PI lawyers stymied by Medicare secondary payer process

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Long-awaited regulations governing the way litigants in personal injury cases with future medical bills should reimburse the government for Medicare payments could come as soon as this year.

But new rules governing Medicare’s secondary payer system could bring more headaches rather than the clarification that lawyers and their clients are seeking.

“There is speculation on both sides of the bar as to what the regulations will be, but until they are actually published both sides would need something of a crystal ball in order to protect their respective clients,” said Jim Larsen, a partner in personal injury law firm Gillin, Jacobson, Ellis, Larsen & Lucey in Orinda, Calif.

It’s also possible that no progress will be made on the proposed rules, which have stalled since being unveiled in 2012. If that happens, litigants and attorneys would be forced to continue flying blind, despite the fact that violating the law requiring Medicare cost repayment could subject plaintiffs to penalties and put their attorneys at risk of defending malpractice claims — or even being forced to repay their clients’ Medicare liens.

If a case is settled, “Medicare also places the responsibility on settling attorneys if the Medicare lien is not paid,” said Andrew Countryman, a partner in the Charleston, S.C., office of Carlock, Copeland & Stair, where he defends civil liability claims. “A law firm can be responsible for the balance of a Medicare lien in the even that a plaintiff does not pay.”

That leaves attorneys treading carefully in claims involving Medicare recipients.

“What happens in these cases is you have to be overly conservative in the advice that you give, because you don’t have clear guidance,” said Andrew Hook, president of Hook Law Center in Virginia Beach, Va. “There are people who have thumbed their noses at Medicare [reimbursement] and have gotten hammered later.”

Uncertain rules

Federal law provides that Medicare has subrogation rights over legal settlements, judgments, awards and other payments received by Medicare recipients in matters involving future medical care. Beyond that the rules are sketchy; the Centers for Medicare & Medicaid Services have not issued regulations or guidance on the specifics of how reimbursement for Medicare-covered care is to be made.

The proposed regulations from the CMS would govern how Medicare recipients who receive verdict awards or cash settlements repay the federal government. But the rules only broadly outline a series of possible approaches the agency could take, including one option that would require plaintiffs to set aside the portion of the award allocated for future medical care costs.

There has been no movement on the proposal in more than a year.

Even if the CMS finalizes regulations covering Medicare set-asides for claims involving future medical payments, it could still leave unanswered for parties and attorneys.

“If the money must be set aside, how do you set it aside?” asked Hook. “Can the client set it aside themselves, or do they have to have a professional administrator do it? How do you determine the right amount of money that must be set aside?”

Agency slow to act

The CMS announced it would resume the process of fleshing out the potential rules in September 2013 after reviewing public comments, but no action was taken. The agency is now slated to consider the matter again sometime this year.

Meanwhile plaintiffs, defendants and their attorneys continue to wrangle with the issue of whether a portion of verdicts and settlements in personal injury cases must be set aside for Medicare subrogation, and if so how much. They do what they can to prepare for the possibility, including contacting the CMS early in the litigation to determine what the potential subrogation liability may be. But that process is often easier said than done.

“It’s really tough, because CMS can be really slow” in responding to such requests, said Countryman. “It can really be an impediment to resolving the case.”

Many lawyers look to similar regulations to try to determine what new rules might look like. For example, the CMS has promulgated rules related to Medicare set-aside requirements for workers’ compensation claims.

But the American Association for Justice submitted comments urging the agency not to adopt rules that simply mirror those for workers’ compensation payments. While workers’ comp claims usually involve a set amount of lost wages and other benefits, personal injury claims are far more complex, and similar rules would hamstring efforts to settle those cases, the AAJ argued.

“CMS must recognize that the liability arena is fundamentally different from and more complex than the workers’ compensation field,” the AAJ’s comments stated.

There are other places the agency could look to for a model. As part of the recently-adopted budget bill, Congress changed the law governing Medicaid liens asserted in personal injury cases to require plaintiffs to repay Medicaid costs in the event of a verdict or settlement even where such costs exceed the portion of the verdict or settlement allocated for medical bills.

If the rules ultimately adopted for Medicare reimbursement take a similar approach, rather than pro rating subrogation payments based on the amount of a settlement award, that could discourage plaintiffs from bringing claims at all.

“If CMS takes the same approach as with Medicaid, they can take the whole judgment,” Hook said.

He suggested such an approach would be fiscally unwise from the standpoint of the government, because a drop in lawsuits means a drop in government revenue.

“If the plaintiff doesn’t collect any money, then the government doesn’t collect any money either,” Hook said.

The continued uncertainty over the rules has already created a chilling effect on some claims, particular those seeking smaller damage amounts, because plaintiffs don’t know if the resulting Medicare liability will eat up most or all of any settlement received.

“I think it’s a huge disincentive,” Countryman said. “If I were a plaintiff’s attorney it would have to be a really good case for me to take it. Otherwise you are really rolling the dice.” Follow @dcdicta