Since 2001, the Centers for Medicare and Medicaid Services (CMS) has been publishing policy memorandums explaining the details of Medicare compliance when settling future medical benefits in a liability, self-insured, no-fault, and workers' compensation scenario. In its 2003 memorandum, the CMS made it clear that Medicare has a direct priority right of recovery against any entity, including the beneficiary, any provider, supplier, physician, attorney, state agency, or private insurer that has received any portion of a third-party payment directly or indirectly. The same memorandum explained that the CMS also has a subrogation right with respect to any such third-party payment per 42 CFR Sections 411.24(b), (e), and (g) and 42 CFR Section 411.26.
In 2004, the CMS again published information regarding Medicare's rights when non-compliance exists. In the 2004 memorandum, CMS made it clear that if Medicare's interests are not "reasonably considered," Medicare may deny payment for medical services related to the claimed injury or disease until such time that the related medical expenses equal the entire amount of the settlement. In other words, if Medicare determines there is an intent to shift the responsibility of the claimed injury's medical care to Medicare, Medicare may refuse to ever pay for medical expenses for the condition and/or may seek double damages from all parties involved (42 CFR Section 411.40 and 42 CFR Section 411.46).
Plaintiff Attorneys: Beware!
The Medicare Secondary Payer Act (MSP) mandates that conditional payments made by Medicare as a result of an injury caused by another party must be reimbursed to Medicare (42 CFR Section 411.21). Otherwise, any and all entities responsible for such reimbursement will be held responsible, including the representing attorney. The recent federal case of United States v. Harris (USDC ND W.Va. November 2008 and March 2009) highlights this.
In U.S. v. Harris, the United States filed a complaint against attorney Paul J. Harris for declaratory judgment and money damages owed to CMS. Harris represented James Ritchea, a Medicare beneficiary, as a result of injuries sustained when he fell off a ladder purchased from a local retailer. Attorney Harris, on behalf of Ritchea, sued the ladder retailer. The action was settled for $25,000. During the life of the claim, CMS paid $22,549.67 in Medicare claims for medical services related to the accident. As a result, after Harris forwarded to CMS details of the settlement, CMS sought reimbursement in the amount of $10,253.59 out of the $25,000.00 settlement. Because payment was not made to CMS within the statutorily required 60 days, CMS claimed the $10,253.59 plus interest, thereby seeking payment of $11,367.78.
Attorney Harris filed a motion to dismiss the complaint, arguing that a lawyer cannot be held individually liable for such a sum when settlement funds were distributed with the knowledge and consent of the government. However, the Court found that pursuant to MSP, when Medicare makes a conditional payment for medical services as a result of an injury caused by another party, the government has a right of recovery for the conditional payments against any entity responsible for making the primary payment.
The Court explained that pursuant to 42 USC Section 1395y(b)(2)(B)(iii), to recover payment, the government may bring an action against any or all entities required or responsible to make payment, including a beneficiary provider, supplier, physician, attorney, state agency, or private insurer that has received primary payment. In this case, because the Ritcheas and attorney Harris received monies in exchange for a release of payment for items or services resulting from the claim, the Court concludes that CMS can seek reimbursement from any entity, including Harris, the Ritcheas' attorney. United States District Court Judge Frederick P. Stamp, Jr., therefore denied Harris' motion to dismiss the complaint, and ordered payment to CMS.
Defendants and Insurers: Beware!
On Sept. 10, 2003, the Circuit Court of Etowah County, Ala., approved a settlement in the matter of Sabrina Abernathy, et al v. Monsanto Company et al. The settlement agreement indicate that the plaintiffs would accept $300 million ($171 million to the plaintiffs with supplemental annual amounts of $1.5 million to be paid from 2004 through 2013 to counsel to be allocated within their sole discretion for plaintiff's benefit and $129 million in attorney's fees and costs, including $1 million annually from 2004 through 2013) in exchange for any liability for punitive damages or penalties against Monsanto Co., Pharmacia Corp., and Solutia Inc., relating to the manufacture, use, release or disposal of polychlorinated biphenyls at or from the Anniston, Ala., plant or Anniston property owned or controlled by the defendants.
The plaintiffs, who included approximately 907 Medicare beneficiaries, received these monies for, among other things, compensation for medical expenses related to their exposure to polychlorinated biphenyls, manufactured by the named defendants at their plant or property. The U.S., through CMS, made conditional payments on behalf of its Medicare beneficiaries for illness and injuries related to and released in the settlement. Neither the plaintiffs or their counsel ever made payments to the U.S. as reimbursement for Medicare conditional payments made on behalf of the approximately 907 beneficiaries. As a result, on Dec. 1, 2009, some six years after the settlement agreement was approved in this case, the U.S. filed a complaint in the District Court for the Northern District of Alabama, Eastern Division, against all of the plaintiff attorneys, all of the corporate defendants, and their insurers, Travelers Insurance and AIG, for failing to take Medicare's interests into account.
In its Dec. 1, 2009, complaint, based upon 42 USC Section 1395y(b)(2), the MSP statute, the U.S. charges plaintiff's counsel, corporate defendants Monsanto, Solutia, and Pharmacia, as well defendant insurers Travelers and AIG with failure to comply with the MSP statute. In each count, the U.S. claims each of these defendants knew or should have known that one or more settlement claimants were Medicare eligible individuals on whose behalf the U.S. was entitled to recover any conditional payments made. The U.S. indicates that neither plaintiff counsel, corporate defendants, or defendant insurers ascertained whether any settling plaintiff was a Medicare beneficiary prior to making payment based on the settlement reached, nor did anyone identify the amounts owed to the US as reimbursement for Medicare conditional payments prior to such payments per the settlement agreement.
In that December complaint, in addition to seeking reimbursement for all conditional payments made on behalf of the settlement claimants for medical items related to the settlement, and interest, pursuant to 42 USC Section 1395y(b)(2)(b) and 42 CFR Section 411.24(c)(2), the U.S. is also seeking double damages against corporate defendants Monsanto, Solutia, and Pharmacia, defendant insurers Travelers and AIG, and plaintiff counsel because it was necessary to initiate legal action against these individuals and entities. The U.S. also seeks declaratory relief by asking the Court that the defendants must give CMS notice of all future payments to Medicare beneficiaries pursuant to 42 CFR Section 411.25 and ensure that before any future settlement payment is made to any claimant, that appropriate payment be made to the U.S.
Conclusion
As CMS has been informing us by way of policy memorandums since 2001, Medicare may not pay for any item or service where payment has been made, or can reasonably be expected to be made, by a workers' compensation law or plan of the U.S. or a state or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance. 42 USC Section 1395y(b)(2)(A). And just as CMS has also been indicating to us by way of policy memorandums since 2001, in order to recover such payments for such items or services, not only may the U.S. join or intervene in any action related to the events that gave rise to the need for the item or service, but the U.S. may bring an action against any entity which is required or responsible (directly, as third-party administrator, or otherwise) to make payment and may collect double damages against that entity, or against any other entity (including any attorney, physician or provider) that has received payment from that entity with respect to the item or service. 42 USC Section 1395y(b)(2)(B).
Rafael Gonzalez is CEO of The Center for Medicare Set Aside Administration, LLC in Clearwater, Fla. He will moderate a panel discussion entitled "The Bold New World of Taking Medicare's Interests Into Account" on Wednesday, Aug. 18, at the 65th Annual Workers' Compensation Educational Conference and 22nd Annual Safety and Health Conference in Orlando. Conference information is available at www.fwciweb.org.
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