As everyone should by now be aware, the Medicare, Medicaid and SCHIP Extension Act of 2007 was scheduled to begin live online reporting in the first quarter of 2010. This statute requires all responsible reporting entities (which includes insurers and self-insureds) to identify claimants who are eligible for Medicare benefits and report whenever a claim is resolved through "settlement, judgment, award or other payment". The overriding purpose of this statute is to place Medicare on notice of entities that have the primary obligation of paying a claimant's medical bills. Given that Medicare's obligation to pay claimants is secondary to all other plans (such as, for example, worker's compensation, no-fault and health insurance), the goal is to save Medicare money.

Originally, the new reporting requirements were to begin online during the first quarter of 2010. Responsible reporting entities were required to register with CMS no later than September 30, 2009. All of the reporting was to have taken place through a secure website administered by CMS. The actual online reporting was to have begun in the first quarter of 2010 after a few months of testing.

In response to numerous complaints and logistical difficulties, CMS announced on February 17, 2010 that testing will continue through December 31, 2010 and live reporting will not begin until January 1, 2011.

Hopefully, the additional nine months will allow CMS to design and construct an online reporting system that accomplishes the core goals of the new reporting statute without imposing undue burdens on the responsible reporting entities that are required to comply.

We will continue to monitor these developments and advise accordingly. If you have any questions, I can be contacted at mchmiel@cheluslaw.com.

As we have been advising our insurance carrier clients, the Medicare Secondary Payer Act and supporting federal regulations allow the Centers for Medicare and Medicaid Services to sue in order to be compensated for payments Medicare made to beneficiaries that should have been paid by some other primary plan or source. This act mandates that Medicare is secondary to all other plans, such as health insurance, worker's compensation, liability insurance and no-fault insurance, all of which have a primary obligation to pay medical claims where appropriate before Medicare is obligated to pay anything. Whenever Medicare does make a conditional payment for a medical claim, it has a direct right of action against "any entity that has received payment or from the proceeds of a primary plan's payment to any entity." In other words, Medicare is empowered to file suit in order to recoup its expenses.

We most often confront this situation within the context of personal injury lawsuits. Where a Medicare-eligible plaintiff is injured, Medicare expects the claimant's medical bills to be covered by one or more "primary" plans, such as no-fault or health insurance. Where Medicare pays a plaintiff's medical bills, it expects to be reimbursed immediately after the plaintiff obtains a settlement or judgment. If this does not take place, Medicare can file suit against a variety of entities, including the claimant, the claimant's attorneys and even the applicable insurance carriers.

To date, there have been relatively few examples of Medicare actually filing such a lawsuit to reimburse itself for conditional payments that were made to a plaintiff. However, in U.S. v. Stricker (CV-09-PT-2423-E), the federal government has commenced litigation pursuant to the Medicare Secondary Payer Act in the Northern District of Alabama. This lawsuit names insurance carriers such as AIG and Travelers, along with corporations such as Monsanto Co., Pfizer, Inc. and Solutia, Inc.

The federal government filed this lawsuit to be reimbursed for conditional payments made to several plaintiffs who were involved in a class action lawsuit against Monsanto, Pfizer and Solutia. The original class action lawsuit was settled for $300,000,000.00. However, the government asserted in the lawsuit that insurance carriers paid this settlement without ascertaining whether any of the plaintiffs were Medicare eligible or determining what reimbursements were owed to the federal government for Medicare conditional payments.

As permitted by the Medicare Secondary Payer Act, the federal government is seeking double damages and interest for all conditional payments that were made to the plaintiffs in the class action lawsuit.

This lawsuit further underscores the obligation that all insurance carriers and self-insureds have under the Medicare Secondary Payer Act. Whenever a personal injury action is settled, the carrier must determine if the plaintiff is Medicare eligible and if any conditional payments have already been made by Medicare to the plaintiff. The carrier must then ascertain that Medicare is placed on notice of the settlement and that Medicare is fully compensated.

We have advised our clients that this obligation has actually been law for nearly 30 years. However, Medicare has always lacked the resources to track its own conditional payments and the personal injury actions that correspond to those payments. Now, with the Medicare, Medicaid and SCHIP Extension Act of 2007, the carriers are obligated to report settlements such as these. This will place the government on notice and make it a lot easier for Medicare to identify situations where it should be filing suit to recoup its expenses.

We fully expect lawsuits such as this to become commonplace. In all likelihood, it was not a coincidence that the federal government chose a large high profile class action settlement to provide the factual background for this lawsuit.

We will continue to track developments on this case and any other similar cases in the coming months. If you have any questions, please contact me at mchmiel@cheluslaw.com

Prepared by Michael J. Chmiel