Amendments to Medicare Secondary Payer Statute: Broader Authority for Government Recovery

• Publication year: 2005
• Pages: 83
• Citation: Vol. 34 No. 3 Pg. 83

34 Colo.Law. 83 Colorado Bar Journal 2005.

2005, March, Pg. 83. Amendments to Medicare Secondary Payer Statute: Broader Authority for Government Recovery

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83

Vol. 34, No. 3, Pg. 83

The Colorado Lawyer
March 2005
Vol. 34, No. 3 [Page 83]

Specialty Law Columns
Tort and Insurance Law Reporter
Amendments to Medicare Secondary Payer Statute: Broader Authority for Government Recovery
by Bradley J. Frigon

This column provides information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases In addition, it addresses issues of insurance coverage regulation, and bad faith

Column Editor:

William P. Godsman of the Law Office of William Godsman, Denver - (303) 455-6900, wgodsman@qwest.net

About The Author:

This month's article was written by Bradley J. Frigon, Englewood, an attorney in private practice in the areas of estate planning, taxation, Medicaid planning, special needs trusts, and tax and public benefit planning in personal injury and workers' compensation settlements - (720) 200-4025, frigonlaw@ qwest.net.

This article discusses the impact of 2003 changes to the Medicare Secondary Payer statute on Medicare subrogation rights in personal injury actions.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("Medicare Act of 2003")1 amended the law to authorize the government to seek reimbursement in a personal injury case for prior conditional Medicare payments made on behalf of an injured party under the Medicare Secondary Payer statute.2 Before the amendment in 2003, the government was denied reimbursement for prior Medicare payments made in some personal injury cases.

This article provides an overview of Medicare eligibility laws and procedures as they pertain to personal injury cases. It also examines the impact of the Medicare Act of 2003 on the Medicare Secondary Payer statute.3

Medicare Eligibility

Medicare is the federal health insurance program that provides major medical and hospital coverage for eligible classes of individuals. These four classes consist of:

1) individuals 65 years of age or older who are entitled to Social Security or Railroad Retirement benefits;

2) disabled individuals of any age who have been receiving Social Security Disability ("SSD") or Railroad Retirement benefits for twenty-four months;

3) individuals with end-stage renal disease who require dialysis or a kidney transplant; and

4) individuals over the age of 65 who are not eligible under the three classifications listed above, but privately purchase Medicare insurance and pay the premiums.4

Generally, a person suffering from a personal injury will access Medicare under the second classification. If the injured person cannot engage in substantial gainful employment, he or she will qualify for SSD. After an injured person has received SSD for twenty-four months, he or she will qualify for Medicare.

Medicare Secondary

Payer Statute

The Medicare Secondary Payer ("MSP") statute was created by the Omnibus Budget Reconciliation Act of 1980.5 The purpose of the MSP statute was to ensure that Medicare was only secondarily responsible for paying the medical expenses of individuals covered by Medicare if they also were covered by another type of private insurance.

On several occasions after its enactment, Congress expanded the reach of the MSP statute. Medicare is now secondary for a larger class of Medicare beneficiaries who have other primary sources of insurance coverage.6

Primary and

Secondary Payers

Medicare serves as the back-up medical insurance plan to an injured party who cannot receive payment from a primary insurance plan. In other words, the insurance company or other responsible party remains the primary payer. As secondary payer, medical benefits are payable by Medicare only to the extent that payment has not been made and cannot reasonably be expected to be made under coverage by the primary payer.7 Any secondary payment made by Medicare is considered a "conditional payment" subject to reimbursement.

If the Medicare recipient is not covered under a primary plan of insurance, the reimbursement provisions of the MSP statute are not triggered. In this situation, Medicare remains the primary medical plan.

Highlights of Amendments to MSP Statute

(Medicare Act of 2003)

No longer requires prompt payment to trigger MSP statute

Expands definition of "primary plan"

Provides a retroactive effective date

Expands list of entities against which the government may assert double damages.

Prior MSP Statute

Prior to the Medicare Act of 2003, the government had to prove two key elements to invoke the repayment provisions of the MSP statute.8 First, the government was required to establish that the Medicare recipient had another source of medical coverage under a "primary plan" of insurance, regardless of whether that source of medical coverage was a group health plan, workers' compensation plan, liability insurance, or self-insurance plan.9 Second, payment of the injured party's medical expenses was reasonably expected to occur "promptly" by a workers' compensation plan, automobile or liability insurance policy (including a self-insured plan), or under a no fault insurance plan.10

Both of these elements proved difficult for the government to establish. For example, Medicare was denied reimbursement where a single defendant in a tort case was found not to maintain a self-insurance plan.11 Prior to amendment, the MSP statute did not reference a right of action for reimbursement against tortfeasors.12 Instead, the previous MSP statute allowed recovery only from an insurer. A defendant's decision to pay a contested liability case out of its own funds did not mean the defendant maintained a self-insurance plan for purposes of the MSP statute.13

Another problem with the previous MSP statute was with the "prompt" payment requirement. Prior to amendment, the repayment provisions of the MSP statute occurred only when

payment has been made, or can reasonably be expected to be made promptly from a workers' compensation law, an automobile, liability insurance policy or plan (including a self-insured plan) or under no fault insurance.14 (Emphasis added.)

"Promptly" was defined in the regulations as payment within 120 days after the earlier of: (1) the date the claim was filed; or (2) the date the service was provided or the patient was discharged from the hospital.15 Thus, for a Medicare payment to be secondary, the government had to prove that when Medicare paid for the medical care of an eligible Medicare beneficiary, there was a reasonable expectation that another primary plan of insurance would pay for such care "promptly."16

Medicare Act of 2003 Amendments

The MSP statute was amended by the Medicare Act of 2003 to overcome the two problems discussed above ("primary plan" of insurance and pay "promptly").17 The following discussion addresses several changes to 42 U.S.C. § 1395y(b)(2), which is also referred to in this article as "§ (2)," with applicable subsections indicated.

Under the new amendment, the term "promptly" was deleted from § (2)(A)(ii), and added to § (2)(B)(i). This change in location solved two problems. First, under § (2)(A)(ii), it no longer is necessary for a defendant or alleged tortfeasor to make a prompt payment of a medical bill to trigger the payback provisions of the MSP statute.

Second, if there is a dispute as to the liability of an alleged tortfeasor to pay the medical bills of an injured party, Medicare may make an advance or "conditional" payment under § (2)(B)(ii). Such payment may be made if a primary plan described in § (2)(A)(ii) has not paid or cannot reasonably be expected to promptly make payment with respect to such item or service This...