This new law impacts the settlement of every personal injury case when the claimant or plaintiff is a Medicare recipient. This article appeared in this week’s edition of DRI’s The Voice. DRI is the largest association of defense trial lawyers in the nation.
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Medicare Reporting: Are Your Clients Ready to Report?
By Jeffrey J. Signor
Goldberg Segalla LLP, Buffalo, New York
I. All claims involving a Medicare eligible plaintiff need to be reported.
On July 1, 2009, the amendments to the “Medicare, Medicaid, and SCHIP Extension Act of 2007” take effect. Under the new rules, all insurers with respect to liability, no-fault, Workers’ Compensation, as well as self-insurers (collectively referred to as Responsible Reporting Entities, or RREs), will be required to determine whether a claimant is entitled to Medicare benefits. If a RRE fails to notify the Centers for Medicare and Medicaid Services (CMS) in accordance with the new guidelines, a civil penalty of $1,000 per day will be charged per claimant.
A RRE involved in the payment to a Medicare eligible plaintiff is required to report electronically, the settlement, award, judgment or other payment. CMS intends to collect over 100 fields of information related to that payment, including Social Security numbers. No lawyer is required to do any of this reporting. Furthermore, reporting is not limited to those claims where the plaintiff is represented.
There are some in the legal community who believe that “defendant insurer lawyers [are going] overboard to protect themselves and their clients,” with regard to the new reporting requirements. See Carol Lundberg, “On the Hook: Medicare Rules Will Press Insurers on Liens against PI Settlements,” Michigan Lawyers Weekly (February 23, 2009). Ms. Lundberg aptly points out that it is a very slow process to work with CMS to obtain simple information about a particular lien. But the exposure to penalties has all RREs, and defense attorneys, understandably concerned.
Further complicating the process is that the CMS contractor, the Medicare Secondary Payer Recovery Contractor (MSPRC) has limited resources. The MSPRC is responsible for collecting the Medicare reimbursement amount. They are tasked with accumulating the data related to the injury caused by the negligent third party and issuing demands for payment. Along the way, they provide interim statements and make adjustments based upon written requests for unrelated treatment. Processing time to obtain an interim statement is anticipated to take at least four months. No final statements will be issued unless a settlement, award, judgment or other payment is received or agreed to be paid to the Medicare-eligible plaintiff. Priority is given by the MSPRC to resolved claims, and such priority delays the processing of requests for reimbursement amounts.
II. Managing a personal injury file with a Medicare lien
The concept of a Medicare lien has been around since the 1980s when section 1862(b) amended the Social Security Act. This amendment came to be known as the Medicare Secondary Payer Act. Even after the passage of this amendment, the government did not actively pursue settling tortfeasors or Medicare eligible plaintiffs. For a good discussion of the evolving nature of the Medicare laws, see Rick Swedloff, “Can’t settle, Can’t Sue: How Congress Stole Tort Remedies from Medicare Beneficiaries,” 41 Akron L. Rev. 557 (2008).
This lax enforcement is changing. The government has already commenced suit against a settling plaintiffs’ attorney to recover a portion of the Medicare lien. In U.S. v. Paul J. Harris, 2008 WL 4900569 (N.D.W.Va. 11/13/08), the government withstood a 12(b)(6) motion filed by the defendant who failed to satisfy a Medicare lien. After settling the case for $25,000, the defendant, an attorney who represented the plaintiff in the underlying action, forwarded to CMS the details of the settlement payment, as well as his attorney’s fees and costs. He then distributed the settlement funds before he was notified by CMS of its demand for payment. CMS then issued its demand for $10,253.59 to which the defendant did not respond. The defendant filed a motion to dismiss on the grounds that a lawyer, in representing his client, cannot be held individually liable under 42 U.S.C. § 1395y(b)(2) when he distributes the funds with the knowledge and consent of the government. He argued that the government consented because he sent the details of the settlement to the government. The defendant lost the 12(b)(6) motion, but it will be interesting to see whether the case is ultimately litigated on the merits.
Previously, attorneys for plaintiffs were obligated to communicate with their clients and determine whether any medical care was provided by Medicare. The new legislation will expand this burden to defendants, insurers, and attorneys for the defense. The federal government will assume a more aggressive role to enforce payment of Medicare liens, and any entity that ultimately pays a settlement, award, judgment or other payment to a Medicare-eligible claimant will be responsible for “double damages” if the lien is not timely satisfied.
The unintended consequences of the added layer of reporting and the government’s increased aggressiveness to monitor tort-related liens are wide ranging. Any claim involving a plaintiff on Medicare will be much less likely to settle. This is because as soon as a defendant settles a nuisance value claim, the government will expect its lien to be paid in full without downward modification based upon comparative levels of fault. It is not a leap in logic to predict disenfranchisement of the elderly with respect to legal representation. Medicare is looking for a dollar-for-dollar recovery (much like the Workers’ Compensation lien, with some adjustment for “procuring” the recovery); thus, there is a distinct likelihood that more claims will be tried to verdict due to the existence of the lien.
All such consequences are compounded by the fact that, by all accounts, our society is “graying” at a rapid rate. Most learned estimates place Medicare recipients at 52 million individuals, and this number is expected to increase, exponentially, in the coming years. See Kaiser Family Foundation reports at http://www.kff.org/medicare/. This will lead to a significant increase in Long Term Care Claims with corresponding Medicare liens to navigate. More litigation is arising out of the issues surrounding Medicare, particularly pertaining to nursing homes. See Marshall B. Kapp, J.D., “The Liability Environment for Physicians Providing Nursing Home Medical Care: Does It Make a Difference for Residents?” Elder Law Journal (16 Elder L.J. 249, 2009).
Conclusion
The new reporting requirements and Medicare lien issues place a heavier burden upon the tort bar and our clients to ensure the federal government is made whole. The basic concept is that any treatment paid for on behalf of a Medicare eligible plaintiff should be repaid if a RRE caused the harm. The way the reporting requirements now read leads to a great deal of uncertainty and concern. Goldberg Segalla LLP recently sent a legal update to its clients discussing this new law, and the feedback is wide ranging. Many RREs appear to be well prepared to provide CMS with the mandated information it requires. These “prepared” entities have dedicated hundreds of hours to this task and are striving to be in compliance. Even those entities who are prepared admit that there is confusion about an insurer and self-insured’s risk. There are many RREs waiting to recalibrate their reporting systems. The exact nature and extent of the risk is still unknown, and such uncertainty does not sit well with entities that want clarity with respect to the law.
Jeffrey J. Signor, Author