The federal government has long enjoyed reimbursement rights when Medicare recipients recover damages from third-party tortfeasors (42 U.S.C. § 1395y(b) (2)(B)(ii)). Although some attorneys have quietly taken advantage of the repayment obligation's lax enforcement, the situation may change this month when new reporting requirements take effect. The new rules, promulgated under the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), require defendants and their attorneys to notify the government whenever they learn that the plaintiff is a Medicare beneficiary. A Super Lien
Medicare is a secondary insurance plan that conditionally pays for medical treatment subject to reimbursement by a primary source such as private health insurance or a third-party tortfeasor. A Medicare beneficiary who receives payment from a primary source must reimburse Medicare within 60 days. Medicare's right to reimbursement is a "super lien" that trumps everything else, even if a client's recovery has already been distributed (42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.24(h)). Enforcement of reimbursement rights rests with the Centers for Medicare and Medicaid Services (CMS). CMS can seek reimbursement directly from the Medicare beneficiary and from anyone else who receives payment from the primary source?including the plaintiffs attorney (42 U.S.C. § 1395y(b)(2) (B); 42 C.F.R. § 411.24(g)). A key amendment of the MMSEA, commonly known as "section 111," shifts the case dynamics because it requires defendants to determine whether the plaintiff is a Medicare beneficiary. If so, defendants and their counsel must notify Medicare of the pending litigation and the plaintiff's identity. (See 42 U.S.C. § 1395y(b)(7) and (8)); 42 C.F.R. §§ 411.22?411.25.) Defendants who make payment to a plaintiff around a Medicare lien are playing with fire; they could end up paying twice. The regulations provide that the defendant or its insurance company must reimburse Medicare "even though it has already reimbursed the beneficiary or other party." (42 C.F.R. § 411.24(i).) Heavy Penalties
Section 111 exacts a $1,000-a-day penalty for failure to comply with Medicare notification requirements (42 U.S.C. § 1395y(b)(7)(B)). In addition, Medicare is entitled to collect interest on delayed payments (42 U.S.C. § 1395y(b)(2)(B)). But the scariest rule change is that all parties in the case-the plaintiff, defendant, defendant's insurance company, and attorneys on both sides-can be held liable for double damages if they ignore the reimbursement obligations and the government must sue to collect (42 C.F.R. § 411.24(c), (e), and (g)). This is bitter medicine to swallow. Indeed, a federal trial court last year imposed liability on a plaintiffs attorney for distributing an award without reimbursing Medicare (U.S. v. Harris, 2009 WL 891931 (N.D. W. Va. 2009)). The good news is that the court imposed liability only for the principal amount, plus interest; but under the new rules, the specter of increased liability looms. What to Do
To avoid such sanctions, plaintiffs counsel should ask the client early on whether Medicare benefits are involved, and alert him or her to the government's potential claim. But don't stop there; contact CMS (www.cms.hhs.gov/apps/contacts/) to verify that benefits were provided, and in what amount. Defense counsel should conduct prompt discovery to ascertain whether the plaintiff is a Medicare beneficiary, and if so the extent of benefits received. If Medicare's claim is unresolved, settlement may be difficult. Defendants will no doubt insist on including language in the settlement agreement that makes the plaintiff (and plaintiffs counsel) responsible for all liens, including Medicare. The defense will probably also ask for indemnity with respect to those liens, and may condition final payment upon resolution of them, perhaps with Medicare as a co-payee on the settlement draft. As a last resort, defendants can interplead settlement funds and join Medicare as a party so that everyone can conclude outstanding issues in a single proceeding. When handling settlement proceeds, attorneys should set aside sufficient funds in their trust account to cover a potential Medicare claim. Clients may not like having their money tied up, but doing so avoids future liability. Given the federal budget deficit, Medicare will probably increase efforts to enforce its rights in personal injury cases. For that reason, attorneys on all sides need to be aware of both Medicare's notification and reimbursement rights and the consequences of ignoring them. Steven G. Mehta is an attorney mediator in Valencia whose practice focuses on health care and injury mediations.