Medicare and Medicaid – The Right to Reimbursement

Medicare and Medicaid have subrogation rights and a “right to reimbursement” when a person that has received Medicare or Medicaid benefits recovers an award from a personal injury action.

MMSEA imposes a reporting requirement on insurers and self-insureds who settle personal injury claims involving Medicare-qualified plaintiffs.

There are many theories and ideas floating around that suggest ways to satisfy the requirements set forth under the Federal Medicare Act. The law is complicated and cumbersome to say the least. In the past, if a lien was asserted by Medicare or Medicaid, the attorney complied with it and attempted to negotiate it in the best interests of the client. That was usually the extent of the involvement.

That causal encounter with Medicare, however, has changed due to the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA).  MMSEA imposes a reporting requirement on insurers and self-insureds who settle personal injury claims involving Medicare-qualified plaintiffs. The insurers and self-insureds are required to register as Responsible Reporting Entities (RPE’s), and are responsible as of January 1, 2010, at the latest, to electronically report settlement data to the Center for Medicare and Medicaid Services (CMS).

As a result, the landscape has changed under which attorneys for both sides must operate when settling a personal injury claim with a Medicare or Medicaid eligible claimant.

Medicare

There are still many uncertainties as to how the new system will function. What has not changed is that Medicare has subrogation rights whenever medical expenses are paid in relation to a personal injury claim. There is also a right to reimbursement when the settlement includes payment for past and/or future medical expenses. It has been suggested that if the settlement does not specifically account for future medical expenses, Medicare will pay no further medical expenses until the settlement proceeds have been exhausted.

Medicare is also entitled to recover its payments made from the plaintiff or the settling defendant, even when the defendant has already paid the plaintiff.

Medicare’s right to reimbursement has sometimes been called a “Super Lien”. What ever it may be called, it is clear that Medicare’s right to recover the payments it made comes ahead of anyone else. Medicare is also entitled to recover its payments made from the plaintiff or the settling defendant, even when the defendant has already paid the plaintiff.

Now, to make matters worse, the contractor used by CMS to assert reimbursement claims has no authority to compromise claims. Medicare will be looking for reimbursement of 100% of the benefits it has paid, with a reduction allowed only for attorneys’ fees. Moreover, it is likely that Medicare will be asserting a right to recover all of its post-injury payments, and it will be plaintiff’s obligation to prove that certain payments were not accident related. Medicare will also not accept an allocation of damages agreed to by the parties. It will only accept an allocation determined by a court. That means that if Medicare asserts a post-accident lien of $10,0000 where the settlement was say $20,000.00, and the Court allocated 80% to pain and suffering and 20% to medical expenses, Medicare will likely accept that allocation and accept $4,000.00 in satisfaction in lieu of the full $10,000.00. Were the parties, however, to make such an allocation on their own, Medicare will reject the determination and demand the entire amount.

As is readily apparent there is a minefield of potential concerns for both plaintiff’s and defendant’s attorney’s to consider when attempting negotiate a settlement to a personal injury claim.

Many commentators on the plaintiff’s side suggest that the claim should specifically exclude any recovery for medical expenses; that it is a conflict of interest to bring such a claim since in effect the plaintiff’s attorney would be representing both the plaintiff and Medicare; and that the release should specially preserve Medicare’s subrogation rights and state that it is for pain and suffering only.

It might be asked why this situation poses a conflict, when the same situation existed in relation to health insurances carriers that asserted liens for payments made? In addition, commentators for defendant’s have suggested that their client’s should be advised never to accept a limited release, and moreover to include Medicare as a payee on the settlement check.

So, what to do? Before settling a personal injury claim, a prudent plaintiff’s lawyer should establish the amount claimed by Medicare as its reimbursement right and compare that to the entire amount paid for medical expenses post-accident. Unrelated treatments should be documented and disputed. Also given the difficulty these new rules pose to settle certain cases, the parties might wish to agree to what the allocation should be and then the plaintiff might petition the Court on notice to Medicare to allocate such damages and establish the amount of reimbursement. Otherwise, without further guidance from the courts both side are sure to take every measure to protect the interests of their clients.

Medicaid

Medicaid’s recovery right is somewhat different given the Supreme Court’s decision in Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268 (2006). This decision limits the Medicaid’s recoupment to the amount of the settlement proceeds allocated to past medical expenses.

In New York, following Ahlborn, Courts will allow the Department of Social Services (DSS) to collect only for past medical expenses expended.

In Ahlborn, the case was settled for $550,000.00. The parties agreed that the full value of the case was approximately $3,000,000.00, The settlement amount represented 1/6th of the full value. The Medicaid asserted a lien of $215,000.00 for the entire amount for medical expenses paid. The Supreme Court held that since the claim was settled for 1/6th of its value, Medicaid (Arkansas State Agency) could only collect 1/6th of its claim for medical expenses, or $35,581.47.

In New York, following Ahlborn, Courts will allow the Department of Social Services (DSS) to collect only for past medical expenses expended. The Court can also hold a hearing (post-settlement allocation hearing) to determine the full value of the case versus the settlement amount and apply the Ahlborn formula accordingly. See, Lugo v. Beth Israel Medical Center, 13 Misc.3d 681, 819 N.Y.S.2d 892 (Supreme Court, New York County, 2006); Chambers v. Jain, 15 Misc.3d 1120(A), 839 N.Y.S.2d 437 (Supreme Court, Queens County, 2007).

As an interesting side note, in an unreported decision, the Supreme Court, Kings County, has held that where the City of New York settles an injury claim for an injury it caused, it should expressly qualify that the settlement offer is also meant to compensate the injured party for past medical expenses, otherwise it waives it right to seek reimbursement of any Medicaid lien for past medical expenses. D.C. v. The City of New York, 18 Misc3d 1116(A), 856 N.Y.S.2d 497 (Supreme Court, Kings County, 2008).