even though they have already paid the full settlement to the beneficiary; and that plaintiffs attorneys will retain (in Trust) sufficient settlement proceeds to protect the Medicare lien interest, in consideration of the statutory required interest from the date of notice (the Final Demand Letter), and as the Rules of Professional Conduct require that the attorney retain settlement proceeds (in Trust) “when there are substantial grounds for dispute as to the person entitled to the funds.” Accordingly, the Court states that Medicare may not preclude plaintiffs attorneys from disbursing undisputed portions of settlement proceeds to their beneficiary clients.
Within about a week after this Order was handed down on May 5, 2011, the MSPRC (Medicare Secondary Payer Recovery Contractor), the federal contractor which processes Medicare liens and reimbursements under the Medicare Secondary Payer Act, issued a temporary suspension on processing letters explaining rights and responsibilities, conditional payment lien information and final demand letters. By late June 2011, the MSPRC had revised its procedures and processing letters and the suspension was lifted.
You may find a complete explanation of the current MSRPC Medicare lien process, including form letters, at the MSPRC’s website, at http://www.msprc.info/index.cfm?content=main. The Final Demand Letter states that payment of the Medicare lien amount demanded is due within 60 days from the date of the letter; that interest on any unpaid balance, from the date of the letter, is due and payable for each full 30 day period the debt remains unresolved; and that the unpaid balance on which interest accrues may include any amount you are determined to owe once a decision is reached on your request for waiver or appeal.