On September 6, 2011 the Medicare Secondary Payer Recovery Contractor (MSPRC) published a Beneficiary Alert on the website (www.msprc.info).  The Alert advised that in liability cases (not workers’ compensation cases or no-fault cases), where a settlement, judgment or award is $300.00 or less, Conditional Payment Recovery will not be pursued by Medicare. They explained that two conditions must be satisfied in order to avoid Medicare’s recovery attempt:

• First, the settlement, judgment or award must be based on physical trauma.
• Second, no other or additional settlements can be reached that are related to the same alleged incident.

Significantly, the MSPRC identified that the threshold includes settlement, judgments or awards where an insurer has paid or is paying medical bills. Thus, liability must be denied and the aggregate settlement must be $300.00 or less. Further, if a demand letter has already been issued by the MSPRC in a case, the threshold would not apply.

As a practical matter, it appears that the threshold will have little affect on litigated claims with attorney representation. Clearly, most liability cases easily exceed the threshold value. More importantly, however, the setting of any threshold seems to signal a more reasonable approach to Medicare recovery efforts. Potentially, the time and resources required to pursue de minimus lien amounts may now be used elsewhere in an effort to bolster Medicare’s precarious financial state.

About the Author: Russell S. Whittle, Esq., is the Vice President of MSP Compliance for Gould & Lamb, LLC. In his twenty plus years of practice prior to joining Gould & Lamb, LLC, Mr. Whittle practiced primarily in the area of insurance defense, representing the interests of large insurers and employers in both workers’ compensation and general automobile liability matters.

Recent Sarasota Meeting Approves Change of Medical Liens Rule 4-1.5

In a recent blog post I wrote about how the Florida Bar Board of Governors was studying the attorney contingency fee rule to address the hiring of special attorneys to resolve subrogation and medical lien issues related to personal injury cases. The issue had been presented to the Board of Governors and I commented on how the passage will effect MSP compliance in Florida. The key issue was the question of whether referring medical liens to a second attorney, who would be paid on a reverse contingency fee, would violate the contingency fee cap in the rule itself. The Board Review Committee on Professional Ethics opined that if the total fees paid to both attorneys exceeded the limits in the rule, a problem is evident.

The Florida Bar Board of Governors, indeed, approved the change of Rule 4-1.5 at the board’s recent Sarasota meeting.  The Rule now allows a firm concentrating in medical liens to be brought in when it will benefit the client, as long as the client agrees and the fee paid to the second lawyer for the lien work does not, on its own, violate the fee limits in the Rule.

Medical Liens in Tort Litigation

The board again acknowledged that liens and medical lien resolution have become “an increasingly intricate area” of the law, particularly in tort cases. With the passage of the new portion of the Contingency Fee Rule, all tort litigants and interested parties acknowledge that medical liens, Medicare Secondary Payer Compliance and the interests of Medicare require special expertise and handling.

The change serves clear notice of the ever changing landscape in tort law and the mandate to protect the interests of Medicare.

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On May 24, 2010 the Superior Court of New Jersey, Appellate Division, decided the case of Ilse Theresa Jackson v. Hudson Court, LLC.  At issue was a request by the plaintiff for a court ordered allocation of settlement funds in order to avoid payment of a Medicare lien.

After settlement of the underlying case, the plaintiff sought to obtain a court order designating that the settlement proceeds were for pain and suffering or for other amounts not related to medical services, notwithstanding the fact that conditional payments had been made by Medicare. Ms. Jackson’s contention was based upon state collateral source doctrine which forecloses recovery of expenses received (or to which she was entitled) in duplication of her recovery.

In short, she argued that no plaintiff should have to reimburse Medicare in a personal injury claim because Medicare’s lien would be satisfied from funds not recovered for medical expenses. Basically, she sought the court’s cooperation in categorizing her settlement proceeds to avoid Medicare lien repayment.

Collateral Source Statute

The court, interestingly, reviewed a prior ruling in which it was found that collateral source statute does not apply to reimbursable benefits paid by Medicaid by likening the reimbursement principles to Medicare liens. Stating that Medicare “has a nearly unqualified right to reimbursement” the court found that the collateral source rule allows a personal injury settlements to include recovery of medical expenses paid for by Medicare.

The court also took the opportunity to point to prior federal case law which established where state collateral source rules “frustrate” MSP reimbursement rights, they are pre empted.

For purposes of MSP compliance, it would appear that, at least in New Jersey, Medicare liens cannot be avoided by hiding behind the collateral source rule or by a creative allocation of settlement funds. The court there recognized not only the pre eminence of the MSP statute as compared to state law but also advised the tort industry that they would not be complicit in rulings that avoid Medicare’s recovery interests.

Accordingly, Gould and Lamb recommends conditional payment research early in the tort process in order to identify Medicare’s recoupment potential and the best strategy for maximizing third party recovery, limiting contingent liability and ensuring MSP compliance.

Download Gould and Lamb’s Medicare Secondary Payer Compliance and Protocols User Guide

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