Reimbursements Made To Medicare

Question
Although we have notified/submitted forms to Medicare of a 3rd party claim, we have not received a response yet. Do we need to repay Medicare?

A Note: What is my obligation as an attorney and what are risks to client of not getting lien/subrogation claim opened and paid?

Pennsylvania Attorney

Answer
Yes. Reimbursement must be made to Medicare for any conditional payments they have made that are related to your client's injuries. Federal law allows CMS to make claim or institute suit for recovery against all individuals and entities involved. Although the beneficiary remains primarily responsible, claim may be made against others, including an attorney for the beneficiary, third party insurers that funded the settlement and/or the tort feasor.

A release in favor of an insurer or its insured, or an agreement obtained by the attorney stating the debt is the responsibility of the beneficiary, does not preclude enforcement. There is also a procedure by which Medicare has the authority to refer non-collectible debts over to the United States Department of Treasury for possible offset of a beneficiary's monthly Social Security or Railroad Retirement benefits.

Section 42 CFR 411.23 states that a beneficiary must cooperate in any action taken by the Centers for Medicare and Medicaid Services in recovering conditional payments. Failure to do so or not protecting the Medicare program during and after settlement negotiations may result in CMS taking action against the beneficiary to collect the mistaken payment.

In the event that reimbursement is not made to Medicare as required by 42 USC 1395y(b)(2)(B)(I), action may be brought against any entity responsible for payment (and may collect double damages from insurance companies), or any entity that has received a third-party settlement. Under 42 CFR 411.24(g), this includes attorneys whose fees are paid from settlement proceeds. Please refer to US v. Sosnowski, et. al. where judgment was entered against a beneficiary and his attorney for failing to reimburse Medicare after receiving settlement proceeds on a personal injury case.

CMS has a direct right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency, or a private insurer that has received a third party payment, 42 CFR 411.24.

I hope this helps,
Mary Skinner

Bankruptcy & Medicare Liens

Question
I have a case where the plaintiffs were involved in a wreck, lost their jobs, and declared bankruptcy (chapter 7) as a result. Medicare paid for all of the injuries resulting from the wreck. We would like to settle, but I am not sure what kind of priority Medicare would take in the bankruptcy court. Please let me know your thoughts. Thanks.

Tennessee Attorney

Answer
Thanks for your question. The entire settlement amount may be considered an asset of the Chapter 7 bankruptcy estate, depending on timing and disclosure issues. Timing issues refer to when the signature injuries occurred when compared to the time the debtor-client filed the bankruptcy petition. And disclosure issues refer to whether the settlement was listed as a contingent asset (even if not reduced to a judgment or payment) on the bankruptcy schedules. If it was not listed on the Schedules, the bankruptcy would need to be reopened so that the asset could be properly distributed among all creditors who filed a claim. (Medicare may not be the only issue to consider.)

Finally, the Chapter 7 trustee, if in possession of settlement funds will have a duty to reimburse Medicare should conditional payment reimbursement be involved within the meaning of the MSP statutes. Medicare also takes the position that timing is a critical factor in determining whether Medicare has a reimbursement right. In fact, any Medicare claims matters involving bankruptcy are automatically escalated to policy analysts for CMS (at the regional offices). So these cases get flagged by the MSPRC (lead contractor) for further review by Medicare policy specialists to identify (1) whether Medicare's right occurred before or after the petition is filed; and (2) what position, if any, Medicare will take.

From the trustee's perspective, because Medicare is not a general, unsecured creditor, and has priority claims status, in some cases, the Medicare reimbursement portion is not even sent to the bankruptcy estate.

Our team has a classification protocol to identify and address these issues, following a bankruptcy coordination methodology that has worked in both mass tort and single event cases. We would be happy to assist as you deem proper, and upon request by your client.

Best,
Kati Payne

Should Lawyers Sign Indemnification Agreements?

Question
Should a lawyer sign an indemnification agreement with respect to Medicare reimbursement claims?

Answer
There are 8 states that will not permit attorneys to sign indemnification agreements.

Following these eight state ethics rules, attorneys in those states cannot agree to indemnify. The best attorneys can do is have their clients indemnify. The states are North Carolina, New York, Illinois, Indiana, Kansas, Missouri, Arizona and Florida, all of whose ethics bar committees have opined that attorneys signing hold harmless agreements along with their clients is a violation of Model Rules 1.8(e), creating an impermissible conflict of interest, in violation of Model Rule 1.7(a). The ethics opinions are building up. While we cannot opine on such matters, knowing there are 8 hot button states will help us to avoid unpleasant circumstances.

- Illinois State Bar Assn Op. No. 06-01, July 2006 WL 4584284
- Indiana State Bar Assn Op. No. 1 of 2005
- Kansas State Bar Assn Legal Ethics Op. KBA 01-05 (May 23, 2002)
- North Carolina State Bar Ethics Op. RPC 228 (July 26, 1996)
- Advisory Committee of the Sup. Ct. Missouri, formal Op. No. 03-05, 2003
- Florida Bar Ethics Op. No. 70-8, Revised (April 23, 1993)
- New York City Bar Inquiry Reference No. 10-12 (June 1, 2010)
- North Carolina RPC 228 (prohibiting lawyers from agreeing to personally indemnify the insurance company for unpaid liens.)
o RPC 228 quotes Rule 5.1(b). That rule is now 1.7(a), which provides that a lawyer whose personal interest is adverse to the client has a conflict of interest.

If an attorney agrees to be personally liable and later Medicaid sues the attorney based on the indemnification, you may have a legal claim against your client.

Sylvius von Saucken, Esq.