Keefe, Campbell & Associates, LLC

Editor’s comment: When you see our federal legislative leaders slapping each other’s backs and high-fiving over the U.S. House of Representatives passing their version of government-mandated health care, please remember conventional estimates are your taxes will certainly be raised at least $500 billion over the next decade. The members of the House have also voted to magically “borrow-spend” about $700 billion during the same period despite the fact the U.S. budget deficit is at a record high. When we see the folks in Washington cheering about spending gobs of money they don’t even have on such things, we are reminded of the quote attributed to Margaret Thatcher: “The problem with socialism is that eventually you run out of other people’s money.”

At the same time, we were sent an important thought by one of our knowledgeable readers about the private cause of action in federal Medicare lien recovery. One of the relatively new obstacles to the efficient settlement of workers’ comp and personal injury claims is resolving outstanding Medicare liens. All observers complain about the Center for Medicare Services’ (or CMS’) slow response time and apparent lack of efficiency.

Further complicating matters, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) and the Medicare, Medicaid, and SCHIP Extension Act of 2007 contain important changes that suggest attorneys representing either workers’ comp and personal injury claimants will have to set aside portions of the settlement to reimburse Medicare for future accident-related payments. However, hidden in the headaches that go with resolving Medicare liens is an enforcement provision that gives Medicare beneficiaries a private cause of action allowing the beneficiary to sue for double the amount of what Medicare paid which has not be repaid for the accidental injuries or exposures.

This private cause of action is often over-looked by insurance carriers/TPAs, claims handlers and defense lawyers. If it is not quickly and properly addressed by the knowledgeable risk/claims manager, wily Plaintiff/Petitioner lawyers may use it to increase the value of their cases and bring about higher and more costly settlements. There is also a clear problem that is something of a claims “land-mine”—no one reserves for claims’ mistakes like not reimbursing a conditional payment to Medicare.

The private cause of action is set forth in 42 U.S.C. § 1395y, and provides:

(A) Private cause of action

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

The purpose of this private cause of action statute was to help the federal government recover conditional payments from insurers or other primary payers, to encourage private parties to enforce Medicare’s rights, and to save money for the taxpayers. The premises underlying the private cause of action are:

(1) The beneficiary can be expected to be more aware than the government of whether other entities may be responsible to pay medical expenses,

(2) Without double damages, the beneficiary might not be motivated to sue an insurer/TPA because Medicare may have already paid the expenses and the beneficiary would have nothing to gain by pursuing the primary payer, and

(3) With the private right of action and double damages, the beneficiary can pay back the government for its outlay and still have money left over to pay for the litigation.

The 2003 amendments to the MMA were specifically enacted to overturn previous court decisions that limited the effectiveness of the MSP private cause of action. The 2003 Amendments made it easier for injured Medicare recipients to bring these private actions on behalf of CMS-Medicare against an expanded class of entities and individuals with insurance, and clarified when such entities are required to pay the Medicare beneficiary’s medical expenses.

The three critical amendments established:

(A)    All businesses, trades or professions shall be deemed to have insurance regardless of whether or not it carries its own risk.

(B)    Any judgment or payment conditioned upon the recipient’s compromise, waiver or release whether or not there is a determination or admission of liability will demonstrate a plan’s responsibility to reimburse Medicare.

(C)    Reimbursement to Medicare was no longer tied to anticipation of “prompt” payment because the Secretary of Health and Human Services may make conditional payments if a primary plan has not made, or cannot reasonably be expected to make payments with respect to such services promptly.

Prior to the 2003 amendments, it was not clear whether Medicare had a right of reimbursement from certain self-insured defendants. After the amendments, it became crystal clear Medicare’s right of reimbursement applies to practically all tort or workers’ comp settlements in which Medicare payments have been made on behalf of the tort plaintiff.

The key to avoiding exposure—pay Medicare back!! If you learn Medicare made a conditional payment of a medical bill or bills that might or could arguably be reasonable, necessary and related to the covered event, don’t hold it. All relevant case law indicates the cause of action exists when the insurer/TPA was aware of the conditional payment and ignored Medicare’s interest. Then, and only then, can the Plaintiff/Petitioner file to seek double recovery for the unreimbursed payment.

Court decisions decided since the enactment of the 2003 amendments consistently permit the private cause of action to proceed against insurers and similar entities including employers, who are deemed responsible for the tort or workers’ comp victim’s injuries. Lawyers representing tort and workers’ comp claimants may understand the MSP private cause of action and may use it as a tool to advance clients’ interests. Before a case goes to trial, Plaintiff/Petitioner lawyers can now use the threat of a Medicare Secondary Payer private cause of action lawsuit to potentially increase the settlement demand or bring a reluctant Defendant to the settlement table.

Risk/claims managers, insurance carriers/TPAs and defense lawyers should keep in mind that the MSP private cause of action can be brought as a separate count in a personal injury lawsuit, or it can be brought as a separate claim after a judgment is obtained against tort defendants. The timing of when the MSP private cause of action can be brought depends on the facts and circumstances of the particular case.

The MSP private cause of action has been strengthened by recent legislation and court rulings. Plaintiff/Petitioner lawyers are rapidly learning about it and may incorporate the use of its double damages provision to benefit their clients. The sheer number of current and future Medicare beneficiaries and recipients demonstrates how important the MSP private cause of action could be to personal injury and worker’s compensation practitioners. Currently, there are forty-one million (41,000,000) beneficiaries in the Medicare health care system. In the next few years, it is estimated an additional seventy-four million (74,000,000) baby boomers will start entering the Medicare system.  These statistics, coupled with the recent changes to the law that strengthen the MSP private cause of action, require risk/claims managers, insurance carriers/TPAs and defense attorneys to understand how and when the MSP private cause of action can be used.

If you have any questions or comments, please forward them to our resident Blog Administrator, Arik D. Hetue, J.D. who can be reached at ahetue@keefe-law.com or post them later today on our award-winning blog at www.keefe-law.com/blog.

Editor’s comment: In the Illinois work comp industry, there may be unexploded malpractice bombs all across our landscape. For attorneys in the workers’ compensation arena, the potential for malpractice often comes in dealing with benefits in the federal Medicare and federal/state Medicaid systems.

First, claimant attorneys need to be concerned their clients will lose benefits if they mishandle their cases and most particularly settlements that close medical exposure for the employer/insurance carrier. This could lead to malpractice liability if clients learn they hired counsel that has not protected them properly. Second, attorneys need to be concerned that they will be liable to the Medicaid and Medicare systems personally should claims made by either system be disregarded or mishandled.

Defense attorneys have to make certain the interests of Medicare are protected or they may face treble damages. Similarly, state Medicaid liens do effectively attach to workers’ compensation recoveries and should be addressed at the time of claim closure.

Similar concerns should and must be shared by claims professionals. From a professional standpoint, identifying and understanding the opposing side’s concerns adds to the claims handler’s preparations when negotiating with these attorneys. Additionally, a comprehensive understanding of these intricate government programs will help the claims manager when the worker is not represented by counsel. In such settings, the claims specialist must be aware of Medicare and Medicaid issues on the claimant’s behalf, and also must protect their account, the employer from liability from these two benefit systems.

The key to correctly working within the Medicare and Medicaid systems is first to understand their differences.

A. Medicare is a federal health insurance system only; there is no companion state-specific program.

1.       A claimant may become entitled to participate in Medicare when he is declared disabled or reaches retirement age.

2.       There are no financial criteria to participate; multi-millionaires and paupers alike receive benefits from the federal program which is one reason it is go large.

B. Medicaid, in contrast, is a federal and state system that provides health benefits to those who meet specific financial criteria.

1. If assets and/or income get too high and exceed the mandated thresholds, all of the benefits received under the program are lost.

2. A claimant may receive benefits under both programs at the same time, and often a claimant may receive Medicaid benefits while awaiting Medicare eligibility.

3. The receipt of compensation benefits can disqualify a claimant from receiving Medicaid benefits, as can receipt of a lump sum or a funded Medicare Set-Aside Trust.

An annuity that is not irrevocable, non-assignable, and does not make equal payments of income and principal over a claimant’s life expectancy can similarly cause disqualification. In both systems the law states government is the secondary payer, meaning that if another source of payment is available, the programs should be reimbursed for inadvertently paying bills in the first place.

It is critically important to understand Medicare or Medicaid claims for benefits paid before or after a workers’ compensation settlement may lead to liability for claimant. When claimants face claims from the government, it may lead to malpractice claims against their attorney, defense counsels or the respective insurance company.

If you have thoughts or comments, please send a reply. If you have questions or concerns about Medicare Set Aside trusts or other issues in the workers’ compensation arena, send your inquiries to ekeefe@keefe-law.com.