The New Medicare Reimbursement Laws: Agonizing for Those Trying to Settle a Claim

By Elizabeth Moreno

The New Medicare Reimburement laws offer a stumbling block to resolving cases.

What Is The New Law?

On December 29, 2007, President George Bush signed into law the "Medicare Medical, and SCHIP Extension Act of 2007." The new legislation amends the Medicare Secondary Payer Act (MSA) by establishing new reporting guidelines beginning July 1, 2009. Under the new rules, all liability insurers, and self-insurers will be required to determine whether any individual who files a claim against the insurer or any entity insured or covered by the insurer is entitled to Medicare benefits. If so, the insurer must provide Medicare with that individual's identity and any other information that maybe required under the law. . This information must be furnished to Medicare within the time specified by after the claim is resolved through settlement, judgment, award or other payment (regardless whether or not there has been an admission or determination of liability). If an insurer fails to notify Medicare in accordance with these guidelines, a civil penalty of $1,000 per day will be charged per claimant. The new legislation clearly indicates a shift in policy which will result in the federal government monitoring general liability claims more closely. The fines represent a few enforcement push by Medicare to hold attorneys and insurers liable. What Barriers Does It Present During Mediation? Mediators must understand the new law and procedure and be prepared in handle the difficulties it will encounter for each side.

A mediator should expect the plaintiff to make a settlement demand that will reflect the payment of all the medical bills paid by Medicare, despite plaintiff's degree of fault.

On the other hand, defendant will not be sympathetic to the Medicare Recovery Act (MRA) and will only pay an amount given the plaintiff's comparative negligence. Insurance carriers are concerned that settlement amounts will increase because the Medicare rules require that Medicare be reimbursed 100% of the expenses it has incurred related to the injuries that arose from the liability incident. Deductions are allowed only for economic hardship of the Medicare recipient or procurement costs of the attorney, none for apportionment of the fault. Until Medicare considers fault principles that are presented in the liability claim and is willing to adjust the MRA, the settlement will not occur unless the carrier increases the proposed offer therefore causing the average cost per claim to increase. Insurance carriers can still be held responsible under the MRA, even if the claim was settled and payment made to the claimant and/or attorney. As a result, claims adjusters after July 1, 2009 will proceed very cautiously in settling a claim. Some insurers are going even further and agreeing on settlement in principle, but requiring some written verification by Medicare (provided by claimant or his attorney) demonstrating that no reimbursement obligation exists or that it has been satisfied.

What Can Or Can't A Mediator Do?

A Mediator should be cognizant that in an attempt to get around the law, the mediator may be suggesting or proposing settlement conditions that are not legal and will not be enforced. Medicare is not bound by the terms of the settlement agreement. So if the parties make a suggestion that the settlement agreement contain terms that the plaintiff's attorney indemnify the insurer for any claims arising out of Medicare, it will not hold up. The insurer is still responsible despite the indemnity. A creative plaintiff's attorney will want the settlement agreement to state that all damages are for emotional distress or pain and suffering and not for medical bills. Similar, to damages in an employment dispute where all is taxable no matter how you describe the damages, under the new Medicare Recovery Act, CMS can take the entire settlement for reimbursement despite what the terms of the agreement state.

A mediator might consider having the parties spell out liability since it may make it easier for the Plaintiff's attorney to comp the Medicare reimbursement. But no party wants to sign an agreement stating that they are responsible and the degree of fault. All parties enter into a settlement agreement because there is no admission of fault.

Pre Mediation Discussions Are The Key To Eliminating The MRA Barrier

A mediator must prepare prior to the mediation. A mediator should call the parties prior to the mediation and determine if there are any medical liens, including a Medicare lien. Inquire if any party has been in contact with Medicare, if they know the amount of the lien and how long it will take to satisfy the Medicare lien, once settlement is reached. Ask plaintiff's attorney if his client is willing to settle the matter, not knowing the reimbursement amount of Medicare. Warn the plaintiff's attorney, that under the Medicare Recovery Act that a liability insurance carrier has a duty to report the settlement therefore, prepare the client that he/she will have to give personal information to the insurance carrier , such as Social Security number.

In preparing the parties to handle the MRA barrier, the mediation will run smoothly. If the plaintiff is clueless about the Medicare Recovery Act, you may suggest that he does some research prior to the mediation. Ask both parties if they have any ideas on how to overcome the MRA barrier. Plaintiff's attorney may have had the issue before and may inform you that he tells his client that the amount of the medical lien will remain in the trust account until the lien is satisfied. The liability insurance carrier may indicate that they are willing to enter into a contingent settlement agreement; based on the amount that CMS is willing to accept to compromise the lien. Asking these types of procedural questions will remove the MRA barrier at mediation.

This new law will pose new challenges for plaintiff's attorney, the insurance carrier for the defendant and the mediator who is attempting to resolve the claim. The key is for the stakeholders involved to be aware of the Medicare Reimbursement Act, and to prepare the parties the barriers that the Medical Care Recovery Act may present prior to the mediation.