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P.I. lawyers caught unaware of new rules

Richmond, VA — Personal injury lawyers are bracing for more paperwork and possible delays in claim payments when the latest round of Medicare regulations kicks in next year.

A few observers are even warning that plaintiffs’ lawyers will have to develop “set aside” plans for future medical expenses to settle cases for Medicare recipients, although there is no explicit requirement for such provisions.

Lawyers studying the new rules say that, at the least, law offices should beef up their intake inquiries to gather detailed information about clients who are Medicare recipients.

Under the new rules, insurance companies may hold up liability payments until they’re assured that Medicare’s interests have been protected.

Concern about the new regulatory plan is so great that claims industry leaders plan a formal lobbying effort against rules that would hold up resolution of liability claims.

New Law

The new law is the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), Pub. L. 110-173 (110th Congress).

Driving the new rules is a congressional determination to ease the budget burden posed by Social Security. Medicare has long been authorized to seek reimbursement from those responsible for costly injuries, but rarely did until this decade. Beginning in 2001, the federal program bared its enforcement teeth to try to recover its share from workers’ compensation and liability insurance payments.

Soon, that enforcement bite will grow. Beginning in July 2009, insurance carriers and self-insured entities must report certain information about liability claimants who are entitled to Medicare. The implication, by comparison to similar procedures for workers’ compensation claims, is that Medicare will be inspecting claim resolutions to make sure they provide for payment of future medical expenses.

“This is going to be a tremendous burden for personal injury attorneys,” said Rocky Mount, Va., lawyer Art Donaldson, who has been reviewing the new law.

Protecting Interest

Exactly how the parties are supposed to protect Medicare’s interest in future medical bills is not spelled out, but it’s the insurance companies who stand to lose if Medicare is not satisfied. The new law provides for penalties of up to $1,000 per day for each claim not reported.

“It puts the burden on all liability payers to report and be satisfied that the rules are complied with,” noted Donaldson.

“You can almost see the target moving to our back,” said Roy A. Franco, an attorney who is director of casualty claims for insurer Safeway Inc. Naturally, he said, insurance companies will cover themselves by sitting on settlement payments until they are sure they won’t get nailed for failing to protect Medicare from future medical expenses.

The fear among some observers is that settlement agreements cannot be finalized until there is a “set aside” plan to pay for future medical expenses.

The regulatory environment is murky. Franco explains that the Medicare rules require, in essence, that Medicare’s “interests be protected.” There is no explicit requirement for approval of a Medicare set aside plan.

Set Aside Plans

Nevertheless, lawyers have been submitting set aside plans for workers’ compensation settlements, and there is concern that such plans will become de rigueur for liability claims. An article in Trial magazine refers to “dire warnings that the government will soon begin enforcing the [Medicare set aside] provisions in personal injury cases.”

“The group that is being completely blindsided by this is the bar,” Franco said. “I speak to groups around the country and I see the blank stares from lawyers who say, ‘This can’t possibly be the rule.’”

Donaldson wants to wise up those blank-staring lawyers. Donaldson is preparing to teach seminars in May to explain the new rules to Virginia lawyers.

“Everything’s just going to grind down unless plaintiff attorneys anticipate this and prepare. The old days where we just settled a case and moved on are gone. Everybody wants a piece of the pie. We have to get up to speed,” Donaldson said.

The fear for attorneys is the prospect of compliance review in hindsight. Lawyers worry that government attorneys will come knocking, demanding a grand a day for letting a plaintiff spend his settlement while Medicare paid his ongoing medical bills. In another nightmare scenario, the former client sues the lawyer for legal malpractice because the client lost Medicare coverage due to an ill-advised settlement payout.

“The problem for both the plaintiff’s lawyer and defense lawyer is, ‘How do I know when I’ve carried out my obligation to my client?’” said Franco.

Heightened Scrutiny

While all sources agree lawyers should be aware of heightened Medicare scrutiny, the fear of set aside requirements is not universal. Ohio attorney Matthew L. Garretson, a specialist in settlement plans, says alarms about mandatory set asides are premature.

“[A]ll conspiracy theories should be cast aside for the time being; nothing in [the new Medicare law] is designed as a ‘Trojan horse’ for liability set asides,” Garretson wrote.

Garretson recommends enhanced case intake forms, and posts samples at his Web site, www.garretsonfirm.com.

Furthermore, only major cases are likely to come under the government microscope. “I don’t think it’s going to have too much impact on minor settlements,” Franco said, noting that most workers’ compensation carriers currently do not worry about Medicare for settlements under $25,000.

Franco helped form a lobbying group called “Medicare Advocacy Recovery Coalition” to bring together insurers, attorneys, third-party brokers and others who have an allied interest in seeing that Medicare gets paid “in a way that doesn’t impede the liability claims process.” The group has a Web site at www.marccoalition.com.

Franco said that the MARC organization has retained a D.C. lobbying firm and is close to getting “significant players on both sides of the house” to sign on to its effort.

Speaking of the uncertainty about the new Medicare regime, Franco said, “It’s just going to create delays in resolving cases. Who does it hurt? Senior citizens and the disabled,” he said.

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