Most attorneys that practice in the injury arena are familiar with the concept of liens.  There are medical liens, worker’s compensation liens, insurance liens, and then there is the issue of a Medicare lien.  In reality, Medicare doesn’t actually have a lien.  Instead, Medicare’s right to reimbursement is far superior than a mere lien; it really is a “Super lien,” because its right of reimbursement is paramount to any other claim. 

 Many attorneys know that Medicare has a statutory right to reimbursement against any recovery from a lawsuit where Medicare paid for health benefits for a beneficiary.  However, some have ignored those rights when settling cases because Medicare has not been vocal in its efforts to assert a lien.  Most attorneys, however, when polled about Medicare reimbursement rights don’t know the following Pitfalls involved with Medicare.

 1.  The Lien Must be Paid Within 60 Days After Resolution

 Medicare is not primary medical insurance like health insurance plans. Instead, Medicare is a secondary insurance plan. By statute, Medicare conditionally pays for medical treatment subject to reimbursement by the “primary plan” such as private health insurance plans, third-party tortfeasors (including uninsured or self insured parties) or liability insurance.  As a result, Medicare is entitled to reimbursement any time it pays and a case is resolved (by settlement or judgment) that involves Medicare payments.  According to the Code, a Medicare beneficiary who receives a payment from a “primary plan” or “primary payor” must reimburse Medicare within 60 days of receipt of payment from that primary plan.  42 U.S.C 1395y; 42 CFR 411.24(h).

2.   If The lien is not paid by the plaintiff (beneficiary) The Defendant Must Pay It

Most people are shocked to hear this one.  The reality is that if the Medicare beneficiary does not repay Medicare within 60 days from receipt of the settlement or judgment, the insurance company for the defendant (or the self-insured) “must” reimburse Medicare “even though it has already reimbursed the beneficiary or other party.” 42 CFR section 411.24 (i).  Most defendants find this provision very difficult to understand because they feel that they have already paid for the settlement and that they should not have to pay twice.  Because of this feeling, I am quoting the rules exactly as follows:

 (i) Special rules. 

(1)  in the case of liability insurance settlements and disputed claims under employer group health plans, workers’ compensation insurance for plan, and no-fault insurance, the following rule applies: if Medicare is not reimbursed as required by paragraph (h) of this section, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.


(2) the provisions of paragraph (i.)(1) of this section also apply if the primary payer makes its payments to anti-other than Medicare when it is, or should be, aware that Medicare has made a conditional primary payment. 42 CFR section 411.24 (i).

 3.  The Plaintiff’s attorney can be held liable for Failure to Pay Medicare

 The “Super lien” allows Medicare to seek reimbursement directly from the Medicare beneficiary. In addition, Medicare is also authorized to seek recovery from anybody, including the plaintiff’s attorneys, who receive payment from the primary plan.   42 USC 1395y(b)(2)(B); 42 CFR section 411.24.  Until recently, this was never tested in the courts. 

However, late last year, the US District Court in the Northern District of West Virginia addressed this issue in the case of U.S. v. Harris (if you would like Steve Mehta to send you a copy of this case, please click here and request it to be sent by email).

 In that case, the defendant was Paul J. Harris, a plaintiff’s attorney who had settled a personal injury case involving a Medicare beneficiary.  After settling the case for $25,000, Harris sent Medicare (A.K.A. CMS) the details of the settlement payment, as well as his attorney’s fees and costs.  However, before he was notified by Medicare of the final demand for payment, he distributed the settlement funds.  CMS then sued Harris for $10,253.59.

 Harris argued that he distributed the sums with knowledge of the government and therefore he wasn’t liable.  The District Court disagreed.  It held that he was personally liable for the full amount of the lien.  The following rules of law were cited by the court:

 ·         A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made…” 42 U.S.C. § 1395y (b) (2) (B) (ii)

 ·         CMS may “bring an action against any or all entities that are or were required or responsible…to make payment with respect to the same item or service…under a primary plan.” 42 U.S.C. § 1395y (b) (2) (B) (iii)

 ·         holding that the government “may recover…from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.” Cox v. Shalala, 112 F.3d 151, 154 (4th Cir. 1997)

 ·         “CMS has a right of action to recover its payments from any entity, including beneficiary provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.” 42 C.F.R. §411.24(g)

 4.  The Defendants Are REQUIRED To Report A Potential Recovery To Medicare

Effective July 1, 2009, section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007” (MMSEA) will require defendants to determine whether or not plaintiffs are entitled to Medicare benefits.  The MMSEA will require defendants to first determine whether or not the plaintiff is entitled to Medicare benefits, regardless of whether or not the claim against the defendant is resolved. Second, if the plaintiff is determined to be entitled to Medicare benefits, the defendant will be required to notify Medicare of its right to a possible recovery against the plaintiff.  The defendant will be required to provide information to Medicare such as the identity of the Medicare beneficiary whose illness, injury, incident, or accident was at issue as well as such other information specified by Medicare to assist it in recovering the amount that Medicare has previously paid. Currently, however, there are no specific guidelines as to exactly what information must be communicated and when.

 5.  The penalties are Stiff!

 The exposure in penalties can be enormous.  For example, the MMSEA will impose $1000 a day penalty upon defendants for failure to comply with notification requirements.  And, Medicare can charge interest if payment is not timely made.  Finally, any party, including the plaintiff, the defendant, the defendant’s insurance company, and both sides’ attorneys can all be liable for up to double the amount of the Medicare “super lien” as damages to Medicare! 

6.                  Six years Exposure!!!!

 Finally, if all this news is not bad enough, think of this:  Medicare has up to six (6), yes, six (6) years to sue you for its right to reimbursement.  28 USC 2415(a).

 Now that we have identified a potential crisis, we have to arrive at a solution to avert the crisis.  Unfortunately, however, there are no guidelines available for plaintiffs or defendants. 

 In the next chapter in this series of articles, we will address the possible solutions from both sides.