Trial Magazine

It’s always good advice for a personal injury attorney to get copies of clients’ insurance cards and take down any related information, including on their dealings with Medicare. You may have heard colleagues talk about a Medicare “Super Lien.” This is descriptive but not technically accurate: Medicare has a right of repayment, not a “lien.” When Medicare is involved, though, the federal government is also involved, and mishandling Medicare’s interest in your case can have serious consequences. When representing a Medicare beneficiary in a personal injury case, it is your responsibility to know what needs to be done to keep Medicare satisfied when resolving the claims.¹

The Medicare Secondary Payer (MSP) Act created a statutory scheme based on the theory that if a tortfeasor, its insurer, or a no-fault or workers’ compensation carrier should be paying the Medicare beneficiary’s bills, then Medicare is the “secondary” payer.² But the Centers for Medicare & Medicaid Services (CMS) may make a “conditional payment” to cover a Medicare beneficiary’s past medical expenses when there is evidence that the primary payer is not going to pay. The payment is conditioned on your client reimbursing Medicare after the case against the primary payer (the tortfeasor) is settled or a judgment is obtained. Because of this requirement, CMS keeps a subrogation interest—or right of repayment—in the proceeds of the Medicare beneficiary’s personal injury judgments and settlements up to the full amount of expenses that are traceable to the tort.³

There can be serious consequences for mishandling Medicare’s interests or ignoring them altogether. Under the MSP Act, the federal government can file an action seeking double damages for unreimbursed conditional payments.⁴ The United States can maintain such a suit against “any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.”⁵ CMS has exercised this right against plaintiff  attorneys over allegedly deficient reimbursements.⁶

Traditionally, Medicare is available to everyone 65 and older, but Medicare may have paid your clients’ medical expenses before age 65. Medicare benefits also may be available for those with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant) and those receiving Social Security Disability benefits. If your client is not yet 65 but is receiving Medicare benefits for any of those reasons, CMS has the same right of repayment as it would with a plaintiff who is 65 or older.

MSP Act Obligations

CMS’s subrogation interest in past-paid medical expenses under Medicare Part A (inpatient hospital care) and Part B (outpatient care and other physician services) can be resolved online through the Medicare Secondary Payer Recovery Portal, which CMS administers.⁷ After creating an account, the portal allows you to submit a beneficiary proof of representation and consent to release (which your client must sign), request current conditional payments, initiate a dispute for any past-paid amounts that may not be related to the injuries in your case, and input settlement information after the case has been resolved.

Disputing claims using the portal. After notifying Medicare of your client’s case and requesting a conditional payment letter, focus on disputing any spending in the claims summary unrelated to the injuries at issue. The portal now provides functionality for this: If you need to dispute a line item such as a visit to a doctor or provider for something unrelated to the facts of your client’s case, you can select particular line items through the portal’s “view/dispute claims” function, provide a brief explanation of why the expense is not a conditional payment, and provide supporting documentation (such as a record of that visit).

Alternatively, if you need to give a lengthier explanation in support of your dispute, you can upload a letter with supporting documents in pdf format to the portal or fax it to CMS’s Benefits Coordination & Recovery Center. This option is useful if you need to dispute many line items on the claims summary for related reasons or if you need to dispute a portion of the amount of a line item on the claims summary.

Submitting settlement information. As soon as your client’s case is resolved, submit your notice of settlement through the portal.⁸ Do this even if funds have not been received yet.⁹

Do not submit a notice of settlement for “preliminary” or “proposed” settlements or for the purpose of generating demand letters to give to the defense during negotiations on what CMS’s interest would be if the case were settled at a given amount. There is no way within the portal to alter the date of settlement or amount of settlement in your notice of settlement, and submitting a notice of settlement only for negotiation purposes could ­nevertheless start the clock on interest penalties for untimely reimbursement.¹⁰

The notice of settlement is important for fulfilling your responsibilities under the MSP Act, and it also is necessary if you want Medicare to accept a reduction of its conditional payment amount. The notice of settlement is where you spell out the information that CMS will need to reduce its recovery and generate a final demand letter.

Demand calculation. CMS uses the formula set forth in 42 C.F.R. §411.37 to calculate any reduction in its demanded amount; if the Medicare payments are less than the settlement or judgment amount, CMS “determine[s] the ratio of the procurement costs to the total judgment or settlement payment,” then “appl[ies] the ratio to the Medicare payment. The product is the Medicare share of procurement costs.” Then, Medicare will “[s]ubtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount.”¹¹ In plain English, this generally means that CMS will pay the same percentage of attorney fees and case expenses from its portion as your client had to pay to obtain the result.¹²

However, there are conditions: If the total attorney fees and case expenses are greater than 25% of the total recovery, the portal will require you to submit a “breakdown” or ledger of case expenses. CMS will consider these two figures to be the procurement costs for which it will proportionally reduce the demand amount.¹³

Expect up to 20 days for CMS to process your notice of settlement information before you receive a “final demand” from CMS. This will apply any reductions and state the amount that, if paid within 60 days, will resolve Medicare’s interest and protect you and your client from further liability. It is a good practice to provide the final demand to defense counsel when you receive it and to copy defense counsel on your letter transmitting payment.

Portal Limitations

The portal provides attorneys with a simplified and convenient way to comply with the MSP Act well before payments must be sent to the government. But the portal has two important limitations.

Prescription drugs. The portal does not show information about amounts paid for injury-related prescription medications under Medicare’s voluntary outpatient prescription drug benefit plan (Part D). Your responsibilities to CMS for injury-related prescription drug payments are, as of this writing, unclear. This is because CMS has not issued guidance on the question since Part D became a part of Medicare in 2006. However, we are not aware of any attempts by CMS, so far, to enforce any rights to subrogation under Medicare Part D.

Medicare Advantage. As of 2018, one in three Medicare beneficiaries was enrolled in a “Medicare Advantage” plan under Medicare Part C instead of traditional Medicare.¹⁴ Medicare Advantage plans are Medicare-approved private health insurance plans that provide Medicare beneficiaries with Part A and B benefits as well as potential additional benefits for hearing, vision, dental, wellness, and prescription drug coverage. Medicare Advantage programs are expected to grow in number and enrollment, so if you represent Medicare-eligible people in tort cases, then you must be familiar with their rights and responsibilities to avoid the ethical and financial pitfalls of disbursing settlement funds without first considering the plan’s interests.

Private entities—known as Medicare Advantage Organizations (MAOs)—administer Medicare Advantage programs. MAOs receive government funding on a per-enrollee basis as opposed to the fee-for-service model of traditional Medicare. Major health care insurance carriers such as Blue Cross Blue Shield, Humana, and UnitedHealth offer ­Medicare Advantage plans and comprise most of the enrolled populations. You may want to assume that because a private insurer administers the plan, you do not need to consider the coverage as Medicare. Resist this temptation.

MAO subrogation rights remain an area of contention and confusion. The MSP portal will not display any information about injury-related amounts paid by a Medicare Advantage plan under Part C. In fact, the portal doesn’t even inform you that your client may have been a beneficiary of a Medicare Advantage plan rather than traditional Medicare at the time of the incident.

Be sure to obtain copies of all of your client’s health insurance cards to sort this out. Relying solely on correspondence from the portal can expose you and your client to liability if an MAO paid the client’s related past medical expenses: Beware the “case closed” or “zero balance” letter from CMS when you have a good reason to believe that the client was a Medicare beneficiary at the time of the incident. Also keep in mind that MAOs do not operate their own recovery portals, so to get claim amounts, you will need to write or call the MAO directly. Often, the MAO will refer the matter to a third-party recovery contractor.

Federal courts have weighed in for and against the existence of a right of recovery for Part C plans under the MSP Act. In 2012, the Third Circuit ruled in In re Avandia Marketing, Sales Practices and Products Liability Litigation that MAOs can bring subrogation claims in federal court against tortfeasors for reimbursement of paid medical expenses under the MSP Act, including the right to double damages.¹⁵ Over the last 10 years, the clear trend in the lower federal courts has been to find that an MAO’s right to recovery is the same as or similar to that of the federal government for injury-related treatment paid for by traditional Medicare.¹⁶

In contrast, the Ninth Circuit’s 2013 decision in Parra v. PacifiCare of Arizona, Inc. supports the idea that Medicare Advantage plans do not have the same subrogation rights as traditional Medicare under the MSP Act.¹⁷ Apply the Parra case to your own with caution because the court’s findings are complicated by case-specific questions of federal jurisdiction and state law. The questions for the court in Parra were resolved without fully reaching the issue of the MAO’s rights. In addition, its analysis of the MAO’s rights under the MSP Act contrasts with the Third Circuit’s analysis in In re Avandia and the bulk of lower federal court and state court decisions that have subsequently looked at the issue. Despite the promise of the holding, in most instances you will be left searching for a stronger base of support for the idea that you can leave your client’s MAO out of the case.

When your client is a Medicare Advantage plan beneficiary, the safest approach is to notify the MAO about your client’s case and to treat the MAO’s interests as though they are traditional Medicare interests. Do this unless you are positive you are in a jurisdiction that holds to the contrary, and both you and your client are prepared to litigate the issue with the MAO under a potential double-damages penalty.¹⁸

You will often deal with third-party recovery contractors, rather than the MAO administrator, when resolving the MAO’s asserted subrogation interests. But, fortunately, the MAO’s argument that it has a right of recovery under the MSP Act subjects it to the same proportional reduction provisions as traditional Medicare.

Medicare Set-Asides in Liability Cases

Medicare “set-asides” allocate a portion of your clients’ settlement or judgment proceeds to pay for likely future medical expenses so that Medicare does not have to pay for them. Although Medicare set-asides are already a part of workers’ compensation subrogation, they currently are not required in standard liability cases.

From time to time, defendants and their insurers will nonetheless demand a set-aside in a liability settlement. As of now, you can reject such a demand. In personal injury cases, there has yet to be a determination that Medicare set-asides are required. In Aranki v. Burwell, the plaintiff sought a declaratory judgment that she had no obligation to create a Medicare set-aside following the settlement of her case, and the District Court of Arizona held that the issue was not ripe for judicial review because no federal law or regulation imposed a set-aside requirement.¹⁹

In Sipler v. Trans Am Trucking, Inc., the District Court of New Jersey specifically found that there was no obligation to include language in settlement documents noting the injured party’s “obligations to Medicare” nor was there any obligation to fashion a Medicare set-aside.²⁰ In reaching this conclusion, the court recognized that unlike a workers’ comp case that “‘generally determine[s] recovery on the basis of a rigid formula, often with a statutory maximum,’” recovery in tort cases often involves noneconomic damages, and those damages as a whole “‘are not determined by an established formula.’”²¹ The court also noted that imposing a set-aside requirement in personal injury cases would “discourage personal injury settlements.”²²

Be aware, however, that CMS has recently indicated that it intends to initiate a rulemaking on the treatment of future medical expenses in liability cases. This rulemaking would revive earlier efforts to create a requirement for the use of set-asides in personal injury cases. The Office of Management and Budget posted a rulemaking notice indicating CMS’s plans to propose a rule in September 2019 that would “ensure that beneficiaries are making the best health care choices possible by providing them and their representatives with the opportunity to select an option for meeting future medical obligations that fits their individual circumstances, while also protecting the Medicare Trust Fund.”²³ At the time of publication, it was unclear what the proposed rulemaking would look like, and there likely will be ample time for comment and potential revision before any rule would go into effect. However, any attorney involved in personal injury litigation should stay informed on this proposal.

Barring any dramatic changes in the landscape, using available tools, such as the MSP portal, will help you meet your responsibilities in Medicare subrogation and keep you and your clients out of harm’s way. Familiarize yourself with the portal, and use it for predictable and reliable resolution of traditional Medicare subrogation claims. And when dealing with an MAO over its subrogation claims, apply traditional Medicare rules as a guide.

Kason Kimberley and Lawrence Lassiter are attorneys with Miller Weisbrod in Dallas and can be reached at ­kkimberley@millerweisbrod.com and llassiter@millerweisbrod.com.

Notes

1. This article does not address Medicaidrelated issues. Unlike Medicare, which is a purely federal program, Medicaid is a cooperative federal/state program with separate “lien” provisions and considerations under both state and federal law. See generally Ark. Dep’t of Health & Human Servs. v. Ahlborn, 547 U.S. 268 (2006). The federal “anti-lien” law and the rules the U.S. Supreme Court established in Ahlborn and Wos v. E.M.A. ex rel. Johnson, 568 U.S. 627 (2013) do not apply to Medicare reimbursement. See Hadden v. United States, 661 F.3d 298, 303–04 (6th Cir. 2011).
2. 42 U.S.C. §1395y (2018).
3. 42 U.S.C. §1395y(b)(2)(B).
4. The Medicare Secondary Payer statute authorizes the government to bring an action to recover amounts paid by Medicare “against any or all entities” deemed to be a primary payer and to “collect double damages against any such entity.” 42 U.S.C. §1395y(b)(2)(B)(iii); see Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229, 1240 (11th Cir. 2016).
5. 42 C.F.R. §411.24(g) (2019).
6. In 2019, for example, the Department of Justice reached a $250,000 settlement with an attorney for alleged underpayment of reimbursements in a medical malpractice settlement. 
7. For access to the portal, see Ctrs. for Medicare & Medicaid Servs., Medicare Secondary Payer Recovery Portal, https://www.cob.cms.hhs.gov/MSPRP/login. For more information on the portal, see Ctrs. for Medicare & Medicaid Servs., Medicare Secondary Payer Recovery Portal (July 11, 2019), www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/MSPRP/Medicare-Secondary-Payer-Recovery-Portal.html.
8. If your recovery is made through a judgment rather than a settlement, there may be additional concerns outside the scope of this article, particularly if the judgment addresses the amount of Medicare’s interest.
9. Interest accrues on untimely reimbursement of conditional payments after the settlement. See 42 C.F.R. §411.24(m). According to a recent final demand letter, the interest rate on untimely reimbursements is 10.375%. As a more practical consideration, you should submit your notice of settlement information as soon as the case is settled because defense attorneys and carriers often will not release settlement funds without a final demand letter, which CMS may take up to 20 days to issue after receiving settlement information.
10. See 42 C.F.R. §411.24(m).
11. 42 C.F.R. §411.37(c). In the event that your settlement is less than the Medicare-paid amount, CMS will reduce the settlement by the proportional procurement costs rather than the total Medicare-paid amount. 42 C.F.R. §411.37(d). There is little guidance on the scope of “procurement costs” under CMS’s proportional reduction formula other than that these are the costs “incurred because the claim is disputed.” 42 C.F.R. §411.37(a)(1)(i).
12. In limited circumstances for total recoveries of $5,000 or less, CMS also offers a “fixed percentage” option with fewer requirements. More information is available on the CMS website. See Ctrs. for Medicare & Medicaid Servs., Demand Calculation Options (Mar. 14, 2016), www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Demand-Calculation-Options/Demand-Calculation-Options-page.html.
13. CMS informally advises that case finance and interest charges, medical bills paid directly for the client and tracked as a case expense, and expenses for other matters you are handling for the client besides the injury case are not considered legitimate procurement costs. If your expense ledger contains any of these items, you should consider removing them from your expense ledger before submitting it to CMS. At the time this article was written, CMS had only informally issued this guidance because the “breakdown” requirement was a recent addition to the recovery portal.
14. Gretchen Jacobson, Anthony Damico & Tricia Neuman, A Dozen Facts About Medicare Advantage, Henry J. Kaiser Family Found. (Nov. 13, 2018), www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/.
15. In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 359 (3d Cir. 2012).
16. See, e.g., MSP Recovery Claims, Series LLC & Series 17-04-631 v. Plymouth Rock Assurance Corp., 2019 WL 3239277, at *7 (D. Mass. July 18, 2019); Aetna Life Ins. Co. v. Guerrera, 300 F. Supp. 3d 367 (D. Conn. 2018); MAO-MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 2018 WL 340020, at *1 (C.D. Ill. Jan. 9, 2018); Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp. 3d 676, 680 (E.D. Va. 2016).
17. Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146 (9th Cir. 2013).
18. One federal court held that a MAO could successfully sue a Medicare beneficiary’s attorney under the MSP Act. See Humana Ins. Co., 187 F. Supp. 3d at 681–82. More recently, another federal court held that such a lawsuit may be brought only against the primary payer itself, not beneficiaries or their attorneys. See Aetna Life Ins. Co., 300 F. Supp. 3d at 381–83.
19. 151 F. Supp. 3d 1038 (D. Ariz. 2015).
20. 881 F. Supp. 2d 635, 639 (D.N.J. 2012).
21. Id. at 638 (quoting Zinman v. Shalala, 67 F.3d 841, 846 (9th Cir. 1995)). 
22. Id.
23. Office of Mgmt. & Budget, Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047-P) (Fall 2018), www.reginfo.gov/public/do/eAgendaViewRule?pubId=201810&RIN=0938-AT85.