Defense counsel must take Medicare requirements into consideration when settling personal injury claims. The key concerns involve Medicare Secondary Payer (MSP) rights and the Medicare, Medicaid and SCHIP Extension Act (MMSEA). The requirements for structuring and reporting settlements are complex and confusing, so the need to understand the requirements and avoid errors or omissions in executing settlements is great. Penalties for noncompliance are steep and can reach up to $1,000 a day.
The new law, Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA Section), adds mandatory reporting requirements with respect to Medicare beneficiaries who have coverage under group health plan arrangements as well as for Medicare beneficiaries who receive “settlements, judgments, awards or other payment from liability insurance, no-fault insurance, or workers’ compensation.” The law is designed to enforce previous statutes passed as early as 1980 – it does not substantively change the pre-existing Medicare law and statutes. However, it does add new reporting rules and includes penalties for noncompliance. Defense counsel for any personal injury claim should be familiar with these reporting requirements and must take the Medicare lien in account when approaching any settlement discussion.
Considerations for defense counsel begin as early as the discovery stage. The key is to identify whether the plaintiff is a Medicare beneficiary and discover the amount of the Medicare lien. It is also important to know whether payments have been made against the lien or whether any negotiations concerning the lien amount have occurred. This can be accomplished with requests for interrogatories, and specifically, by requesting the plaintiff complete a Form A-1. The Form A-1 allows the insurer to determine whether the plaintiff is a Medicare beneficiary. The form requests the plaintiff’s full name, Medicare claim number (HICN), date of birth, social security number and sex. This will provide the insurer with the information necessary to obtain the lien amount. Once the lien amount is determined, the parties will be in better position to negotiate potential settlement and can make an accurate report to the governing body.
So you’ve got your settlement – now what? REPORT. Both plaintiff and defense counsel have an obligation to report the settlement amount to the Centers for Medicare and Medicaid Services (CMS). Medicare beneficiaries are required to reimburse Medicare within 60 days of receipt of settlement. If Medicare is not reimbursed by the beneficiary, payment becomes the responsibility of the primary payer. Indeed, the 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 primary payment. If Medicare is not reimbursed, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.
With potential penalties looming against a failure to report settlement amounts to the CMS, there are a few options for defense counsel to take advantage of. First, and most commonly used, is to allocate the duty to report directly into the language of the settlement agreement. A release or other settlement instrument may require the plaintiff or plaintiff’s counsel report the amount of the settlement to CMS. Be cautioned, however, that this does not discharge a defense counsel’s obligation to report if plaintiff fails to abide by the terms of the settlement agreement. It merely allows for recovery under contract principles should plaintiff fail to report. A second option that is highly recommended for defense counsel to consider is to make certain that the client, either the insurer or self-insured entity, is registered to report with the CMS. All Responsible Reporting Entities (RREs) have the ability to report settlement amounts to the CMS and can do so through the use of third party administrators. Finally, both plaintiff and defense counsel should seriously consider the use of a Medicare set aside prior to reaching resolution. Considering settlement figures with an established set aside to satisfy a Medicare lien is a sure fire way to ensure that Medicare will receive reimbursement. Taking these simple precautions can help a defense counsel avoid fines, penalties and potential legal malpractice.