71 The Alabama Lawyer 212 (2010). Navigating the Medicare Reporting Minefield- A Practitioner's Guide to Settlement with a Medicare Beneficiary.

AuthorBy Russell C. Buffkin and Annie J. Dike

Alabama Lawyer


71 The Alabama Lawyer 212 (2010).

Navigating the Medicare Reporting Minefield- A Practitioner's Guide to Settlement with a Medicare Beneficiary

Navigating the Medicare Reporting Minefield- A Practitioner's Guide to Settlement with a Medicare BeneficiaryBy Russell C. Buffkin and Annie J. DikeMedicare was signed into law in 1965 to provide government-funded health care coverage for: (1) persons age 65 years or older; (2) persons under age 65 years with certain disabilities; or (3) persons with end-stage renal disease. From its inception, it was Congress' intent that the government not be forced to carry the cost of a recipient's medical care if another entity is responsible for the recipient's medical expenses. The Medicare Secondary Payer ("MSP") statute, section 1862(b) of the Social Security Act, 42 U.S.C. § 1395y(b), was created to ensure that certain "primary plans" (liability insurance, including self insurance, and no-fault insurance plans responsible for paying the recipient's medical expenses) act as the "primary payer," making Medicare a "secondary payer" only with the right to reimbursement. The MSP statute ensures Medicare is not saddled with the responsibility of unconditionally shouldering the cost of a recipient's medical care if payment has been, or can reasonably expect to be, made by a primary payer. See42 U.S.C. § 1395y(b)(2); 42 C.F.R. § 411.20, et seq. Although Medicare is authorized to make payments when a primary payer cannot reasonably make payments promptly, any such payments, referred to as "conditional payments," are made by Medicare on the condition that Medicare will be reimbursed by the primary payer. See 42 U.S.C. § 1395y(b)(2)(B)(I); United States v. Baxter International, 345 F.3d 866, 892 (11th Cir. 2004).

The MSP statute is designed to protect Medicare's interest where a defendant/insurer is liable for a recipient's medical expenses. Despite its passage in 1980, however, the MSP statute was seldom followed by the business industry, and it was rarely enforced by the Center for Medicare and Medicaid Services ("CMS"). This situation will undoubtedly change with the passage of the Medicare, Medicaid and SCHIP Extension Act of 2007 ("MMSEA") on December 29, 2007 and the enactment of new mandatory insurer reporting requirements.

Purpose of the Medicare Secondary-Payer Statute

The Eleventh Circuit recognized, in Baxter International, the intent of the MSP statute to make Medicare a secondary payer whenever possible. Baxter International, 345 F.3d 866. The Eleventh Circuit explained that since enactment of the MSP statute, Congress has expanded the scope of the statute several times to make Medicare "secondary to a greater array of primary coverage sources."

Id.at 877. The Court further declared that the failure to enforce the MSP statute was costing the taxpayer billions of dollars. Id. at 891. Some studies predict that,

unless a change is made, Medicare reserves will be exhausted by 2017. See Summary of the 2009 Annual Reports by Social Security and Medicare Boards of Trustees, available at http://www.ssa.gov./OACT/TRSUM/index.html.

The MMSEA was enacted to give "teeth" to the MSP statute and provide effective penalties that would force insurers to comply with the reporting requirements. Reporting prevents Medicare recipients from receiving a windfall in the form of unreported lump-sum settlements for medical expenses when their medical costs were previously paid by Medicare. Although the MMSEA went into effect in July 2009, the new reporting requirements were pushed back to January 1, 2010. These new reporting requirements ensure Medicare is notified of any settlement, judgment or payment made to a Medicare beneficiary by a primary payer so it can be reimbursed. Without mandatory reporting, it is extremely difficult, if not impossible, for Medicare to learn of payments to Medicare beneficiaries.

Penalties for Failure to Report

Under the new reporting requirements, primary payers must report payments made to a Medicare beneficiary and reimburse Medicare (to the extent of the insurer's liability) for any conditional payments made within 60 days of the payment. The penalties for failure to comply with these mandatory reporting requirements include:

1. $1,000 per day, per plaintiff, for late reports; 2. Direct collection by CMS of the Medicare lien (even if the defendant/insurer has already paid the claimant/plaintiff); or 3. A private cause of action by CMS for double damages (twice the amount of Medicare's lien).See42 U.S.C. § 1395y(b)(2)(B); 42 C.F.R. §§ 411.24, 411.26.

These regulations only grant CMS the ability to recover double damages if it is required to take legal action to recover. The statute of limitations for primary plans is six years. See Manning v. Utilities Mutual Insurance Co., Inc., 254 F.3d 387, 397-398 (2d Cir. 2001). Pursuant to 28 U.S. C. § 2415(a), this six-year period begins to run from the later of either the date of payment to the Medicare recipient or the date Medicare learns of the payment to the Medicare recipient. In addition, CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, state agency, or private insurer that has received a primary payment. See 42 C.F.R. § 411.24(g) (emphasis added). See also United States v. Weinberg, No. Civ. A. 01-CV-0679, 2002 WL 323563999, 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."). CMS may also recover interest on a Medicare lien if reimbursement is not made before the expiration of the 60-day time frame. See 42 U.S.C.§1395(y)(b)(2)(B)(ii).

A defendant/insurer can simply no longer depend on an indemnity provision from the plaintiff because it will not sufficiently insulate the insurer from the double damages Medicare may be able to recover. The defendant/insurer must now ensure Medicare's lien is satisfied firstout of the funds paid as result of a settlement or judgment.

Who Must Report

Persons and entities required to report under Section 111 of the MMSEA are referred to as Responsible Reporting Entities ("RREs"). Determining RRE status is an important first step in assessing Section 111 reporting responsibilities. RREs include:

1. Anyone who funds and pays, in whole or in part, a settlement, judgment, award or other payment to a Medicare beneficiary; and 2. Liability, no-fault and workers' compensation insurers as well as self-insured entities and TPAs.

A liability insurer and no-fault insurer is defined by CMS as an entity that, in return for the receipt of a premium, assumes the obligation to pay claims described in the insurance contract and assumes the financial risk associated with such payments. Even if the liability insurer does not assume responsibility for claims processing, it must still assume responsibility for the new reporting requirements. The User Guide provided by CMS provides...

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