Knowingly ignoring a Medicare or Medicaid Lien

Posted by Matthew Garretson

Question:
What sanctions, penalties or any other punishment can a lawyer expect for knowingly failing to pay a Medicaid or Medicare lien and distributing the proceeds of a settlement without telling the client of the responsibility to pay?

-Kansas Attorney

Answer:
Medicaid penalties are generally determined on a state-by-state basis. Generally, states require attorneys to give notice to the Department when pursuing a tort claim for a Medicaid beneficiary. If Medicaid is ignored, they typically have right to pursue Def’d directly (and, b/c of this issue, most defendants will, in turn, seek indemnification in settlement agreements). Some states can pursue collection from attorney. (Model Rule 1.15 probably comes into play too). As for the clients, they have the obligation in every state to report a “change of financial condition” every 30 days – They have to report the settlement or face penalties in some jurisdictions for fraud… that usually ties back to the tort recovery department…

Medicare has the “double damages” plus interest…unfortunately for the attorney, he or she has direct liability for reimbursement if Medicare is not fully satisfied. The two most notable case I am aware of is United States of America v. Henry L. Sosnowski, D.J. Weis, and Home Mutual Insurance Company, Defendants. The Office of General Counsel (OGC) may bring suit against the attorney or the Medicare beneficiary for recovery for the full amount of the Medicare Secondary Payer (MSP) claim. Furthermore, MSP can send the case to the Department of Treasury for collection. Also, MSP and OGC may seek double damages and interest. (see below) If really spun up, MSP may disregard the settlement and pursue reimbursement “over-and-above” the amount granted to it in the settlement agreement (also see below).

Medicare assesses interest on MSP debts by exercising common law authority that is consistent with the Federal Claims Collection Act (FCCA) and implementing regulations (see 45 C.F.R. § 30.13). The CMS requires that a beneficiary or other entity repay the CMS within 60 days of receiving insurance proceeds from a third-party payer (see 42 C.F.R. § 411.24(h)). If the CMS does not receive a full refund, or adequate proof that no overpayment exists, within 60 days of notifying the beneficiary of the CMS's demand, the intermediary will begin assessing interest as of the date of mailing of the demand letter. 45 C.F.R. § 30.14(a) provides that a debtor may either pay the debt, or be liable for interest on the uncollectible debt while a waiver determination, appeal, or a formal or informal review of the debt is pending. Therefore, assessment of interest may not be suspended solely because further review may be requested. It should be noted, however, that you may repay the debt to avoid accruing charges, but retain your right to dispute, appeal, or request waiver of the debt. If you succeed in the appeal or waiver request, Medicare will refund the amount waived. If the beneficiary requests a waiver or an appeal of the overpayment determination, he or she will be held responsible for the interest on the debt if the agency prevails and a refund is later collected (see 45 C.F.R. § 30.14(a)). In cases of joint and several liability among two or more debtors, Federal regulations at 42 C.F.R. § 401.623 prohibit the CMS from allocating the burden of claims payment among the debtors. The CMS will proceed with collection action against one debtor even if other liable debtors have not paid their proportionate shares. Therefore, if one of the joint debtors owes Medicare, the intermediary may assess interest on the debt. Regulations at 45 C.F.R. § 30.13(a) provide for assessing the higher of the private consumer rate (PCR) or the current value of funds (CVF) rate of interest on overpayments and underpayments. Interest will continue to accrue on delinquent debts until the debt is either paid in full or there is a determination to terminate the collection action by the CMS Central Office or Regional Office.

The fact that a settlement has been made between the beneficiary and the liable party does not, necessarily, bind Medicare to that settlement. If the liability insurer was aware of Medicare's interest, but Medicare was not consulted in the settlement, Medicare may pursue the balance of its claim, over and above any amount granted to it in the settlement, against the liability insurer (see 42 C.F.R. § 411.24(I)).

Probably more than you wanted, but I had it at my fingertips…

My best,
Matt Garretson