Medicare Question

Posted by Sylvius Von Saucken

Question:
Our client is a 34-year-old young woman who is about to receive a non-compensable settlement from her employer in the amount of $40,000 to basically buy peace in relation to a work injury.
Although we do not know the exact figure of the Medicare lien at this time, her medical bills total $41,000. My question is whether this “buy peace” settlement qualifies as a third party contribution which has to be reported to Medicare. Your assistance in this dilemma is greatly appreciated.

-New Hampshire Legal Assistant

Answer:
To address your question I have a few points of clarification/questions, which relate to conditional payments (past), and which might also relate to the employer’s duty to notify Medicare (through MMSEA’s reporting requirements):

1. From the fact pattern, it appears that this is a workers’ compensation settlement, in which the “buy peace” part might be considered the indemnity portion of the settlement.

2. If correct, then what part of the settlement, if at all, relates to medical expenses (whether past or future)? If there is a part of that settlement which includes past medicals paid for by Medicare on a conditional basis, then the reason for settlement may not be as relevant to the reimbursement obligation. This would trigger opening a tort recovery record with the COBC (CMS /Medicare’s contractor in NY).

3. If incorrect, and this is really a liability case, the answer to your question is still “yes” Medicare should be contacted, but another question arises. “How much might Medicare be entitled to recover?”

4. The answer to this second question lies in the allocation methodology of the case. For example, if the $40,000 is being paid and can be shown to be paid for economic and non-economic damages that have nothing to do with past medical expenses, then an argument can be made that the Medicare claim (as distinguished from a lien due to the independent cause of action Medicare can assert under 42 U.S.C. §1395y(b)) is limited to only that part which is allocated for medical expenses.

5. Nevertheless, the crux of your question – must you notify Medicare – is “yes”, because the point is to protect your client’s Medicare card (by having Medicare pay for injury and non-injury-related care in the future). Contacting Medicare ensures that protection. Not contacting Medicare leaves open the risk of loss of coverage. If Medicare has paid for injury-related care on a conditional basis, then it has a right of recovery under the MSP. Medicare’s recovery rights are not limited just because there is a “make peace” settlement. Instead, the critical inquiry is whether Medicare paid for your clients’ medical expenses on the condition that when your client settles with a third party, Medicare gets reimbursed.

6. Thereafter, the question remains “how much”. If you can get Medicare to waive any interest based on proof that this settlement was unrelated to personal injury damages, then you might be able to significantly reduce any Medicare claims. But that is provided you report the settlement and make the arguments as part of the recovery process.

7. Finally, note that if the employer settles before July 1, 2009, and has no continuing obligation to manage your client’s medical care, reporting by the employer to CMS under the MMSEA (Medicare Medicaid SCHIP Extension Act of 2007) should not be a factor. If, on the other hand, the employer will continue to pay for medical expenses, then the employer may have a reporting obligation as a “responsible reporting entity” under Section 111 of the MMSEA.

We trust this information has been helpful.