Elder Law Newsletter
Personal Injury and Medicare
Medicare, established in 1965, is a federal health care plan for those 65 and older, in addition to certain persons under 65 (e.g., the disabled). In the event a Medicare recipient is injured through the fault of another, he or she may have the right to recover from the person causing injury (or his or her insurance company).
Medicare was initially the “primary payer” for medical services to beneficiaries, meaning that it paid first for medical costs, even where other sources existed. However, high costs led Congress, beginning in 1980, to enact “Medicare Secondary Payer” (MSP) laws. The MSP legislation sought to reduce Medicare costs by requiring beneficiaries to first exhaust other sources of payment before resorting to Medicare.
Medicare Payment for Treatment of Injuries
Federal law generally prohibits Medicare from paying for any item or service where payment can reasonably be expected from another “primary” source within 120 days. Primary sources include the following:
- Automobile insurance
- Liability insurance (including self-insurance)
- No fault insurance
When payment from another source is probable, yet not likely to occur within 120 days, the law allows “Conditional Medicare Payment” for medical costs. Although Medicare providers are often required to question patients regarding possible alternative sources of payment, as a practical matter, the agencies that run Medicare have little way of knowing about such alternatives. As a result, “conditional payment” is often made.
Medicare Reimbursement: Rights and Duties
The MSP system includes provisions for reimbursement and “subrogation.” In other words, Medicare succeeds to the rights of the injured party to sue the injuring party, or others, for recovery. Further, the administration of enforcement efforts of Medicare reimbursement rights has been contracted out to HGS Administrators (HGSA).
Debate has taken place over the nature and extent of Medicare’s right to recover. Some commentators, for example, have called it a “super lien” against any settlement or judgment in a personal injury lawsuit. Strictly speaking, the right to recover does not technically constitute a lien (i.e., not a right to recover from specific property or funds). However, the MSP program grants extensive powers and specifies broad rights and duties related to reimbursement of “conditional payments.” These include, but are not limited to:
- A duty on the part of the beneficiary (and perhaps his or her attorney) to notify HGSA of any lawsuit and pending or possible settlement or recovery.
- The beneficiary (and perhaps his or her attorney) has a statutory duty to reimburse Medicare for its “conditional payments” within 60 days of receipt of a “third party-payment” (e.g., a settlement or collection on a judgment). If payment is not timely made, Medicare may begin charging interest.
- HGSA and Medicare have the right to seek repayment (e.g., bring a collection action) from a wide range of individuals who receive payment, but fail to reimburse Medicare (including the injured party and his or her attorney). Although it is not clear whether Medicare can proceed directly against the injured person’s attorney after the money has been distributed, at least one court has affirmed this right. In general, however, it appears that if the money has been distributed and spent, the injured person’s future Social Security benefits will be used to reimburse Medicare.
- As part of Medicare’s right of action, it may recover double the amount of the conditional payments from an insurance company that is a “third-party payer” and “primarily liable” for the damages. This is true even if payment has already been made to the injured party. As a consequence, the insurance company may end up paying the injured person and Medicare (resulting in triple payment). Furthermore, Medicare has the right to deduct the amount from Medicare payments owing to the third-party payer.
- Medicare is deemed to have a “priority right of recovery;” i.e., it takes precedence even if state law or the third-party payer asserts otherwise.
Waiver or Compromise
Depending on the circumstances, Medicare may waive its right to reimbursement, though it is more likely to compromise the amount. Under applicable regulations, Medicare will reduce its recovery to allow for the cost of procuring the settlement or judgment, including attorneys’ fees.
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