Medicare and Allocation

Posted by Matthew Garretson and Elizabeth Vish Schad

Question:
Plaintiff and defendant have been tentatively agreed to settle a personal injury case for $16,500 for approaching a year and a half. It is a case of highly contested liability and very questionable injuries. Medicare has identified conditional payments in the range of $200,000 for conditions that are near certain plaintiff will be unable to establish causation for. Thus far, all attempts to "negotiate" with Medicare have been unfruitful. I am aware that it is normal Medicare practice to not give a final settlement demand until after the primary tort case has been settled. For obvious reasons, both plaintiff and defendant are reluctant to enter into a firm settlement agreement in this case without some agreement in hand from Medicare. Any suggestions as to how to make Medicare see the light? It is my understanding that Ahlborn is inapplicable to Medicare cases. I have been advised that there is a section in the Medicare handbook whereby Medicare will recognize a Court ordered allocation, and will assert their reimbursement claim only against that portion of the recovery having been allocated to medical expenses. I have also been advised that Medicare has recently been interpreting this as applying only in the case of a federal court allocation, which would be of absolutely no assistance to us. Any suggestions as to how to deal with Medicare on this problem would be greatly appreciated.

-Recent Seminar Attendee

Answer:
Medicare does not recognize Ahlborn; however it has always been Medicare’s policy to accept a court-ordered allocation on the merits of the case.

Medicare's manual states that Medicare is bound by an allocation that has been designated by a court on the merits of the case.... "The only situation in which Medicare recognizes allocations of liability payments to non-medical losses is when payment is based on a court order on the merits of the case. If the court or other adjudicator of the merits specifically designates amounts that are for payment of pain and suffering or other amounts not related to medical services, Medicare will accept the Court's designation." Medicare Intermediary Manual, § 3418.7.

Recently, we have seen Medicare challenge any allocation they believe was done after the fact in an effort to avoid any reimbursement claims. They really want to see that it was done based upon judicial fact-finding on the merits of the case. Your facts are a good starting point in demonstrating that you are not allocating after the fact to avoid Medicare.