Medicare and Medical Liens in Personal Injury Cases

We explain here Medicare liens and medical liens in personal injury cases and the obligation to pay back Medicare after a personal injury settlement.

Medicare Liens

How Medicare Liens Work in Personal Injury Cases

If you are injured in an accident and Medicare pays for some of your treatment, you will be obligated to reimburse Medicare for these payments if you bring a personal injury claim and get financial compensation for the accident.

What Law Gives Medicare Reimbursement in Personal Injury Cases?

Under two federal statutes, 42 U.S.C. §1395y(b)(2) and § 1862(b)(2)(A)/Section and § 1862(b)(2)(A)(ii) of the Social Security Act, the Medicare program may not pay for medical expenses for a tort victim when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or plan (including a self-insured plan), or under no-fault insurance.”

This federal law also unambiguously gives the Medicare program subrogation rights if it does make payments. The law provides: “The United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment concerning such item or service under a primary plan.” 42 U.S.C. § 1395y(b)(2)(B)(iv).

The Nature of the Medicare Medical Lien

To enforce this right to reimbursement, a “Medicare lien” will attach to judgment or settlement proceeds that are awarded as compensation for the accident. This means that if you get a settlement, you will have to pay back Medicare before anything else gets taken out.

While you can get the lien reduced, paying back Medicare after a settlement is not optional. The only path around a Medicare lien is to negotiate the lien to zero. Have we done this? We have. Is it rare for Medicare to waive a lien? It is very rare. But it can happen.

How Do Medicare Liens Work?

At the root of it all is the Medicare Secondary Payer (“MSP”) statute, section 1862(b) of the Social Security Act, 42 U.S.C. § 1395y(b). The purpose of this law was to make sure that sure Medicare was not paying for medical bills that someone else should pay. The MSP gives Medicare the right to claim (i.e., a lien) reimbursement from any judgment or settlement proceeds that include compensation for medical bills paid by Medicare.

If a Medicare beneficiary receives a personal injury settlement, they will be required to reimburse Medicare for any payments made on their behalf. To enforce this requirement, the law gives Medicare an automatic priority lien against any settlement proceeds in personal injury cases.

Almost any party involved in the personal injury settlement or payment, including the attorneys, has the responsibility for complying. Any settlement or payment must be reported to Medicare within 60 days and their valid lien amount must be paid.

Medicare Actively Enforces These Liens

If a Medicare lien is not properly paid back after a settlement, the Medicare lien statute allows Medicare to come after pretty much everyone in the case. Medicare can file against the defendant, the plaintiff, or the plaintiff’s counsel.

If Medicare brings a lawsuit suit against a party to collect its lien, it may be entitled to a civil penalty of two times the amount owed. Additionally, Medicare can fine the “Responsible Reporting Entity,” usually the insurer, up to $1,000 for each day that they are out of compliance with Medicare’s reporting requirements.

That is some harsh medicine. It leaves insurance companies stone terrified.

How Do You Handle a Medicare Lien

So what should attorneys do to avoid these large penalties? First, when an attorney has been hired they should inquire whether the client is a Medicare beneficiary, and if they are, they should contact the Benefits Coordination & Recovery Center (BCRC) and report the case. After the BCRC is notified of the case, it will begin to determine what conditional payments it has made for the injuries and treatment related to the case. Based on this, they will issue a conditional payment letter containing detailed claim information to the beneficiary.

Keep in mind that this initial letter will not provide a final conditional payment amount because Medicare can and often makes changes while the beneficiary’s claim is pending. Is this an unfair and torturous rule? It is. But this is the way it is and there is no other path.

An attorney will not receive a formal recovery demand letter until there is a final settlement, judgment, award, or other payment reported to Medicare. Once this occurs, a final demand letter will be sent out regarding the Medicare lien amount.

This letter will make clear the timeframe you have to pay, conditional payments that were made by Medicare, the total demand amount, and information on applicable waiver and administrative appeal rights.

The Gun to Your Head

Once the final demand letter is issued, from that date interest will begin to accrue, but is only assessed if the debt is not repaid or otherwise resolved. If you fail to repay the debt, interest is due and payable for each full 30-day period the debt remains unpaid and any payments that are made will be applied to the interest first and then to the principal.

If you fail to respond to the demand letter within the specified timeframe, it can result in the referral of the debt to the Department of Justice for legal action and/or the Department of the Treasury for further collection actions. After the lien has been paid, Medicare will issue a letter usually called the “zero letter” that confirms the lien has been paid. Settlement proceeds should never be disbursed unless and until any Medicare lien is paid in full.

Medical Liens

In this section, we will look at medical liens in personal injury cases. Medical liens differ from Medicare liens in that they involve regular health insurance as opposed to Medicare. This section explains how the health insurance company may have an interest in your case in some states….and why it is not quite as big of a deal as you may think.

Medical Liens in Injury Cases

Most car and truck accident victims wisely use their PIP, Med-Pay, or health insurance to help with the costs of medical treatment. You are generally not obligated to pay back your health insurer.

If you break your arm playing with your kids in your backyard, your health insurance company is not looking to get paid back. But in many health insurance contracts (and under a legal rule called subrogation) your insurance company may place a lien on your case that allows them to be paid back out of any settlement.

If you have been injured due to the negligence of another, contact Michael J. Redenburg, Esq. PC at 212-240-9465 for your free, no obligation, in-office consultation now and learn how to get the Wheels of Justice spinning for you!