Kelly on Malpractice

There is a new legal landscape involving Medicare/Medicaid (“Medicare”) liens in your lawsuits. This includes medical malpractice actions, where Medicare pays for medical expenses caused by the negligence of physicians and hospitals. It is vital that you revise how your office handles Medicare liens TODAY! Failure to do so can be disastrous. Many thanks to Will Shapiro, Esq. and Clayton Starnes, Esq. for their contributions to this important newsletter.

In 1965, Congress passed legislation to create the Medicare trust. The trust provides healthcare benefits for individuals and their spouses who worked for at least 10 years in Medicare covered employment and are over 65, on Social Security Disability Income (SSDI), or are in End Stage Renal Failure (ESRD). Section 1862(b)(2) of the Social Security Act Regulation 42 USC 1395y(b) designates that Medicare must be reimbursed from third party tort payments. You already knew that. Written into law in 2003, the law amends the MSP and gives any responsible party a (1) Duty to Inform Medicare of lawsuit, (2) Duty to Satisfy Lien, and (3) Duty to Make Medicare first payee of lawsuit. The United States may, in accordance with paragraph (3)(A) “collect double damages against any such entity….that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.” Ouch. In 2007, President Bush signed the Medicare Medicaid / SCHIP Extension Act (MMSEA) into law as part of the State Children’s Health Insurance Program Extension Act. Section 111 adds new mandatory reporting requirements for group health plan arrangements and for liability insurance (including self insurance), no fault insurance, and worker’s compensation plans. This includes medical malpractice liability insurance carriers. Insurers or health care plan administrators are required to report the types of situations where their plan is primary to Medicare. The law requires all applicable plans to determine whether an injured individual making a claim is also a Medicare beneficiary. If so, then the insurer or plan must report the identity of the injured individual to The Centers for Medicare and Medicaid services (CMS). Failure to comply with reporting requirements of the 2007 Act will result in a $1,000 per day / per incident penalty to the insurer or health care plan administrator.

The duty to inform Medicare and satisfy its lien is statutory. Thus, you need to know if your client is a beneficiary. Ask your client if he is receiving Medicare/SSDI or Medicaid/SSI. Look at your client’s check stub (SSI/SSD), get a copy of his insurance card, submit a question to Social Security Office, and then send a signed Social Security consent release and HIPAA form to your client’s local Social Security office. Initial contact on a case should be reported to the Coordination of Benefits Contract center (COBC) by telephone at (800) 999‐1118. Once the case has been reported to COBC, it will automatically be assigned to the Medicare Secondary Payer Recovery Center (MSPRC) in Detroit, Michigan. You can call MSPRC at (866) 677‐7220. Once you have sent a letter to COBC, you have satisfied your first obligation under the new law - the duty to inform. All further correspondence should be directed to MSPRC for processing. The correspondence needs to detail the date and nature of the injuries alleged in the lawsuit. Mail the correspondence to MSPRC Liability, P.O. Box 33828, Detroit, MI 48232‐3828 or to (734) 957‐0998 by fax. MSPRC has thousands of cases, so it is good practice to request a Conditional Payment Summary a/k/a Itemization of Benefits along with a HIPAA consent. Follow that up with a phone call to insure MSPRC is canvassing for bills paid on behalf of your client. At 30 days, call MSPRC to get the itemization of benefits. MSPRC does not distinguish whether the bills paid are directly related to the tort. Remember, Medicare is only entitled to reimbursement for medical expenses directly related to the tort. For example, if the plaintiff has a broken bone from a car accident and three months later undergoes chemotherapy treatments for cancer, MSPRC will send bills for both the broken bone and the chemo. Hence, it would be your obligation to audit those bills, segregate the unrelated chemo charges, and send a letter back to CMS with an explanation.

Normally, Medicare offers a 1/3 reduction for attorneys fees and 7% for litigationcosts (“procurement costs”). You can also submit your own request for further reduction based on 42 C.F.R. § 411.37. If Medicare payments are less than the judgment or settlement amount, the recovery is computed by determining the ratio of the procurement costs to the total judgment or settlement payment, and then applying the ratio to the Medicare payment. The product is Medicare’s share of the procurement costs. Next, subtract the Medicare share of procurement costs from the Medicare payments. The remainder is the Medicare recovery amount, i.e., what your client owes. Once there is a settlement and figures have been provided to Medicare, the final demand process begins. Any dispute of claims should be made before the settlement details are sent to Medicare. Once settlement details have been sent, Medicare will issue a final demand letter. Payment in full must be received by Medicare within 60 days of the date of the demand letter or else interest will accrue on the balance owed. If you are aware of any bills with dates of service prior to the date of settlement that do not appear on the conditional payment summary, you are obligated to make Medicare aware of those claims. If a final demand letter is received that includes unrelated expenses, the demand amount must be paid up front within 60 days, and an appeal letter should be sent to dispute the unrelated expenses. This stinks like an IRS tactic, but it is the law.

After settlement, you have the opportunity to apply for a hardship waiver to further reduce or eliminate the lien. Medicare can issue a full or partial waiver. You need to prove “financial hardship” in accordance with 50.6.5.1; e.g., your client has spent the settlement proceeds and the only remaining income from which he could attempt to satisfy Medicare’s claim would be from the money that is needed for his monthly living expenses. In addition, you may claim pursuant to 50.6.5.2 that recovery “would be against equity and good conscience” based on “the totality of the circumstances.” Factors include, but are not limited to (1) the degree to which the beneficiary contributed to causing the overpayment, (2) the degree to which Medicare and/or its contractors contributed to causing the overpayment, (3) the degree to which recovery or adjustment would cause undue hardship for the beneficiary, (4) whether the beneficiary would be unjustly enriched by a waiver or adjustment of recovery, (5) whether the beneficiary changed their position to their material detriment as a result of receiving the overpayment or as a result of relying on erroneous information supplied to the beneficiary by Medicare. The Supreme Court’s decision in Arkansas Department of Health and Human Services v. Ahlborn, 126 S.Ct. 1752 (2006) helps you. Ahlborn limits a state’s ability to collect from the entire proceeds recovered by a Medicaid recipient from a third party. According to Ahlborn, federal law “prohibits collections from portions of a settlement or judgment that represent compensation for damages other than past medical expenses.” The Supreme Court held that Medicaid reimbursement was limited to one sixth of the state’s payment for medical bills because the tortfeasors accepted liability for only one‐sixth of the insured’s overall damages. This is commonly referred to as “the Ahlborn formula.”

In conclusion, you need to identify Medicare as a lien holder, inform Medicare of the lien, audit bills, identify discrepancies, negotiate procurement offsets, and satisfy the liens in any medical malpractice case involving Medicare. I hope this newsletter helps you in that endeavor.

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