§ 5.9 Medicare Recovery Rights (Medicare Parts A and B)
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§ 5.9 – Medicare Recovery Rights (Medicare Parts A and B)
Medicare, or what is more precisely called “original Medicare,” is a 53-year old federal health insurance program benefitting individuals who are over 65 years of age, have a disability, or are suffering from end-stage renal disease. See generally 42 U.S.C. §§ 1395c to 1395w-5. The Centers for Medicare and Medicaid Services (“CMS”), an operating division of the Department of Health and Human Services (“HHS”), administers the Medicare program.
Medicare is the single largest health insurance program in the nation and, according to the Henry J. Kaiser Family Foundation, accounts for more than 15% of federal spending. To understand Medicare, it is helpful to understand the four major components of Medicare: Parts A, B, C, and D.
Original Medicare, which is the focus of this section, is provided by the federal government and is divided into two types of insurance known as Medicare Parts A and B. Medicare Part A covers hospital care and related services, 42 U.S.C. §§ 1395c to 1395i-5, and Medicare Part B covers other medical services and equipment, 42 U.S.C. §§ 1395j to 1395w-5.19
Medicare Part C, 42 U.S.C. §§ 1395w-21 to 1395w-28, is a private alternative to original Medicare that we discuss in a later section. See infra § 5.10. Medicare Part C is commonly referred to as Medicare Advantage and allows eligible individuals to obtain Parts A and B coverage, as well as additional services not included in original Medicare, through plans provided by private health insurance companies approved by CMS. 42 U.S.C. § 1395w-22(a); 42 C.F.R. § 422.100.
Medicare Part D, 42 U.S.C. §§ 1395w-101 to 1395w-154, is a program offering optional coverage for prescription drugs. Part D benefits are provided by private insurers who form Prescription Drug Plans (“PDPs”), similar to Medicare Advantage plans. In most circumstances, participants in Medicare Part D add this coverage to original Medicare since prescription drug coverage is already part of the coverage offered by Medicare Advantage plans. See 42 U.S.C. § 1395w-131 (requiring Medicare Advantage plans to offer prescription drug coverage).
This can create confusion because PDP rights of recovery mirror those of Medicare Advantage plans. See 42 C.F.R. § 423.462(a). Thus, for an injured person enrolled in original Medicare and enrolled in a PDP, it is likely that there could be separate reimbursement obligations to both the federal government and a private insurance carrier for accident-related prescription drug benefits.
This section will address the federal government’s recovery rights in connection with original Medicare. To the extent there are reimbursement claims involving PDPs, those issues should be addressed in the same manner as Medicare Advantage claims. See infra § 5.10.
a. The Scope of Medicare Recovery Rights
Original Medicare recovery rights first came into being in 1980 when, pursuant to the Medicare Secondary Payer Act (“MSP Act”), 42 U.S.C.
§ 1395y(b), Medicare was made secondary to “primary” sources of payment. See 42 U.S.C. § 1395y(b)(2)(A).
As a result of the MSP Act and subsequent modifications, Medicare makes “conditional payments” for Medicare-covered services to healthcare providers if a primary payer, infra, will not pay or will not pay “promptly.” See 42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. § 411.21 (defining “promptly” as being within 120 days). But, regardless of whether a primary payer is reasonably expected to pay promptly, Medicare is intended to be secondary to any primary sources of payment. See Medicare Secondary Payer Amendments, 71 Fed. Reg. 9466, 9467 (Feb. 24, 2006) (“Congress intended that the [secondary payer] provisions be construed to make Medicare a secondary payer to the maximum extent possible.”).
The MSP Act, therefore, requires that Medicare must be repaid for conditional payments from a “primary payer” or any entity that received a “primary payment.” 42 U.S.C. § 1395y(b)(2)(B)(ii). This includes, but is not limited to, payments from automobile liability insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners’ liability insurance, malpractice insurance, and general casualty insurance. 42 C.F.R. § 411.50 (defining “liability insurance” to include both first-party and third-party insurance coverage).
To secure reimbursement of conditional payments, CMS has broad recovery rights consisting of direct rights of recovery and subrogation rights pursuant to 42 U.S.C. § 1395y(b)(2)(B)(ii)-(iv) and 42 C.F.R. § 411.24. These recovery rights are often referred to as a “Super Lien,” ostensibly because of their breadth, but the MSP Act does not, in fact, create any “lien” rights. E.g., Medicare Secondary Payer Manual, Ch. 2 § 40.2(F) (Rev. 118, 04/28/16) (CMS Pub. 100-05) (“MSP Manual”) (“The MSP [Act] provisions do not create lien rights when those rights do not exist under State law.”).
Under the MSP Act’s liberal recovery provisions, CMS not only retains the right to require a non-compliant third-party “primary payer” to pay again pursuant to 42 C.F.R. § 411.24(i)—i.e., even when they have already paid a beneficiary or other party—but CMS may also collect double damages against “any entity” that fails to properly reimburse Medicare. 42 U.S.C. § 1395y(b)(2)(B)(iii); but see United States v. Sosnowski, 822 F. Supp. 570, 574 (W.D. Wis. 1993) (concluding double damages only applies when a primary plan, such as an insurer, fails to properly reimburse Medicare, and not when a beneficiary or attorney fails to reimburse Medicare).
CMS has taken the position that the phrase “any entity” includes personal injury attorneys who can be sued for failing to repay Medicare. See, e.g., 42 C.F.R. § 411.24(g). Although courts in other jurisdictions have presumed the correctness of this contention, an Arizona district court found “no statutory support, either expressly or in the legislative history, to support the . . . assertion that [Medicare] has a direct cause of action, pursuant to 42 U.S.C. § 1395y(b)(2)(B)(ii), to recover a reimbursement claim from an attorney that has received payment from a primary plan and has passed it along to the beneficiary.” Haro v. Sebelius, 789 F. Supp. 2d 1179, 1995 (D. Ariz. 2011) (Bury, J.), reversed on other grounds, 747 F.3d 1099, 1117 (9th Cir. 2013) (“The Secretary’s authority to bring an action against an attorney who has disbursed the proceeds is not a controversy ripe for our review”); see also infra § 8.4.
The majority of courts in other jurisdictions agree with CMS. For example, in Denekas v. Shalala, 943 F. Supp. 1073, 1080 (S.D. Iowa 1996), the district court concluded that Medicare may “pursue third parties, including attorneys, who receive payments of any sums which should be reimbursed to Medicare, a fact that would cause any prudent personal injury attorney to involve Medicare before any disbursement of settlement proceeds is made.” Other courts follow suit. See United States v. Harris, No. CIV 5:08CV102, 2009 WL 891931, at *3 (N.D.W. Va. Mar. 26, 2009) (“[T]his Court holds that Mr. Harris is individually liable for reimbursing Medicare in this case because the government can recover ‘from any entity that has received payment from a primary plan,’ including an attorney.”) (emphasis in original) affirmed by, 334 F. App’x 569 (4th Cir. 2009); United States v. Weinberg, No. 01-CV-0679, 2002 WL 32356399, at *3 (E.D. Pa. July 1, 2002) (“Attorneys who have received settlement funds on behalf of clients who have received Medicare benefits may be subject to a direct claim by the Government.”); Sosnowski, 822 F. Supp. at 574 (holding attorney is liable for failing to reimburse Medicare).
b. Tracking by Medicare and Initial Determinations
To increase its reimbursement rate, Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (“MMSEA”) added mandatory reporting requirements for settlements, judgments or awards involving Medicare beneficiaries. See 42 U.S.C. § 1395y(b)(7) and (8). As a result of the “Section 111” amendments of MMSEA, various primary payers—such as liability insurers—are now required to directly report any awards or payments made to a Medicare beneficiary to a private division of CMS known as the Benefits Coordination and Recovery Contractor (“BCRC”).20
Upon receipt of this information or other information alerting CMS to recoverable conditional payments, a “Rights and Responsibilities” letter will be issued to the Medicare beneficiary, as well as to any carrier identified as a primary payer. Then, within 65 days, a Conditional Payment Letter (“CPL”) will be automatically generated.21
The CPL is not a final demand for payment. The CPL includes a Payment Summary Form itemizing and listing interim items...
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