Medicare

            Medicare: Subrogation vs. Lien:  Medicare presents one of the most interesting aspects of the problem of subrogation versus liens.   The Medicare statute, in all its present forms, clearly states that the federal government, the Medicare provider, has an independent right of action and a right of subrogation relative to any and all monies it has paid and might in the future pay for treatments relative to a third party liability action. 

             $1,000 per day penality for non-compliance.  Medicare, Medicare Part “D” and the “Medicare, Medicaid, and SCHIP Extension Act of 2007” which does not go into effect until January, 2010, provide in pertinent part that insurers are responsible to report to the Secretary of Health and Human Services that a third party claim has been filed on behalf of a Medicare beneficiary.  The Secretary is empowered to issue a civil penalty in the amount of $1,000 per day for non-compliance.

             Certainly, if a global release is tendered, then future subrogation rights will have been extinguished and an “equitable lien” will have been created.  Global releases have always been the tradition in the personal injury field.  If the attorney in the personal injury suit provides a global release, then Medicare will have a lien and the amount due as well as the amount that must be set aside for future medical expenses will have to be negotiated.  Furthermore, all such payments and reservations come out of the plaintiff's recovery.  If the plaintiff’s attorney is going to or has included claims for medical expenses, past or future as among the claims he is making, then the intended effect of the statute will take place and the final settlement will necessarily include payment to the government of some or all of their expenditures or anticipated expenditures.  Anticipatory trusts will need to be set up for future medical expenses and approval will have to be obtained before anyone may be paid.  The defendant's insurance company may be required to hold part or all of the settlement in escrow to protect their personal exposure rather than simply dispursing the funds to the plaintiff’s attorney and filing their stipulation of discontinuance.  It could be that they also would be held personally responsible if they paid a settlement without insuring that the Medicare equitable “lien” is satisfied.

            There is an alternative.  The answer is a "Limited Release".   The medical reimbursement claim can be segregated from the personal injury claim in the case.  In other words, no claim for reimbursement of medical expenses are made in the lawsuit.  As a further safeguard, advise in writing the government providers and any private agencies with whom they contract to recover from personal injury claims that you, the attorney, on behalf of your client, will not be recovering their monies for them.  Their subrogation rights are preserved. Make sure that every collection agency and entity who might assert jurisdiction over this Medicare recovery claim is on notice that you and your client are not making any claims for their medical expenditures.  This may include your local United States Attorney.  He has authority to resolve these claims.  Point out that they have an independent right of subrogation.  Do this repeatedly if necessary.  Copy them on all pleadings.  Inform them of pending settlements.  Offer them an opportunity to intervene, especially if their statute of limitations has expired.  Medicare’s statute is three years from the date of payment for the service.  Make sure that the defense counsel are aware of the existence of the federal subrogation/Medicare claim and that you do not represent Medicare.

         There is one case that addresse this specific issue in the Medicare arena.  Merrifield v USDC, Dist of NJ, 2008 U.S.Dist. LEXIS 25877.  In that case, seven plaintiffs who had allegedly settled their personal injury cases for pain and suffering only were threatened with a reduction in monthly payments by Social Security if they did not pay back Medicare.  In two of the cases, there had been a formal determination that the recovery was for pain and suffering and CMS did not appeal that determination.  "Frick submitted the court order indicating that "no portion of [her] recovery is attributable to medical expenses."... "The ALJ issued a favorable decision several days later, finding that CMS must refund to Plaintiff Burke the amount she had repaid. CMS did not appeal this decision."  The important consideration is that CMS is being careful to avoid setting "bad law".  It is better for them if this distinction is minimized and not publicised.

To CMS and Federal Attorney General in Cases Involving Medicare

                                 [LETTERHEAD]

                                                                                                [Date]

 [Addressee]

Dear Sir or Madam:

                 We acknowledge your right of subrogation for any related medical expenses covered by Medicare.  [Plaintiff] will not prejudice your recovery rights.  [Plaintiff] has commenced action against Defendants, [name them], for his/her “injuries, pain and suffering only”.  There is no claim for compensated medical expenses.     

 We understand that you have a right to seek to recoup the covered medical expenses in an action commenced directly against the tortfeasor.  We have no objection to you in intervening in order to obtain the reimbursement of bills incurred in connection with this action.  Obviously, you would need to retain your own counsel or engage the services of the Federal Attorney General’s office for this district and have them make the appropriate application before the Court.  If your portion that you claim only vests in Federal Court, you are certainly free to commence on action in that forum.

 We will not be able to represent Medicare’s interests in this matter.  We will not be pursuing their expenditures relative to the Plaintiff.  We will do nothing, however, to prejudice Medicare’s rights of subrogation.

 A copy of Plaintiff’s Complaint and Bill of Particulars are enclosed and you will note that medical expenses are not claimed.  A copy of Defendant’s Answer is also enclosed such that you might identify and, if you so choose, contact defense counsel directly in order to pursue or protect your interests further.

What if the Insurance Defense Attorneys “Insist” that Medicare be Resolved?

          The defense attorneys and their carrier may all “insist” that you assume responsibility for and resolve the medical claims.  This still puts you in a conflict situation.  While you may be motivated to resolve the action, there is general reluctance to incur the wrath of the Attorney Grievance Committee in the process.  The following is a sample letter to insurance defense counsel.

Correspondence to Defense Counsel When They “Require” that Plaintiff’s Counsel Resolve the Medicare Claim

        [Letterhead]

                                                [Date]

[Defense Attorney]

The qualifier and critical factor is the “recovering” payment for Medicare-related items that also seems to be a focal point in this dispute.  The statute provides the Federal Government has a right of reimbursement, a right of subrogation and allows for recovery of double damages contingent upon various predicates relative to Medicare-related items.  Healthcare providers including Medicare, Medicaid, Independent Health, Blue Cross/Blue Shield and APIP have contractual and/or statutory subrogation authority for independent rights of action.  None of the above providers, however, is authorized or empowered to pursue a bodily injury claim on behalf of the Plaintiff.  That is a separate cause of action involving a separate party and requiring a signed retainer. 

It is inconsistent that the above entities would have a right to an independent action as to medical or Medicare-related items, which they obviously can sever or distinguish from a bodily injury claim, and then assert that an injured Plaintiff may not make the same distinction in the reverse relative to medical expenses.

                It would appear that this comes down to whether there is actual, bona fide intent as opposed to illusory distinctions.  In this case, [Plaintiff Name] clearly is making no claim for medical expenses.  These claims are omitted from his/her Bill of Particulars.  They are specifically not an item of damage in her claim.  Having never been pled, alleged or particularized, at trial, she/he will be precluded from proving them as items of damage.  Further, to insure that there is absolutely no misunderstanding on this issue, counsel in the personal injury action advised in writing to the Federal Government that Plaintiff has no intention of making or presenting any claims for medical expenses. 

                Please also note further that Plaintiff’s counsel has never been retained by the government.  The claim for recovery of Medicare-related items belongs to the government.  It would be improper for us to represent their interests without their authorization and retainer.  Furthermore, it would also be a conflict of interest and unethical for our office to represent two different and potentially competing claimants for different claims arising out of the same incident.

In light of the above and considering all these circumstances, we would recommend that any discussions or negotiations relative to recovery of Medicare-related items be conducted directly with the Attorney General for the United States’ Government in this district.

                                                                                             Very truly yours,

                                                                                             [Attorney Signature]

cc: [Attorney General of your district]

What if Medicare “Insists” That Their Claim be Resolved?

          The government itself may all “insist” that you assume responsibility for and resolve the medical claims.  They may threaten “double damages” if you are not complicit.  Regardless their threats, this still puts you in a conflict situation.  Medicare may further argue that they can only bring a claim under the statute in Federal Court. 

         Your response is straight forward.  Cite the Merrifield v USDC, Dist of NJ, case.  Suggest that they remove your case to Federal court and intervene.  They may argue that if you contest their claim, your remedy, which your are obligated to exhaust, is Administrative.  But you are not contesting their claim.  You recognize both their claim and their independent right to pursue and recover same from the tort feasor.  Therefore, there is no need to proceed administratively.  There is no need to do anything at all beyond full disclosure and notification provided you do not recover their monies and do not prejudice their rights with a global release.  If you preserve their subrogation rights, they are in exactly the same position they would have been in had no action been commenced.

         There is also the problem of Bush’s Executive Order of May 17, 2007 wherein he precludes any attorneys from being compensated by way of contingency.  So the claimant’s attorney now has the additional problem of neither having an agreement with the government to act on their behalf nor any means of compensation for his efforts.  Yet, they demand and expect that he will represent them.  If the Plaintiff does not claim medical expenses, past or future, Medicare’s position and demands are untenable

Attorney General to Intervene in Federal Court 

[LETTERHEAD]

                                                                                                [date]

Assistant United States Attorney

[City, State  Zip]

Dear Mr. _________:

             You and I have had numerous discussions and written communications regarding Medicare’s rights of subrogation.  You do appreciate that our office, on behalf of the above claimant, will not list or pursue medical expenses arising out of the incident of __________.  We also will not prejudice Medicare’s subrogation rights.

                 In light of that position, we would suggest you consider intervening in the pending action.  My perception is that the statute of limitations on Medicare claims is three years from the date of payment 42 USC §1395y(b)(2)(B)(vi).  It would appear to me that payments, if any, made immediately following this incident would be beyond the statute of limitations.  The Government should be able to relate back to plaintiff’s date of commence of her action, assuming intervention is permitted.  If Medicare claims may only be venued in Federal Court as you assert, then we would suggest that the Government remove the state court action to Federal Court and then intervene.  Otherwise, the Government’s Medicare rights of subrogation may be beyond the statute of limitations and unredeemable.

                 Thank you for providing the additional addresses of Government entities or surrogates that are to be apprised of our position.  I am copying them on this correspondence as well as providing them with copies of the pleadings.  Obviously, if they or you require any authorizations or additional information, we will certainly cooperate.

                                                                                Very truly yours,

                                                                                    [Attorney]