Vol. 7, No. 6, Pg. 20. Medicare Recovery in Liability Cases.

AuthorBy Thomas J. Nyzio

South Carolina Lawyer


Vol. 7, No. 6, Pg. 20.

Medicare Recovery in Liability Cases

20MEDICARE RECOVERY IN LIABILITY CASESBy Thomas J. NyzioMedicare is the federal health insurance program that offers coverage for certain types of services for individuals who are either over 65 or under 65 and have received Social Security disability benefits for at least 24 months, or who may qualify on the basis of end stage renal disease. 42 U.S.C. 1395(c). The Medicare program is overseen by the Health Care Financing Administration (HCFA), a division of the U.S. Department of Health and Human Services.

The Social Security Administration is responsible for determining if an individual is entitled to benefits, but claims are processed by private insurers, known as contractors, that are also responsible for maintenance of beneficiary records, the investigation of fraud and abuse, and recovery activities. While Medicare has recently been the source of much discussion, one of the least understood aspects of Medicare law involves the right of the Medicare program to recover its payments for accident related services from a liability settlement or judgment. This recovery right, however, can cause plenty of misery for the unwary.


Lawyers commonly refer to Medicare's right of recovery as a lien or a subrogation right. It has even been called a Super Lien. See Timothy V. Hoffman and George L. Acosta, "Beware of the 'Super Lien:' Medicare Payments' Effect on Personal Injury Cases," Illinois Bar Journal, Vol. 81, #2, February, 1993. It has been held that Medicare does not have a lien because the statute (42 U.S.C. 1395y(b)(2)(B)(ii)) does not give Medicare a claim against property. Zinman, et al. v. Shalala, 835 F.Supp. 1163 (D.C. N.D.Cal., 1993).

Simply calling Medicare's interest a subrogation right is also not totally accurate. It is true that the statute clearly gives Medicare a subrogation right. HCFA, however, prefers not to use the term subrogation, stating that "this term has caused confusion in the legal community and implies that Medicare has only a subrogated right, when, in fact, Medicare has a priority right of recovery." Medicare Intermediary Manual (MIM) § 3418. Rather, HCFA considers the recovery rights under the statute to grant Medicare a priority right of recovery that takes precedence over the rights of any other party (except perhaps the Internal Revenue Service). MIM § 3418.

Medicare recovery rights take priority over those of a Medicaid agency (even though Medicaid is considered a payer of last resort), with Medicare having authority to recover directly from a Medicaid agency that has received a third party payment. 42 C.F.R. 411.24(j). There is no doubt that the statute and regulations create affirmative duties for beneficiaries, insurers and lawyers to protect Medicare's interest, whether or not Medicare has formally demanded repayment. If that interest is not protected, HCFA has a great deal of flexibility in deciding who should be liable for repayment to Medicare.

Medicare's recovery rights are part of what is commonly known as the Medicare Secondary Payer (MSP) Program. MSP is a series of payment exclusions, resembling a coordination of benefits arrangement, designed to shift the burden for primary claim payment from the Medicare program to certain types of other insurance. 42 U.S.C. 1395y(b). The MSP statute includes not only Medicare's recovery rights in liability cases, but also payment exclusions for services covered under Workers' Compensation, no-fault insurance and qualifying employer group health plans and large group health plans.

Under the statute, payment may not be made with respect to any item or service to the extent that payment has been made, or prompt payment (defined under 42 C.F.R. 411.50 as 120

22days from the date of service) can reasonably be expected to be made, under a liability or no fault insurance policy or plan. However, payments can be made in the event that a provider will not receive prompt payment from a third party payer or from the proceeds of a liability settlement or judgment. 42 U.S.C....

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