Medicare Liens

by | Apr 11, 2016 | Featured, Insurance Defense, Legal Updates

Why They Matter and What to Do About Them

For attorneys practicing personal injury law, Medicare liens can be a source of confusion and danger.   This article seeks to remove some of the confusion from the process of dealing with a Medicare lien, and to alleviate at least some of the associated dangers by providing information about possible pitfalls.

Medicare is a medical insurance program that is administered and managed by a federal agency called the Centers for Medicaid and Medicare Services (“CMS”).1  Very generally, to be eligible for Medicare, a person must be at least sixty-five years old or disabled.2  Medicare operates as a “secondary payer,” meaning that it is entitled to reimbursement for any payments related to an injury that is otherwise covered by insurance, including self-insurance.3  For purposes of this article, we assume that the parties know whether or not a Medicare lien is at issue, and we address means of resolving that lien.

The danger to those dealing with Medicare liens usually arises in the reporting and reimbursement processes.  Frist, Medicare can bring suit against the entity making payment on the claim (e.g., Defendant, insurer), the claimant (i.e., Plaintiff), or their counsel.4  If CMS has to bring suit against an entity to collect its lien, it may be entitled to a civil penalty of double the amount owed.5  Second, Medicare can fine a Responsible Reporting Entity (“RRE”) (in practical effect, an insurer, including a self-insured Defendant)6 $1,000 per day for each day that the RRE is out of compliance with Medicare’s reporting requirements.7  Thus, all parties and their counsel are exposed to significant penalties if Medicare’s interests are not protected.

To ensure RREs have the information necessary to fulfill their reporting requirements, some states have implemented the Rule 26 Initial Disclosure requirements, some states have implemented Rule 26 Initial Disclosure requirements that require disclosure of the basic Medicare information,8 so that Plaintiffs cannot unintentionally prevent Defendants from complying with their statutory obligations.9   Regardless of whether it is required, there is no reason this Medicare information should not be shared to assist all parties in meeting their statutory obligations to Medicare.

The best practice for resolving a Medicare lien is to begin laying the groundwork when you first take a case involving a Medicare beneficiary, regardless of which side you represent.  Plaintiff’s  counsel should determine whether Plaintiff is a Medicare beneficiary and provide Medicare with a Proof of Representation letter as soon as possible,10 followed by a request for a Conditional Payment Letter (“CPL”).  Counsel can expect a “Rights and Responsibilities” letter (“RRL”) from Medicare relatively quickly and a CPL approximately sixty-five days after the RRL.11  The RRL summarizes the information Medicare needs from Plaintiff and that Plaintiff can expect to receive from Medicare. A CPL lists each charge Medicare is including in its lien and the total of those charges as of the date of the letter.  It is important to remember that this is not the final lien amount, and Medicare is not bound by this number.

There is no reason to wait to request the CPL, but there are important reasons to request it immediately.   Once a Plaintiff has the CPL, Plaintiff can dispute, or “challenge,” charges that are not related to the incident at issue and should therefore not be part of the lien.  Making challenges is easy and can be handled via mail, fax or online.12 In our experience, Medicare is very willing to remove payments if they are challenged, and Medicare has time to issue another CPL, before the settlement or verdict.

After Medicare receives notice of a settlement or verdict, it will issue a Final Demand Letter (“Demand”) to the Plaintiff, Counsel may want to use the Final Settlement Detail Document to provide settlement information to Medicare and assist Medicare in properly calculating a reduction to its lien based on procurement costs.13

Once Medicare issues the Demand, Plaintiffs have only sixty days from the date of the letter to pay the final lien amount listed in the Demand,14 or interest begins to accrue.15  During this period, a Plaintiff may still appeal specific charges included in the lien or, if certain conditions are met, request a waiver of some or all of the repayment.16  Medicare’s recent Demands state that it is Medicare’s policy not to initiate recovery proceedings while an appeal or waiver request is pending.  However, it is important to remember that an appeal or waiver request does not toll the sixty day repayment period before accrual of interest.  If a party wishes to avoid paying interest, it can make the repayment on time and work with Medicare for a refund.  This is another reason why it is much better for Plaintiff to challenge unrelated charges early.

Defendant should request, and Plaintiff should provide, a “Consent to Release” from.  This form allows Medicare to release limited information directly to Defendant, as specifically outlined on the release.17  It only allows Defendant to obtain information related to the injury at issue, and it enables Defendant to comply with its statutory reporting obligations.

Once a Plaintiff obtains a verdict or settlement, and if the claim meets Medicare’s minimum dollar amount, Plaintiff must submit a notice of the settlement to Medicare.  The Medicare minimum reporting thresholds have changed in recent years.  As of the date of this article, the reporting threshold is $1,000, meaning that if Medicare has a lien of $1,000 or more, the settlement must be reported to Medicare.18  You should always check the current minimum threshold when dealing with a Medicare lien.

Once the final lien is paid, Medicare will issue a letter, sometimes referred to as a “Zero Letter,” confirming that the lien has been satisfied.  In one case, we experienced Medicare attempting to add to this letter and successfully disputed the addition by arguing proceeds had been distributed in reliance on the Zero Letter, so this letter is very important.  It can protect all involved if Medicare attempts to collect additional amounts, and Defendants should consider requiring a copy of the Zero Letter as a condition of settlement.

We will end with a few tips that have helped us expedite resolution of Medicare liens.  It is often helpful for parties to include the method of lien payment in the settlement agreement.  Defense counsel may be tempted to ignore the impact of delays, assuming Plaintiff is “on the hook” if a payment is late, but remember that a failure to pay may create liability for all parties and their counsel.  Two common possibilities for addressing Medicare repayment are (1) to specify that the Defendants pay Medicare directly out of the settlement proceeds or (2) to have plaintiff’s counsel hold the settlement proceeds (or a portion thereof) in trust until the parties receive a Zero Letter.  If the final lien amount is unknown or could have increased since the date of the last Conditional Payment Letter, it may behoove all parties to require counsel for one side to hold a portion of the settlement proceeds including but in excess of the anticipated lien amount, until repayment is completed and a Zero Letter is obtained.  This protects all parties from potential liability, while allowing distribution of the majority of the settlement proceeds.  Additionally, in our experience, Medicare is much quicker to respond and more efficient if the HICN is written on the top, right corner of each page of correspondence faxed or mailed to Medicare.  Last, always check for updated forms and current guidance from Medicare at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Attorney-Services/Attorney-Services.html.

Full Article found at:  http://digitaleditions.walsworthprintgroup.com/publication/?i=289554&p=34

  1.  In this article, we use the term “Medicare” generally, and intend it to include CMS as the administering agency.
  2. For a full list of eligibility requirement, see http://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol/index.html.
  3. 42 U.S.C.  1395y(b)(2)(A).
  4. 42 U.S.C.   1395y(b)(2)(B)(iii); see also, e.g., United States v. Stricker, 524 Fed. Appx. 500, 506-07 (11th Cir. 2013) (recognizing cause of action, but dismissing on statute of limitations grounds).
  5. See 42 U.S.C. 1395y(b)(2)(B)(iii) and 42 U.S.C. 1395y(b)(3)(A).
  6. An entity is an RRE if it pays, in whole or in part, a settlement, judgment, award, or other payment to a Medicare beneficiary.  It is not an RRE simply because it reimburses another entity that has so paid (e.g., client reimburses insurer; insurer is RRE, not client) unless that reimbursement is to a third-party administrator or results from a private settlement agreement.  See, generally, 42 U.S.C.   1395y(b)(7)and (8).
  7. 42 U.S.C.   1395y(b)(8)(E)(i) and 1395y(b)(7)(B)(i).
  8. Information required in these disclosures often includes the beneficiary’s full name (as on the Medicare card), HICN, gender and date of birth, and complete address and phone number.
  9. See, e.g., Utah Rule of Civil Procedure 26.2(b)(3) (requiring Plaintiff’s SSN or Medicare HICN, full name and DOB in initial disclosures): Iowa R. Civ. P. 1.500(b)(1)-(2) (requiring in initial disclosures HICN number and full name and DOB).
  10. The Proof of Representation from can be found at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-Process.html (see bottom of the page for links to documents).
  11. See https://www.cms.gov/Medicare/Coordination-of-
    Benefits-and-Recovery/Attorney-Services/Conditional-Payment-Information/Conditional-Payment-Information.html:     (stating that a Conditional Payment Letter is sent within 65 days of a Rights and Responsibilities letter).
  12. Some may argue that it is Plaintiff’s counsel’s responsibility to point out unrelated chrges in the lien.  However, if all counsel work together to identify such issues, and the lien can be reduced so Plaintiff has less to pay to Medicare, it may facilitate settlement, which generally benefits all involved.  See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Reovery/Beneficiary-Services/Medicares-Recovery-Process/Medicares-Recovery-Process.html  for information on the dispute process.
  13. See 42 C.F.R. 411.37 (formula for calculating final lien amount).  The Final Settlement Detail Document can be found at the link in endnote 10.
  14. 42 U.S.C.    1395y(b)(2)(ii).
  15. Interest rates are set by regulation and may be changed.  42 C.F.R.  411.24(m)(iii);  42 C.F.R.   405.378(d).  Recent interest rates have been between 10 and 11%.
  16. See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Reimbursing-Medicare/Reimbursing-Medicare-.html, explaining that recovery may be waived if the beneficiary is not at fault for Medicare making conditional payments and if repayment would cause financial hardship or otherwise be unfair.
  17. The Consent to Release from language can also be found at the link in endnote 10.
  18. See www.cms.gov,  generally, for information on the minimum threshold for reporting settlements.  Because these numbers seem to change periodically, the best course of action to ensure an accurate number is to go to the CMS website and search for “Secondary Payer Mandatory Reporting Threshold” to see if there are any recent changes or guidance.  As of the date this article was written, the reporting threshold can be found at http://www.cms.gov/Medicare/Coordinationoo-of-Benefits-and-Recovery/Mandatiory-Insurer-Reporting-For-Non-Group-Health-Plans/NGHP-Training-Material/Downloads/Mandatory-Reporting-Thresholds.pdf.