Baylor Evnen Newsletter

       You settle a questionable liability slip-and-fall claim for $15,000 -a pretty good settlement considering the elderly plaintiff ran up nearly $100,000 in medical bills to treat her fractured hip. You realize Medicare has paid for most of the plaintiff's medical treatment and you know you need to protect Medicare's interest in the settlement proceeds. The plaintiff doesn't want to wait several months (or longer) for Medicare to issue its demand letter specifying the amount it is owed from the settlement, so plaintiff's counsel suggests you simply issue the settlement check now and let the plaintiff handle the details of reimbursing Medicare. You agree, but only if you can include Medicare as a payee on the $15,000 settlement check (along with the plaintiff and her attorney) and only if the plaintiff agrees to sign a release which includes language reciting that she is responsible for reimbursing Medicare from the settlement proceeds and agreeing to indemnify against any claim Medicare may assert. By settling the injury claim in this fashion, have you protected Medicare's right to reimbursement and eliminated the possibility of future liability to Medicare?

      If you are handling Medicare's right to reimbursement as you would an ordinary medical lien or subrogation claim, you're not doing enough. The Medicare Secondary Payer (MSP) statutes and supporting federal regulations give Medicare something far more powerful than a typical lien or right of subrogation ---- they give Medicare a priority right of reimbursement from personal injury proceeds which allows Medicare to pursue recovery from virtually anyone who receives money, or pays money, in a personal injury claim.

      For instance, consider what might happen in the $15,000 settlement referenced above if the plaintiff fails to reimburse Medicare from the settlement proceeds. Under federal law, Medicare can seek reimbursement of its conditional payments directly from the plaintiff or from the plaintiff's lawyer, but Medicare also can choose to seek recovery directly from the insurer (or self-insured) which paid the settlement money in the first place-even though the insurer already settled with and paid the plaintiff. If Medicare's reimbursement demand is ignored and it decides to take legal action the stakes get even higher, because once litigation is filed Medicare is allowed to recover twice the amount of its damages, plus interest. So failing to protect Medicare's interest in a $15,000 nuisance-value settlement can potentially expose the insurer to paying an exponentially higher sum to Medicare before the claim can be closed and the settlement considered final.

      What about the plaintiff's agreement that she would be responsible for reimbursing Medicare from the settlement proceeds --- doesn't that release language protect the insurer from Medicare's recovery efforts? Unfortunately, Medicare can pursue recovery directly from the insurer despite release provisions requiring the plaintiff to reimburse Medicare from the settlement proceeds. Medicare isn't bound by the terms of a release between the parties, and the plaintiff's promise to reimburse Medicare has no effect on Medicare's right under federal law to seek recovery directly from anyone with the obligation to protect Medicare's interests, including the insurer or self-insured plan which paid the settlement. Insurers faced with the prospect of reimbursing Medicare because the plaintiff failed to comply with the terms of the settlement agreement may opt to sue the plaintiff for breach of contract (or for indemnification under the terms of the release), but that remedy offers incomplete protection because a plaintiff who lacked the funds to repay Medicare initially is unlikely to have sufficient funds to indemnify the insurer against Medicare's claim for double damages later.

      Even the common practice of including Medicare as one of several payees on the settlement check will not reliably protect against the possibility that Medicare will pursue the insurer for direct reimbursement later. It is Medicare's practice not to endorse multi-party settlement checks until all other payees have first endorsed the check, after which Medicare deposits the settlement funds into its own interest bearing account. If all other payees are willing to endorse the multi-party check and allow Medicare to deposit the entire check, the process works smoothly and Medicare's interests are protected. However, if the dollar amount of the multi-party check is insufficient to reimburse Medicare for the amount of its recovery claim (as would occur if a case settles for an amount less than Medicare's conditional payments), or if one of several payees refuses to endorse the check or refuses to allow Medicare to deposit the check into its own interest bearing account, Medicare can claim it has not been paid, and can refer the matter for legal action to recover its conditional payments thereby exposing the insurer to the possibility of double damages plus interest. If a settling insurer wants to be confident it has protected itself against the possibility of duplicative payments to reimburse Medicare, it is best to wait for Medicare to issue its demand letter to the plaintiff, after which the insurer can prepare a separate check made payable to Medicare for the amount Medicare has calculated it is owed.

      The rules and regulations governing Medicare's priority right to be reimbursed from personal injury settlements and judgments are confusing, sometimes inequitable, and always frustrate the parties' legitimate interest in expeditiously resolving claims. Medicare's right to reimbursement is governed by hundreds of different statutory and regulatory provisions, all designed to facilitate the same outcome: ensure Medicare gets repaid from personal injury proceeds whenever possible and before anyone else, including the Medicare beneficiary. The enactment of the new Mandatory Insurer Reporting Requirements (which require insurers and self-insureds to notify Medicare when they make a payment to a Medicare beneficiary) is expected to make Medicare even more aggressive in pursuing reimbursement from personal injury settlements and judgments. Now, more than ever, continued reliance on outdated settlement practices and shortcuts for handling settlements involving Medicare is dangerous, and could expose insurers and self-insured plans to significant future liability in cases they believed were finally settled.

      Baylor Evnen has expertise in Medicare Secondary Payer issues, and is available to assist clients in developing and implementing best practices for handling and settling injury cases involving Medicare. This summer, Baylor Evnen is presenting an intense half-day course for claim handlers, claim managers and in-house counsel who want a more sophisticated understanding of the complex rules governing Medicare's right to reimbursement. Baylor's Medicare Boot Camp will cover current strategies and best practices for handling and settling personal injury claims where Medicare has made conditional payments. The detailed course book will provide quick access to the federal statutes, federal regulations, CMS rules, and contains the forms and contact information needed to navigate through the Medicare maze, obtain a full and final settlement, and close injury claims with confidence. For more information on enrolling in Baylor's Medicare Boot Camp, see the registration information at the end of this newsletter.