These articles have been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, June â€“ September 2008 issues, @2008 by Steven J. Bruzonsky, Esq.
MEDICARE LIENS, PART 1 â€“ A BRIEF PRIMER
(This is the first part of a three part series on Medicare liens. The second and third parts will be in the next two issues.)
The Medicare MSP (Medicare Secondary Payer) statute, 42 U.S.C. § 1395y(b)(2) "Exclusions from Coverage and Medicare as Secondary Payer," and regulations 42 C.F.R. §§ 411.20 â€“ 411.54 "Exclusions from Medicare and limitations on Medicare payment" are written as broadly as possible to effectively give Medicare (U.S.) a "SUPERLIEN" on all injury settlements in which a Medicare recipient receives Medicare coverage for injuries included in a personal injury claim or lawsuit. The lien applies automatically to any payments from a source other than Medicare that are made in connection to the injury damages claim (including medical payment, no fault/personal injury protection, liability insurance, uninsured motorist, underinsured motorist, self-insured, or third party) and is enforceable against all parties involved in the recovery including the plaintiffs' attorneys, the insurance carrier or third party which pays the settlement, and the injured party/Medicare beneficiary.
The Medicare Prescription Drug and Modernization Act of 2003 amended the Medicare MSP (Medicare Secondary Payer) statute, 42 U.S.C. § 1395y(b) to effectively preclude any legal challenges regarding applicability and enforceability. The amendment purports to be effective retroactively to the original 1984 law enactment. Prior to this law, there were some successful Federal court challenges which may still have some application if the plaintiff was injured prior to the 2003 amended Medicare MSP statute.
Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) amended the Medicare MSP (Medicare Secondary Payer) statute, 42 U.S.C. § 1395y(b) to enact tight reporting requirements for insurers (and self-insureds) as well as additional penalties for insurer non-compliance. Please see Part 3 of this series for more information in this regard.
The Medicare lien is automatic with no perfection or recording required. 42 U.S.C. § 1395y(b)(2)(B)(iii) gives the U.S. the right of direct action to recover the Medicare lien. Pursuant to 42 U.S.C. § 1395y(b)(2)(B)(iv), the U.S. has subrogation rights. There is no mention of perfection or recording requirements.
The lien has been enforceable against all parties involved - plaintiffs, plaintiffs' attorneys, insurance carriers, and defendants, thanks to the provisions of 42 U.S.C. § 1395y(b)(2)(B)(iii) and 42 C.F.R. § 411.24(e),(g) and (i). The beneficiary, the insurer and even the plaintiff's attorney is liable for failure of payment of the Medicare lien, plus interest. Under these provisions the U.S. can even collect double damages against insurers. And the insurer or third party payor is responsible even though it has already reimbursed (settled with) the beneficiary.
Health care providers are required to bill the adverse party/insurer within the first 120 days of furnishing medical care or supplies (or discharge if hospitalized). Once the 120 days has expired, the provider must elect either to bill Medicare or to bill the injury settlement. If the provider bills Medicare, then the provider must accept the Medicare rates including patient responsibility amount and adjust (write-off) the remainder of the billed charges. If the provider elects to bill the injury settlement, then the provider can file a statutory lien to protect its interest if and as provided by state law, the provider is required to reduce the bill by procurement costs (pro-rata attorney's fees and costs), and the provider can't charge interest, lien filing or administrative fees against the lien or beneficiary. See 42 U.S.C. § 1395y(b)(2)(B), 42 C.F.R. §§ 411.31, 411.50(b), 411.52, 489.20 and the Medicare Secondary Payer Manual, Chapter 2, § 40.2.
Medical Payments or any no fault coverage must be exhausted prior to Medicare paying any conditional payments of accident-related medical expenses. The provider is required to promptly bill no fault (including Medical Payments) medical coverage if the services are auto accident related, and only if the no fault insurance will not pay promptly may the provider bill Medicare. See 42 U.S.C. § 1395y(b)(2)(B) (conditional payment), 42 C.F.R. §§ 411.50(b) and 411.51 (no fault insurance), and Medicare Secondary Payer Manual, Chapter 2, § 60 and Chapter 3, § 30.2.1.
I recommend that you use Medical Payments coverage promptly for Medicare patient responsibility/copay/deductible amounts and for non-Medicare providers as much as possible. Then you can advise health care providers as that Medical Payments or no fault are exhausted and, hopefully, they will agree to bill Medicare.
After 120 days from the date of health care provider providing service or supplies, or if inpatient hospitalization from the date of discharge, attorney should verify that each Medicare participating health care provider is billing Medicare. Attorney should consider holding off on any final settlement, because if claim has settled, then provider will be more likely to bill settlement and not Medicare. For a hospital in particular, attorney may be asked to verify in writing that there is no auto or premises Medical Payments coverage or that such coverage has already been exhausted.
Regarding the applicability of Medicare liens in Wrongful Death cases, please see my January 2007 "Liens Corner" article on this very subject.
Regarding the uncertainty surrounding whether there is an applicable statute of limitations for Medicare liens, and for more detail regarding the discussion in this article, please see my article on Medicare liens in Arizona Personal Injury Lien Law and Practice (2nd Ed. 2007), published by our AzTLA Association.
Medicare liens must be reduced to cover procurement costs (pro-rata attorney's fees and costs), as long required by 42 C.F.R. § 411.37. Medicare also has discretionary authority to compromise and even to fully waive Medicare liens although I would expect the MSPRC (as a paid collection agent) and Medicare bureaucracy to be resistant to this idea of reduction beyond procurement costs. If medical payments coverage paid for any health care bills paid by Medicare, then the medical payments amount will first be applied dollar for dollar to reduce the lien amount â€“ and then the amount left over will be reduced by pro-rata attorneys' fees and costs. For more detail concerning the statutory and regulatory basis of Medicare's lien compromise and waiver authority, please see my article on Medicare liens in Arizona Personal Injury Lien Law and Practice (2nd Ed. 2007), published by our AzTLA Association.
Our above referenced AzTLA publication also discusses in detail Arkansas Dept. of Health and Human Services v. Ahlborn, 126 S.Ct. 1752 (2006), an unanimous ruling of the Supreme Court limiting Medicaid (AHCCCS in Arizona) lien claims to that portion of any settlement attributable to past medical expenses, meaning that Medicaid/AHCCCS may not lay claim to any portion of a patient's recovery for lost wages, pain and suffering, or future damages of any kind. In Ahlborn, the parties stipulated that the injury claim's full value as six times the amount of the settlement ($550,000); the state Medicaid agency claimed a lien of $215,645.30; and the U.S. Supreme Court affirmed the holding of the Eight Circuit that the state Medicaid agency was authorized by Federal law to charge a lien of up to only the pro-rata portion or one-sixth of its payments or $35,581.47, as this constituted reimbursement for medical payments made. The holding in Ahlborn in part relied upon a Medicaid anti-lien provision which is not present in the Medicare statute, but there are other good reasons to apply the logic of Ahlborn in the Medicare context. Ahlborn is particularly important when the tort recovery is substantially limited due to liability problems or too low policy limits. However, as of yet there is no Federal appellate decision applying Ahlborn to Medicare.
(The second part will discuss how to best contact Medicare to hopefully timely resolve and compromise the lien. The third part will discuss the "Medicare, Medicaid and SCHIP Extension Act of 2007" and how insurance companies are starting to include Mediare as a payee on settlement checks to protect themselves.)
MEDICARE LIENS, PART 2 â€“ CONTACT INFO & LIEN COMPROMISE
(This is the second part of a three part series on Medicare liens. The third part will be in the next issue.)
Effective October 2, 2006, CMS awarded a single contract for a national Medicare Secondary Payer Recovery Contractor (MSPRC) to the Chickasaw Nation Industries, Inc.-Administative Services, LLC (CNI). Initial indications are that this may be positive (I hope) for us as plaintiffs attorneys, with the new MSPRC being much more organized and responsive than the "old" lead regional contractor which too often was backlogged months and even years and too often unresponsive to requests for lien itemization and compromise.
Medicare of course encourages you to contact them re their lien interest as soon as you initiate representing your client. However, I recommend that you consider doing this later on in the process if appropriate, if you need the time to better determine which of your client's post-accident medical care expenses are accident-related vs. unrelated. My concern is that too early of notification may be more likely to lead Medicare to claim unrelated medical expenses as part of the lien.
When you are ready to contact Medicare to start the lien process, call (do not write or fax, unless you want it to be lost) the Medicare Coordination of Benefits Call Center (1-800-999-1118). Have handy your client's Medicare identification number (usually the client's social security number followed by an A, or sometimes a B, but check your client's Medicare card or the Medicare # listed in medical records), date of birth, address and phone, date of accident, information regarding liability/UM/UIM carriers, etc. When you call, a message will give you the options. Currently (as of June 2008), to enter a new Medicare lien claim, enter options in this order #2, then #1, then #3, then enter client's social security number, then stay on the line to talk to a Customer Service Representative, who will ask you questions to open the claim.
Once you have called in the Medicare lien claim, Medicare's standard procedure is to promptly set up a lien file, and then to send you within about ten days the following:
A "Consent To Release Form" which is Medicare's latest Medicare Authorization, as of April 2008, which must be completed and signed by your client. Medicare will not accept any other authorization, even a prior year's Medicare authorization. Medicare will give you the address to complete and return the Consent form to. In my recent injury cases, this has been the following:
P.O. Box 33828
Detroit, MI 48232-5828
A "Medicare Secondary Payer Development" questionnaire, which requests information as applicable regarding any non-Medicare health benefits from whatever source (whether health insurance, Black lung benefits, workman's compensation benefits, Medical Payments, auto or no fault medical benefits, etc.), information regarding the adverse insurance carrier(s), and brief description of illness or injury. Medicare will give you the address to complete and return the questionnaire to. In my recent injury cases, this has been the following:
Medicare â€“ Coordination of Benefits
Medicare Claims Investigation Project
P.O. Box 33847
Detroit, MI 48232-5847
I recommend that you write your client's Medicare identification number at the top right of each document that you send to Medicare, including the above forms and all letters. Medicare uses that number to file documents, and absent that number don't be surprised if the document is misplaced or returned to you.
If you have any other letters or documents, mail them to the following (if you mail them to a different address, my experience is they will be returned or thrown away):
P.O. Box 33828
Detroit, MI 48232-5828
Wait ten days after you have sent in both of the above documents. Then call the MSPRC (1-866-677-7220) to verify that they have received and have on file both of the above documents. Also, discuss accident vs non-accident care and ask them to be sure to note this in the file. Ask them when they sent the claim to research for a current lien itemization, and if they haven't done so yet, to do so if you need a current lien itemization. It takes 30 â€“ 45 days from when the claim is sent to research before the MSRPC will send you a Conditional Payor Letter (current lien itemization). Also, send a letter to the MSPRC reiterating your discussion of accident vs non-accident care and expenses and outlining outlining which of your client's medical expenses since the accident are claimed and aren't claimed as accident-related and why. Then in ten days follow up by phone with the MSPRC (1-866-677-7220) to ensure that this letter has been received, considered and filed; and also verify research status of current lien itemization.
As you continue to correspond with the MSPRC, call every ten days thereafter to check and ensure that the correspondence has been filed and considered and that the MSPRC is timely processing your client's Medicare lien file.
Whenever you need a current lien itemization, call and ask for one (please don't overdo this more than you need to, or we will all suffer with the backlog as a result). Always call again 10 days later to confirm the date that the current lien itemization was requested. Then call again 30 days later if you haven't received the Conditional Payor Letter to check on its status.
When you have settled your case, mail (you can try faxing it, but their fax is always busy) the MSPRC a letter outlining the settlement information, attorney's fees and costs, and if you are requesting a Final Demand Letter (final lien itemization and lien compromise). If you request a reduction in excess of procurement costs (pro-rata attorney's fees and costs) be sure to explain your reasons for this request. Then call the MSPRC 10 days later to confirm that the documents are in the file and the date that the Final Demand Letter was ordered. Call the MSPRC 30 days from the date that the Final Demand Letter was Ordered to check on its status, and follow-up with a phone call every 10 days thereafter.
If the case is settling, but the MSRPC hasn't issued a Conditional Payor Letter yet which shows that they are not including non-accident medical expenses in the lien, you may want to first obtain a Conditional Payer Letter confirming this, prior to ordering the Final Demand Letter. This will of course delay the Final Demand Letter, but from an administrative standpoint it's a lot easier to amend a Conditional Payer Letter lien itemization as opposed to amending a Final Demand Letter once issued.
42 C.F.R. §§ 411.120â€“411.126 cover appeal and hearing procedures and Administrative review if you disagree with the CMS Medicare lien reduction determination.
(The third part will discuss the "Medicare, Medicaid and SCHIP Extension Act of 2007" and how insurance companies are starting to include Medicare as a payee on settlement checks to protect themselves.)
MEDICARE LIENS, PART 3 â€“ INSURERS INCLUDING MEDICARE AS PAYEE AT SETTLEMENT & THE MEDICARE, MEDICAID AND SCHIP EXTENSION ACT OF 2007
(This is the third of a three part series on Medicare liens.)
The Medicare lien is enforceable against all parties involved - plaintiffs, plaintiffs' attorneys, insurance carriers, and defendants. The beneficiary, the insurer and even the plaintiff's attorney is liable for failure of payment of the Medicare lien. The insurer or third party payor is responsible even though it has already reimbursed (settled with) the beneficiary.
Pursuant to 42 U.S.C. § 1395y(b)(2)(B)(iii), the U.S. "may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan's payment to any entity."
42 C.F.R. § 411.24 sets forth Medicare's "Recovery of conditional payments" as follows: Subsection (e) Recovery from third parties: "CMS has a direct right of action to recover from any entity responsible for making primary payment. This includes an employer, an insurance carrier, plan, or program, and a third party administrator." Subsection (g) Recovery from parties that receive third party payments: "CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency, or private insurer that has received a third party payment."
For more detail concerning the statutory and regulatory basis of Medicare's lien being enforceable against in particular plaintiff attorneys and insurance companies, please see my article on Medicare liens in Arizona Personal Injury Lien Law and Practice (2nd Ed. 2007), published by our AzTLA Association.
A few AzTLA members have reported that State Farm Insurance is recently insisting on including Medicare as a payee on settlement checks. This was discussed at our AzTLA Liens Seminar, January 2008, by State Farm attorney Joel DeCiancio. He advised that Medicare had withheld tax refunds due State Farm in several cases to repay unrepresented claimants' Medicare liens, and that State Farm was considering how to best protect its interest when Medicare liens are involved.
We also know that Medicare is now tracking Medicare liens not only by claimant's Medicare/Social Security #s, but also by insurance carrier Tax ID #s and even by attorney Tax ID #s.
Medicare Secondary Payer Manual, § 50.4.1 ("Existence of Overpayment") (effective 4-25-05) states that as Medicare alerts beneficiaries and their attorneys in pre-settlement correspondence of Medicare's right to recover settlement proceeds, that the beneficiary and attorney are to be notified that settlement proceeds should not be disbursed until Medicare's claim has been satisfied. However, here in Arizona, ER 1.15 requires that we protect the Medicare lien interest, and if we distribute settlement proceeds except that we retain sufficient funds in Trust to cover the full Medicare lien, then we satisfy ER 1.15. However, if we err and do not retain sufficient funds in Trust to cover the full Medicare lien interest, then we are in violation of ER 1.15, as as plaintiff attorney we are also liable to Medicare as discussed herein.
Practice Tips: At settlement, confirm in writing the terms of settlement including exactly who the settlement checks will be payable to and for how much. In a recent minimal limits settlement, I confirmed with the liability carrier that the $15,000 limits would be payable to my law firm and my clients, and that it was agreed my firm would hold sufficient funds in Trust to fully cover the Medicare lien, as it would take some time to obtain the final lien amount from Medicare. Another option might be for the insurer to issue one check payable to attorney and clients, and hold the remainder of the settlement (amount sufficient to cover the Medicare lien) in an interest bearing account, and once the final Medicare lien is determined, to pay the lien and pay the remainder by check to attorney and clients.
Lets say that you demand the policy limits, the carrier agrees, then the carrier after the fact insists on issuing one settlement check including Medicare as a payee. Is this a breach of the settlement agreement? A few AzTLA members have given their opinions that this is a breach of settlement agreement. I would suggest that if you desire to proceed to sue the insurer for breach of settlement agreement, that you first offer the insurer in writing the alternatives presented above and give them a time limit to respond.
In any event, the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), may make it that much more difficult, if not impossible, to sue the insurer for breach of settlement agreement if the insurer acts at settlement to protect Medicare's lien interest, as discussed above. The new law is effective for injury settlements on or after July 1, 2009. The MMSEA amended Section 1862(b) of the Social Security Act (42 U.S.C. § 1395y(b) by adding the new requirements discussed below as paragraph 8. The new requirements at Section 111 of the MMSEA (for our purposes as plaintiff attorneys settling with insurers) include the following:
1. Insurers (including self-insureds) are required to determine the Medicare entitlement of all claimants to the Secretary of Health and Human Services.
2. Penalty for noncompliance of $1,000 per day for each day that the insurer is not in compliance. (In addition to double damages penalty from the prior regulations.)
The CMS (Centers for Medicare & Medicaid Services) is in the process of revising its regulations in consideration of these new requirements.
As plaintiff attorneys, we are now going to have to work even harder and more efficiently in Medicare lien cases. We have to even more timely communicate with Medicare (specifically, the MSPRC, please see Part 2 of this series in the prior issue) to speed up Medicare's final lien itemization and compromise. We need to better communicate with insurers and convince them that we can adequately protect their interests concerning Medicare liens so that preferably we as the plaintiff attorney, or as last resort the insurer, hold a portion of the settlement pending final Medicare lien determination, insisting that the insurer also pay reasonable interest on funds so held. The alternative is wait for Medicare lien resolution before our clients receive settlement proceeds, or file more lawsuits such as breach of settlement agreement or bad faith for failure to timely pay at least the clear non-Medicare lien portion of settlement.
If you liked the movie "Spider-Man 3", Medicare already has Venom's (one of Spider-Man's super powered foes) fangs. And with the new MMSEA, Medicare will have Venom's teeth to boot!