Medicare Liens – Protecting Medicare’s Past Interests – The First Step of Medicare Secondary Payer (MSP) Compliance for The Plaintiff Attorney

A. How and When Medicare Liens Arise

Under the Medicare Secondary Payer Act, found at 42 U.S.C. §1395y(b) (MSP), Medicare has a right to be reimbursed for payments it has made for a Medicare beneficiary’s medical treatment when the Medicare beneficiary is compensated for the treated injury by a third-party source. While Medicare’s rights to recovery under the MSP are so strong that they have been described as a super lien, that does not mean that your client has to always pay the full amount requested by Medicare.

The MSP right to reimbursement includes both a direct statutory right and a subrogation right, with a variety of recovery remedies available to the U.S. Government. In some jurisdictions, similar MSP recovery rights extend to privately administered Medicare benefits under Part C (Medicare Advantage Organizations or MAO’s) and Part D Prescription Drug Plans via the MSP’s private cause of action provision. The recovery rights described exist without regard to the date of service for the medical items, services, or expenses (medicals). Most attorneys know that they should check to see if traditional Medicare or a MAO has paid for medicals related to a compensated injury and address paying the amount or negotiating payment for same from the settlement proceeds. This article will explore ways to secure satisfactory lien resolution, focusing on traditional Medicare liens.

It should be noted that if a Medicare beneficiary begins billing Medicare or a MAO for injury related medicals after the settlement date/date compensated for the tort claim, recovery rights associated with those post settlement medicals exist in the same way that recovery rights exist for pre-settlement injury related Medicare covered medicals. Under such a post settlement scenario, the need for a Medicare lien investigation and resolution could essentially start all again.

B. Medicare Secondary Payer statute, 42 U.S.C. § 1395y(b) (MSP)

1. History of the Medicare Act and the Medicare Secondary Payer Act.

a. Background and Scope – Both arise from the Social Security Act of 1935. Medicare is a federally funded single payer national healthcare insurance administered by the U.S. federal government, through the Department of Health & Human Services (HHS) under authority of the Social Security Act of 1935. Medicare is funded by a payroll tax, premiums and surtaxes from beneficiaries, and general revenue. HHS delegates running the Medicare program and interpreting Medicare law and implementing regulations to the law to the Centers for Medicare & Medicaid Services (CMS). Medicare covers medical expenses not on the list of exclusions found in 42 U.S.C. §1395y(a)(1) typically for U.S. Citizens (although exceptions exist allowing eligibility for some non-US Citizens as well), who are 65 and older, or younger than 65 with disability status determined by the Social Security Administration as well as people with end stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS or Lou Gehrig’s Disease). It is made up of parts such as Part A (mainly inpatient hospital insurance and skilled nursing care) and Part B (doctor visits, durable medical equipment, outpatient hospital care and some physical and occupational therapy and some home health care), the two together are known as traditional Medicare; Part C, covering Part A and B services but administered by private insurers; and Part D, covering Prescription Drug Plans (PDPs) that are also administered by private insurers.

b. SSDI is for people who qualify under the Social Security Administration’s definition of disability. SSDI payments start about 5-6 months after SSDI eligibility is determined depending on the date eligibility is first established. Individuals approved for SSDI also become eligible and qualify for Medicare two years after they begin receiving the SSDI payments. Both SSDI and Medicare are entitlement-based in contrast with Medicaid and SSI, that are largely needs-based.

c. Since the Medicare law’s inception in 1965, Medicare has been secondary to Workers’ Compensation. Therefore, if an injury occurred while at work, the Workers’ Compensation carrier would take responsibility for payment of those injury related medicals in accordance with the applicable state statutory rates and procedures. However, in 1965, there was no provision in the law pertaining to payment of medical bills related to liability claims for injured Medicare beneficiaries. Therefore, Medicare would (most often) pay for all medical treatment within its scope, leaving private insurers (other insurance) to work out who would cover non-Medicare covered services.

2. The Medicare Secondary Payer Act (MSP) was Enacted in 1980.

a. In 1980, the Medicare Secondary Payer Statute (MSP) was enacted. 42 U.S.C. §1395y(b) et seq. is commonly called the MSP Act or MSP Statute and is also referred to as the Medicare Secondary Payer provisions of the Social Security Act (SSA). While it has different statutory references, it is the same law and has parallel sequences of each number and letter after the section 1395y or 1862 as follows: 42 U.S.C. § 1395y(b) = 42 U.S.C. §1862(b) of the SSA.

b. The MSP mandates Medicare to be a secondary payer to other forms of health insurance such as group health plans (GHPs), as well as other payment sources such as non-group health plans (NGHPs) when these primary plans are responsible for payment.

c. A “primary plan” is defined in 42 U.S.C. §1395y(b)(2)(A) to mean “a group health plan or large group health plan to the extent that clause (i) applies, and – a workers’ compensation law or plan, – an automobile or liability insurance policy or plan (including a self-insured plan) – or no fault insurance, to the extent that clause (ii) applies. An entity that engages in a business, trade or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part. 42 U.S.C. 1395y(b)(2)(A)(ii).”

d. All plans other than the group health or large group health plans are categorized by the Centers for Medicare & Medicaid Services (CMS) as Non Group Health Plans (NGHPs). While the MSP applies to Group Health matters, it is in the NGHP area that the MSP compliance industry focuses its attention. NGHPs are those entities that demonstrate obligations of payment as primary payers by either statute (think workers’ compensation or no fault insurance) or by virtue of resolution of claims through settlement, judgment, award or other payment (think liability matters), regardless of whether liability is admitted. Most liability releases specifically deny liability for alleged liability claims. The payment obligation that triggers the MSP arises in the tort scenario when payment is made. There are no defenses listed in the MSP associated with how the demonstration of the obligation arises; when a party begins to make payments under a statute or contract for insurance such as workers’ compensation or under the state’s no fault law under terms of an insurance contract, or when a party settles a liability case, the payment obligation is “demonstrated” and the party responsible for payment is by the MSP, primary to Medicare.

e. The MSP was enacted to curb the rising costs of Medicare and designed to make insurers responsible for payment of injury related treatment primary payers and Medicare, the secondary payer. See Humana Medical Plan, Inc. v. Western Heritage Insurance Company, 832 F.3d 1229, 1234 (11th Cir. 2016). Regulations interpreting the MSP are found at 42 C.F.R. §411 et. seq.

f. To accomplish the goal of curbing Medicare costs, the MSP general rule – 42 U.S.C. §1395y(b)(2)(A) – prohibits Medicare from making payment when a primary plan should make the payment. Specifically, a Medicare payment may not be made
“to the extent that –
(i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1) [pertaining to GHPs], or
(ii) payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no-fault insurance.”

g. There is only one exception to the prohibition of Medicare making payment when there is a primary payer that should make the payment. The exception authorizes Medicare to make payments called conditional payments if a primary plan “has not made or cannot reasonably be expected to make payment with respect to such item or service promptly.” 42 U.S.C. §1395y(b)(2)(B)(i).

• Prompt or promptly, when used in connection with primary payments, except as provided in § 411.50, for payments by liability insurers, means payment within 120 days after receipt of the claim. 42 C.F.R. § 411.21.
• Under 42 C.F.R. §411.50, prompt or promptly, when used in connection with payment by a liability insurer means payment within 120 days after the earlier of the following:
  (1) The date a claim is filed with an insurer or a lien is filed against a potential liability settlement.
  (2) The date the service was furnished or, in the case of inpatient hospital services, the date of discharge. 42 C.F.R. § 411.50

The payments allowed to be made by Medicare are considered “conditioned on reimbursement” to Medicare by the primary plan. These payments could occur either before a settlement or after a settlement so settling parties should always address and make sure to resolve conditional payments a/k/a Medicare liens that arose prior to settlement from the settlement proceeds (even if negotiated to a compromised/reduced number) and additionally, due to the MSP, settling parties should also consider how to avoid conditional Medicare payments after a settlement.

h. Congress enacted the MSP provisions to address enforcement of Medicare as a secondary payer to WC and included the various other types of insurance as primary plans at that time.

i. Between 1980 and 2001, there was very little enforcement of the MSP.

j. CMS Memos of note. In July 2001, CMS issued the Patel memo which mentioned Medicare Set-Asides (MSAs) for the first time. In 2011 – the Stalcup Memo from the Dallas CMS Regional Office was the first time liability MSAs (LMSA’s) were mentioned in a CMS memo with the most detailed guidance on CMS’s position of a need to consider and protect Medicare’s interests for liability as well as Workers’ Compensation settlements to protect the Medicare Trust Funds in a manner consistent with the MSP.

k. The MSP gives Medicare both direct “lien rights” (42 U.S.C. §1395y(b)(2)(B)(iii)) to be able to collect its conditional payments as well as subrogation rights whereby the MSP subrogates the United States to “any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.” 42 U.S.C. §1395y(b)(2)(B)(iv). This can be an important distinction when it comes to how CMS and courts interpret whether and to what extent an apportionment calculation may be performed to the outstanding conditional payment amount by discounting procurement costs including attorney’s fees and costs in securing the settlement, judgment or award. Actions by the U.S. on behalf of HHS/CMS via the MSP’s direct right of recovery (through the Department of Treasury or potentially the Department of Justice) against entities responsible for payment or those that have received some of the settlement proceeds is separate from its right of subrogation to recover reimbursement of Medicare conditional payments. The MSP’s direct right of recovery has in some cases been interpreted to not be limited by the equitable principle of apportionment stemming from the subrogation right. See Social Security Act, § 1862(b)(1), (b)(2)(B)(ii), as amended, 42 U.S.C.A. § 1395y(b)(1), (b)(2)(B)(ii); 42 C.F.R. § 411.24(c). Zinman v. Shalala, 67 F.3d 841 C.A.9 (Cal.1995).

l. Considering Medicare’s future interests. Without a plan for future care, CMS’s policy regarding settlements has been to presume that the entire settlement amount is designed to compensate the injured party for future medical expenses. While CMS has not yet promulgated regulations regarding how Medicare beneficiaries should ideally protect Medicare’s future interests, because the MSP liability extends to the primary payer as well as any entity or person that receives payment from a primary payer, it is common for settling parties to discuss and consider and sometimes estimate Medicare’s potential future exposure (and therefore the potential recovery that could result from said exposure) on a case prior to settlement. This analysis may involve the use of a MSA allocation report.

m. Having an injured party agree to use other insurance or to agree not to bill Medicare is not adequate according to CMS’s Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide. This Reference Guide focuses on the voluntary submission process for MSA’s in the Workers’ Compensation realm that meet certain workload review threshold dollar/time frame criteria. In the absence of a corollary guide for liability settlements, the WCMSA Reference Guide stands as the current CMS policy for all NGHP matters such as liability (including self-insurance), automobile, Workers’ Compensation, and No Fault settlements. With respect to any matter or settlement inside or outside the WCMSA Reference Guide workload review thresholds, CMS has indicated that without a plan for future care, CMS could deny injury related medicals up to the entire amount of the settlement. (See discussion on pages 8-9, under Section 8.1, titled Review Thresholds).

n. Keep in mind that there is no reference to a MSA in the MSP or any of its corresponding regulations. While Liability MSA allocation reports (LMSA’s) are not currently being reviewed by CMS Regional Offices or the Workers Compensation Review Contractor (WCRC), the current contract that started in 2018 that the WCRC operates under, contemplated some level of review for LMSAs. While regulations or at least notification of regulations, are expected as early as October 2019 regarding protection of future interests for liability settlements, parties in the liability field (and Workers’ Compensation settlements outside of workload review threshold time periods/amounts) have generally been left to “read between the lines” as to what is an adequate consideration and protection of Medicare’s future interests. For those Medicare beneficiaries that are more risk adverse, an option exists to request the respective Regional Office (RO) to update the common working file of any Section 111 reported settlement with an agreed LMSA amount in an effort to help provide a ceiling to the amount of money that would need to be exhausted before Medicare should begin paying for the injured plaintiff’s injury related Medicare covered medicals. Attorneys should counsel their clients to explain these sensitive issues and document their files in a way that will help show how Medicare’s interests were considered in the settlement.

o. In conjunction with considering a Life Care Plan and possible consultation with an economist, plaintiffs’ counsel may also choose to obtain a LMSA to learn of potential future medical expenses (whether Medicare allowable and reimbursable or not) as an aid to understanding and articulating some of these important economic damages for his or her injured client. Defense counsel will typically want to do their own calculations according to the standards set by CMS policy to get a grasp on the Medicare exposure issue regarding future medicals. This article will not address the protection of Medicare’s future interests further, or the intricacies of equitable apportionment, as it relates to LMSA’s. However, evaluating a plan for future care such as setting aside a reasonable amount of funds for Medicare allowable and reimbursable future medicals, and restricting the spending of those funds to injury related Medicare allowable medicals, can often be a wise MSP compliance procedure. The balance of this article will focus on protecting Medicare’s past interests by investigating and addressing a variety of Medicare based conditional payment reimbursement claims (commonly referred to as liens) at or near the time of settlement.

C. Medicare’s Past Conditional Payment Recovery (Medicare Liens): Navigating the Medicare System to Obtain Lien Information and Tips on Lien Resolution

1. General Information.

a. The first step is to determine whether the injured party is eligible for and/or receiving federal benefits. If not a Medicare beneficiary, then Medicare could not have made any conditional payments that would need to be reimbursed. Sometimes, a settlement will take years to reach. Because a person deemed disabled under SSA’s definition, becomes enrolled in Medicare within two years of receiving Social Security Disability Insurance (SSDI), those who are in the pending application or appeals process for SSDI, are considered to have a reasonable expectation of becoming Medicare enrolled within 30 months. People with end stage diseases like End Stage Renal Disease or ALS have an expedited path to Medicare enrollment separate from the ordinary application SSDI process or via age eligibility.

b. Signed SSA Consent for Release of Information – Form SSA-3288 is required. Other authorization/representation (“Representation”) documents described below should be obtained as early as possible to help make the process run smoothly.

c. Lien searches are crucial to identify conditional payments to be addressed and resolved.

d. Communication with CMS for plaintiffs is accomplished through its Benefits Coordination and Recovery Center (“BCRC”) contractor and the respective CMS web portal called the Medicare Secondary Payer Recovery Portal (MSPRP). Medicare beneficiaries may access the MSPRP through their MyMedicare account via the MyMedicare.gov web site. Attorneys (and insurers) may access the MSPRP using the following MSPRP application link: https://www.cob.cms.hhs.gov/MSPRP/. There is a registration process that must occur before access to the MSPRP is permitted. There is also a User Guide available under the option entitled ‘Reference Material’ in the following link MSPRP application.

2. Steps involved in The Medicare Lien Investigation Process.

a. Claim notification/reporting of the claim to the BCRC by the beneficiary, attorney for beneficiary or other third-party representative for beneficiary starts the conditional lien “case development process.” This can be accomplished by calling the BCRC or reporting the claim via the MSPRP.

i) This is different from Mandatory Insurance Reporting under Section 111.
ii) If a liability claim has been reported via Section 111 reporting after settlement as a Total Payment Obligation to Claimant (TPOC), then a BCRC case will typically be opened at that time. In some instances, a Section 111 reported case won’t be opened because information may be missing.
iii) If the BCRC opens a case that was reported via Section 111 and an injured party’s attorney or third-party representative also provides notification of the claim, this could cause duplicate files. To prevent generation of a duplicate case, it is a best practice for a third-party representative to confirm with the BCRC whether or not a case has been established before providing notification of a claim.

b. Third-party representative requests various Authorization documents at this time if they didn’t get them at the time of verifying federal benefits depending on the type of case and what service is being provided.

c. Settling parties provide Authorization documents to third party representative:
i) For WC cases, a Letter of Authority (LOA) signed by commercial debtor/TPA and Consent to Release (CTR) signed by injured worker (IW) or
ii) For liability cases, a plaintiff specific attorney referral letter on referring attorney’s letterhead authorizing agent representative to resolve Medicare’s potential recovery claim and a Proof of Representation (POR) signed by the injured plaintiff. Alternatively, an attorney could sign the POR on behalf of the injured plaintiff naming the third party representative as long as they also provide a copy of the underlying Attorney/Client retainer agreement to help complete the chain of custody for the lien representation. For lien resolution matters, a POR/CTR combination form may be used. Certain language is to be included but CMS does not require that the exact “form” posted on its website is to be used.

d. Authorization documents are forwarded to BCRC and monitored for receipt.

e. The representative will then inform settling parties of the claim notification to the BCRC.

f. BCRC typically forwards commercial debtor claim files, such as those pertaining to employer responsibility for WC cases to the CRC to develop the case (specifically, this is the development of a traditional Medicare conditional lien case and takes about 21 business days). Generally, the CRC pursues primary plan payers for any commercial repayment associated with WC matters and the BCRC pursues recovery from Medicare beneficiary Claimants with copies to their representatives for liability matters after settlement. Sometimes there can be duplicate files generated when settlement information is provided to the BCRC and the settlement was also reported via Section 111. Prior to October 2014, the BCRC handled all NGHP collection matters while today there has been an attempt to bifurcate this process. There have been times when the BCRC has helped the CRC with backlog it experienced and generated and developed commercial debt recovery cases post the October 2014 timeframe. The various letters referenced below could be prepared and sent by either the CRC or BCRC but due to the focus in this article on tort claims, further references will be to the BCRC.

g. BCRC issues a Rights and Responsibilities letter after it is initially notified of a claim from a Medicare beneficiary, the attorney for the beneficiary, or a third party representative. It then performs a conditional payment search and most often issues a beneficiary a Conditional Payment Letter (CPL). A CPL does not have a specific time frame to which a beneficiary must respond. However, if the payment summary form that accompanies the CPL contains diagnosis codes belonging to pre-existing or co-morbid conditions unrelated to the claimed injury, it is a best practice to submit a dispute to the BCRC through the MSPRP to request removal of unrelated charges.

h. A Conditional Payment Notice (CPN) may be issued either in lieu of a CPL or after a CPL but prior to the issuance of a demand. A CPN is commonly issued when a settlement over $750 has occurred and a settlement called a Total Payment Obligation to Claimant (TPOC) has been reported through Section 111 reporting. Unlike a CPL, a CPN has a thirty-day time period beyond which CMS automatically generates a demand (Final Demand) for conditional payment reimbursement unless a timely dispute is made.

i. Settling parties provide any additional documentation helpful to assist with conditional payment dispute if applicable. For WC cases, this could include documentation of why an injury was not accepted by the WC carrier.

j. The BCRC issues revised conditional payment correspondence within approximately 11 business days of receipt of a dispute when the dispute is submitted via the MSPRP. Not all disputes are able to be submitted via the portal and when submitted by mail, the turnaround is closer to 45 days.

• Of note, pursuant to the regulation governing this process, 42 C.F.R. §411.39 (v-vi), the opportunity to dispute discrepancies is a one-time only event and does not have an appeals process; i.e. there is no administrative or judicial review of the decision of CMS regarding disputes at this stage (although there is an opportunity to appeal after the Final Demand is issued). However, each piece of conditional payment correspondence may be disputed in this fashion.

k. The applicable CMS contractor issues a Final Demand letter approximately 30 days after initial CPN or revised CPN (if the CPN had been disputed) or after notification of settlement by beneficiary/representative and any dispute (if CPL was issued). The request for a CPL alone does not trigger the sending of a Final Demand and the representative or beneficiary has to typically provide the settlement documents to trigger the Final Demand process in contrast to the process with CPNs, which by virtue of a Section 111 TPOC notification, trigger the Final Demand at 30 days from the CPN without the provision of settlement documents, mainly because Section 111 Reporting information is restricted to electronic data as opposed to documents.

l. A first level appeal called a Redetermination may be submitted in writing through the MSPRP and must be requested in writing within 120 days of the issuance of the Final Demand. The Final Demand is considered an Initial Determination and once issued by a Medicare contractor, beneficiaries, providers and suppliers (and Primary Plans for commercial recovery matters) may appeal the recovery amount as codified and described in the Code of Federal Regulations under 42 C.F.R. § 405, Subpart I. There are five levels of appeal: Redetermination, Reconsideration, ALJ hearing, Medicare Appeals Council Review, and U.S. District Court review. A party may not obtain review by a U.S. District Court unless and until they have exhausted the four initial administrative appeal stages; a process called exhaustion of administrative remedies. There is no threshold amount in controversy for the Redetermination to be reviewed. Any evidence to support the request for Redetermination is to be reviewed by the contractor. If the Redetermination is not favorable, the parties have 180 days from the date of the Redetermination to request a Reconsideration. Unlike the Redetermination, the Request for Reconsideration must be mailed and is reviewed by a Qualified Independent Contractor (QIC). There is no minimum amount in controversy to have a Reconsideration reviewed. Prior evidence submitted to the contractor is to be reviewed by the QIC along with any new evidence the Parties include in the Request for Reconsideration. If the Reconsideration is not favorable, the parties have 60 days after the receipt of the Reconsideration to request a Hearing in front of an Administrative Law Judge (ALJ), if it meets the amount in controversy requirements outlined in 42 C.F.R. § 405.1006. The current amount in controversy required to request an ALJ hearing is $160. The ALJ will review the evidence that is contained in the record of the previous two appeals. The ALJ will consider additional evidence if there is good reason the evidence was previously left out of the previous appeals. If the decision by the ALJ is unfavorable, the parties have 60 days from the date of the decision to request a Medicare Appeals Council Review (Council Review). There is no current amount in controversy needed to request a Council Review. The Council is to limit its review to the evidence contained in the record of the proceedings before the ALJ, unless the ALJ’s decision included a new issue that the parties did not address at an earlier stage. If the decision by the Council is unfavorable, the parties have 60 days from the date of the decision to file an action in U.S. District Court, if the file meets the amount in controversy for the appeal. The current amount in controversy for 2019 that must be met to file an action in a U.S. District Court is $1,630. This is the final appeal a party has in the Medicare appeals process. The decision by a federal district court described above is binding on all parties.

m. Interest begins accruing 60 days from demand and can be sent by CMS to the Department of Treasury (DOT) as soon as 120 days after demand. The DOT has remedies including the temporary diversion or suspension of federal benefits to the Medicare beneficiary such as SSI, SSDI, and Medicaid (partially federally funded) or even tax refunds through the Treasury Offset Program (TOPs) and use of privately contracted collection agency actions. Amounts over $100,000 can be referred to the Department of Justice.

n. While an appeal or dispute is pending, the contractor will cease all collection action on the case. However, interest will still accrue after the 60 days from the Final Demand time period, but the debt should not be transferred to the DOT until a determination is reached. 42 C.F.R. § 411.39 provides an overview of the entire conditional payment process, including timing for requests to obtain “final conditional payment amounts” (lien amounts) via the CMS web portal. “Once settlement, judgment, award, or other payment information is received, CMS applies a pro rata reduction to the final conditional payment amount in accordance with § 411.37 and issues a final MSP recovery demand letter.” 42 U.S.C. §411.39 (ix). Therefore, it is important to provide the attorney’s fees and costs in procuring settlement for CMS to take into consideration for its final demand.

o. Detailed information regarding the conditional payment recovery process may be obtained from the CMS website www.cms.gov and the MSPRP using this link: https://www.cob.cms.hhs.gov/MSPRP. The CMS website explains Medicare’s Recovery Process, the reporting of pending NGHP claims to the BCRC, and defines some important terms. It also has a sample cover sheet for communication, a sample Proof of Representation form, and a sample Consent to Release form as well.

3. Medicare Lien Resolution.

a. Road Map Overview

Because conditional payments are to be reimbursed and there is a direct statutory right providing the U.S. Government with rights of recovery including double damages, Department of Treasury offsets, and other remedies, the industry often refers to conditional payment claims as Medicare liens. We will use this terminology although it could be said that a lien usually needs some other action (such as a filing in a court) before it may be perfected.

When a party is engaged to secure a Medicare lien resolution, they want CMS to evaluate the fairness of the recovery of the entire Medicare lien amount compared to the net amount to be received by injured party after fees and costs are deducted. The goal is to get CMS to either waive the amount being requested or to reduce the amount being requested. If CMS agrees to no longer pursue the recovery claim, it is said to waive the recovery and if CMS agrees to reduce the amount it will accept as full payment, it is called a compromise of the recovery claim. There are several federal statutes and accompanying regulations that provide authority for CMS to compromise or waive Medicare liens. The statutes and regulations discussed below outline standards and factors that may be considered for full (waiver) or partial (compromise) reductions of Medicare lien amounts. These factors often focus on the ability of the injured party to pay the lien, costs the government would incur to pursue collecting the lien, as well as the injured party’s financial/physical circumstances.

b. Medicare Lien Waiver Process

The Medicare lien waiver process is a more involved process than the compromise process. Waiver requests typically focus on the financial position of the injured Medicare beneficiary, who may have higher expenses and/or lower income after sustaining an injury. After settlement occurs and funds are transferred, while the MSP technically still allows the U.S. to pursue the primary payer, when a Medicare beneficiary fails to satisfy a Medicare lien, the Medicare beneficiary is most often considered the debtor and pursued by CMS initially through the BCRC. Attorneys for Medicare beneficiaries can also be caught in the MSP cross hairs. Waiver requests for a Medicare beneficiary are sent to the BCRC. In turn, the BCRC typically asks for a SSA-632 form to be filled out with a variety of financial information about the beneficiary. Waiver determinations may be made by BCRC staff and are usually based on financial hardship.

In their demand letters, CMS typically informs beneficiaries that they may request a waiver or compromise if paying back the money would cause financial hardship or would be unfair for some other reason. The beneficiary is asked to provide a brief statement of any reasons why paying back the money would cause the financial hardship or would be unfair. CMS will send a form asking for information about income, assets, and expenses, and requesting an explanation of why it is believed the beneficiary is entitled to waiver of the overpayment. The determination for waiver including requests from CMS for additional information typically takes up to 120 days. An appeal may be filed if the beneficiary disagrees that they received an overpayment, disagrees with the amount of overpayment; or disagrees with any decision by CMS to not waive the repayment of the overpayment. The beneficiary must file an appeal within 120 days from the date of their receipt of this determination. CMS informs that if the beneficiary decides to appeal this determination further, they can have a friend, lawyer, or someone else help them.

To speed up the process and increase the likelihood of a positive outcome, it is a best practice when requesting a waiver to provide a full financial picture of the beneficiary, including either a completed SSA-632 form or as much of the information requested by that form as can be obtained, so BCRC staff will have adequate information to reach a fair determination. A waiver may be granted when continuing the collection would be against “equity and good conscience.”

Out of pocket expenses of beneficiaries may be considered. Beneficiaries should be advised to document out of pocket expense including having any copies of canceled checks to correlate with bills paid. A notarized/sworn statement may be considered along with canceled checks, corresponding bills and/or receipts etc. Examples of the type of out-of-pocket expenses and other factors that might support granting a waiver are also provided in what is known as the MSP Manual under Chapter 7.

If recovery would defeat the purpose of benefits under these titles, i.e., would cause financial hardship by depriving a beneficiary of income required for ordinary and necessary living expenses. Examples are provided as are examples of financial hardship with analysis provided as to what CMS would recommend under the hypotheticals provided. They also provide “waiver indicators” for and against granting waivers as well as examples of the letters used to provide notice of determinations regarding same.

The process takes about 120 days from start to finish for a waiver determination to be made. If a conditional payment demand has been paid, a waiver or compromise request may still be made, and a refund will be considered. If the BCRC makes a determination to refund all or part of the prior payment, the refund will typically take an additional 3-4 weeks, depending on whether payment had been made to the BCRC directly or whether it was made to the Department of Treasury after a referral of the debt to Treasury by the BCRC.

c. Medicare Lien Compromise Process

If there is not a significant financial or physical hardship to the Medicare beneficiary, but the dollar amount of the projected settlement is low compared with the likely settlement value and/or the Medicare lien amount, an alternative to a waiver request is a Medicare lien compromise request. To request a compromise, a third-party representative may offer to pay a specific dollar amount on behalf of the beneficiary to fully compromise the outstanding Medicare debt/lien amount. The requester must include the settlement amount (or settlement offer), the amount they are asking CMS to accept as full payment, and the actual or projected attorney fees and costs associated with procuring the settlement. Attorney fees and costs are omitted when the beneficiary is not represented by counsel. CMS, through the BCRC, either responds by accepting the offer or presenting an alternate proposed amount. At that point, the beneficiary must pay the countered amount or if accepted, pay the accepted amount within 60 days of the BCRC response, or else the offer is no longer valid.

d. Because of the high interest that the U.S. may charge pursuant to 45 C.F.R. § 30.13 (currently just under 10%) for failing to pay a final conditional payment demand within 60 days, the standard in the industry is to pay the demand and then request a waiver or compromise. Under 45 C.F.R. § 30.14(a), a debtor may either pay the debt within the 60-day period from the final demand or be liable for interest during the 120-waiver determination period, while on appeal, or while any formal or informal review of the debt is pending. If a waiver or compromise is granted, a refund will be issued to the entity and address payment was received from.

e. Statutory Bases for Waiver or Compromise of Medicare Conditional Payment Liens – Three Main Federal Statutory Provisions.

1) The Federal Claims Collection Act (FCCA) governs collections by the federal government and requires heads of legislative agencies to try to collect claims of the U.S. and authorizes compromise of claims up to $100,000 and waiver of claims, “. . . when it appears that no person liable on the claim has the present or prospective ability to pay a significant amount of the claim or the cost of collecting the claim is likely to be more than the amount recovered.” 31 U.S.C.A. § 3711(a)(3). The FCCA is also known as the Debt Collection Improvement Act of 1996.
2) Additionally, the MSP provides that “[i]f the Secretary determines that waiver of all or part of a conditional payment is “in the best interests of the program”, all or part of a conditional payment may be waived. 42 U.S.C. §1395y(b)(2)(B)(v). However, this general “best interests of the program” standard is rarely used as the basis for negotiating a compromise or waiver of a conditional Medicare lien. Instead, those in the lien resolution business typically request a waiver or compromise of the lien pursuant to the more detailed bases and factors listed in various regulations.
3) 42 U.S.C. §1395gg(c) a/k/a 256 H §1870(c) of the Social Security Act allows waivers of Medicare liens by CMS contractors when not granting the waiver would be unfair (“against equity and good conscience”).

f. Regulatory Basis for Waivers or Compromises of Conditional Payment Liens.

42 C.F.R. § 411.28 Waiver of recovery and compromise of claims. Pursuant to this regulation, CMS may waive recovery, in whole or in part, if the probability of recovery, or the amount involved, does not warrant pursuit of the claim. It references the general rules applicable to compromise of claims in both subpart F of part 401and under 42 C.F.R. § 405.376, as well as pertinent rules in subpart C of part 405.

Falling under subpart F of part 401 is 42 C.F.R. § 401.601 et seq. Under §401.601(c), if the claim exceeds $100,000, those claims are referred by CMS to the Department of Justice or the General Accounting Office for evaluation. Otherwise, collection of claims at or under this amount are handled initially by CMS and later referred to the Department of Treasury. 42 C.F.R. § 401.613 requires that the compromise amount “[b]ear a reasonable relation to the amount of the claim; and [b]e recoverable through enforced collection procedures.” Subsection (c) of the regulation follows the general principles of the FCCA in considering waiver or compromise. For example, CMS may compromise a claim for any one or combination of the following three factors:
(1) Inability of debtor or estate of deceased debtor to pay at the time or within a reasonable period of time;
(2) Probability of success in litigation. Difficult issues of law or lack of agreement on facts may be considered. This is a “step in the shoes” evaluation whereby the amount that CMS accepts in compromise under this provision should reflect how likely it would be for CMS to win and make a recovery; i.e. prevail on the legal question(s), obtain a full or partial recovery of a judgment, factoring in whether witnesses or evidence needed to support its case would be available and admissible, and the total court costs that would be assessed to CMS;
(3) Cost of collecting the claim. If the cost of collecting the claim does not justify the enforced collection of the full amount, CMS may discount an appropriate amount for the costs of collection it would have incurred if it had not been for the compromise.

Once CMS establishes that there is a basis under subsection (c), subsection (b) of the same regulation allows CMS to also consider:
(1) The age and health of the debtor if the debtor is an individual;
(2) Present and potential income of the debtor; and
(3) Whether assets have been concealed or improperly transferred by the debtor.

Furthermore, under subsection (d) entitled Enforcement policy, “CMS may compromise statutory penalties, forfeitures, or debts established as an aid to enforcement or to compel compliance, if it determines that its enforcement policy, in terms of deterrence and securing compliance both present and future, is adequately served by acceptance of the compromise amount.” 42 C.F.R. § 401.613.

Similar factors for evaluation of compromise requests are also described under 20 C.F.R. § 404.515 pertaining to recovery of overpayments from beneficiaries and under 42 C.F.R. § 405.376 pertaining to claims for overpayments against a provider or a supplier under the Medicare program.

g. Terms may be accepted on amounts due to CMS, but a debtor must submit a request to CMS in writing along with any information required by CMS to make a decision regarding the request. 42 C.F.R. § 401.607(c)(1). Usually, the maximum term is three years although this regulation provides hardship circumstances under which payment terms over three years may be granted.

h. While the Federal Claims Collection Act grants Medicare the right to compromise its claims, or suspend or terminate its recovery actions, only CMS claims collection officers may take this action. Contractors may not enter into negotiations (either pre- or post-settlement) with beneficiaries, or their attorneys or representatives, to compromise Medicare’s claim. If beneficiaries, or their attorneys or representatives, wish to discuss arrangements by which Medicare’s claim might be reduced (outside of a formal request for Medicare to waive its claim), the contractor either has the party make a request in writing to be forwarded to the applicable RO or refers the party to the appropriate RO directly.

i. The trend has been for CMS and its contractors to offer reductions through the compromise process. Therefore, it has become more common and efficient to make a request for a reduced lien balance rather than starting with a 120 determination of whether a waiver would be acceptable and then moving to (and waiting for) a compromise evaluation and determination. Please keep in mind that today, the answer to a request for a compromise is not appealable. There is currently no limit to the number of requests that may be made but after several requests, CMS seems to indicate it will not entertain additional requests. Waiver responses (Determinations) on the other hand are appealable and follow the same appeals process described regarding appeals of Final Demand amounts

4. MSP Rights of Recovery with Regulations and Case Law.

a. The MSP provides a statutory cause of action for double damages for failure of a primary plan to make payment or reimburse a conditional payment promptly. 42 U.S.C. §1395y(b)(2)(B)(iii). The MSP direct cause of action by the U.S. including double damages is distinct from any claim under a theory of subrogation although the MSP statute provides a subrogation right to the U.S thereby allowing claims of subrogation by the U.S. as well. There is an exception to recovery from Third Party Administrators (TPA) provided the TPA would not be able to recover the amount at issue from the employer or group health plan and is not under contract with the employer or group health plan at the time the recovery action is initiated. See U.S. v. Travellers Ins. Co., 815 F. Supp. 521 (D. Conn. 1992) (holding U.S. Government had direct right of recovery against insurer under MSP apart from its rights of subrogation but determined Government did not have a claim against insurance company when the insurance company was acting in the capacity as a TPA of an employer group health plan). There is also no claim against a TPA that provides administrative services when there is insolvency or bankruptcy of the employer or plan.

b. Recovery Time Limits.

• Three Year Statute of limitations. The U.S. must file suit within three years after the date of receipt of notice of settlement, judgment, award or other payment via paragraph 8 (which is the paragraph in the MSP that describes the Section 111 Reporting requirement). 42 U.S.C. 1395y(b)(2)(B)(iii). This was added to the MSP pursuant to the SMART Act amendments in 2012, effective in 2013. Therefore, if Section 111 Reporting was never provided, the U.S. could argue that the three-year SOL has not yet began to run. Furthermore, if there is an update to Section 111 Reporting with an update with new codes or new accepted body parts for example, the three years for those new codes and/or new accepted body parts would begin running from the date of the updated Section 111 Reporting.

• There is also a “time limit” under the MSP for claims for reimbursement requests. Notwithstanding any other time limits applying for employer group health plans, the U.S. may seek to recover conditional payments under the MSP where the request for payment is submitted to the “entity required or responsible under this subsection to pay with respect to the item or service (or any portion thereof) under a primary plan within the 3-year period beginning on the date on which the item or service was furnished.” 42 U.S.C. 1395y(b)(2)(B)(vi).

c. The ability to collect the double damages is described as being “in accordance with paragraph (3)(A)”, which is the private cause of action provision that Medicare Advantage Organizations and individual Medicare beneficiaries that have been “injured” have available to them. This is discussed in the next section below.

d. The U.S. may recover double damages from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity. 42 C.F.R. § 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment and a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer. Furthermore, “CMS may initiate recovery as soon as it learns that payment has been made or could be made under workers’ compensation, any liability or no-fault insurance, or an employer group health plan.” 42 C.F.R. §411.24(b).

e. Case law against beneficiaries and/or their attorneys.

(i) In March 2019, a law firm in Maryland named Meyers, Rodbell & Rosenbaum, P.A., had to pay $250,000 to resolve a conditional payment demand on a case where the firm had already disbursed net proceeds of the settlement to its client. U.S. Attorney Robert K. Hur was quoted in a Department of Justice press release saying, “We intend to hold attorneys accountable for failing to make good on their obligations to repay Medicare for its conditional payments.”

(ii) On June 18, 2018, the Department of Justice announced in a press release that an attorney/law firm entered into an agreement to repay the U.S. $28,000 after failing to ensure that the attorney/law firm client reimbursed Medicare for conditional payments made related to the underlying injury. The law firm had already disbursed the net settlement funds to its client. The law firm of Rosenbaum & Associates in Philadelphia entered into a settlement with the DOJ agreeing to pay the government this money after the U.S. alleged attorney Rosenbaum failed to timely repay MSP debt. The firm additionally agreed to designate a person at the firm to be responsible for paying MSP debts, to train the designated employee to ensure that the firm pays these debts on a timely basis; and to review any outstanding debts with the designated employee at least every six months. Attorney Rosenbaum also acknowledged that he may be liable under the False Claims Act (31 U.S.C. § 3729 et seq.) for wrongful retention of government overpayments arising from the failure to timely repay the MSP debt.

(iii) Other cases have confirmed the above-referenced recovery rights of the U.S. to timely Medicare lien reimbursement. For example, a U.S. District Court granted summary judgment for $11,367.78 plus interest against an attorney for a Beneficiary, holding the attorney liable when Medicare’s conditional payments were not addressed/timely reimbursed from a third party settlement because the attorney had received his contingency fee from the proceeds of Primary Plan’s (liability) payment. See U.S. v. Harris, 2009 WL 891931 (N.D. WVa. 2009) aff’d 334 Fed. Appx 569 (4th Cir. 2009). See also, U.S. v. Weinberg, 2002 WL 32356399 (E.D. Pa. 2002)(Partial judgment was entered in favor of the U.S. against the Defendant attorney on the issue of liability).

(iv) In U.S. v. Sosnowski, 822 F. Supp. 570 (W.D. Wis. 1993), the U.S. was entitled to recover MSP conditional payments from a Beneficiary and his attorney but was denied the award of double damages because neither injured beneficiary nor attorney were a Primary Plan. In the Sosnowski case, the court placed more weight on the MSP wording “received primary payment from a primary plan” as opposed to the wording in the next phrase “or from the proceeds of a primary plan’s payment to any entity.” The wording in the regulations 42 C.F.R. § 411.24, “from the proceeds of a primary plan’s payment to any entity” would seem to make it clear that attorneys and Beneficiaries could be liable for double damages claims by the U.S. (or Medicare Advantage Plans under the MSP private cause of action – see below). If CMS gets more efficient at searching for all possible conditional payment reimbursements, it could become more aggressive with recovery actions against plaintiff attorneys and depending on the jurisdiction, may seek double damages from plaintiff and/or counsel.

f. Cases against Estates of Beneficiaries.

Cases in which CMS has proceeded against an estate of a Medicare beneficiary have yielded varying results. For example, CMS was successful in Benson v. Sebelius, 771 F. Supp. 2d 68, 75 (D.D.C. 2011) (Because plaintiff claimed his mother’s medical costs in pursuing his wrongful death action, medical expenses of mother were taken into consideration in calculating and negotiating wrongful death settlement award, and release to landlord where slip and fall occurred included any and all claims and rights including associated medical liens, no error was found when Medicare Appeals Board (in a de novo review) allowed CMS to recover its full medical expenses lien minus its procurement costs from the wrongful death settlement) (citing Mathis v. Leavitt, 554 F.3d 731, 733 (8th Cir.2009) (“Because appellants claimed all damages available under the Missouri wrongful death statute, the settlement, which settled all claims brought, necessarily resolved the claim for medical expenses.”); Cox v. Shalala, 112 F.3d 151, 154–55 (4th Cir.1997) (determining that Medicare was entitled to reimbursement for medical expenses from the proceeds of a wrongful death settlement because the settlement included recovery for decedent’s medical expenses); see also Brown v. Thompson, 374 F.3d 253, 262 (4th Cir.2004) (holding that CMS was entitled to reimbursement from the proceeds of a medical malpractice settlement pursuant to the MSP).

However, when the underlying wrongful death claim made no claim for medical expenses, there is a stronger argument that the Medicare lien does not extend to the estate of a deceased Medicare beneficiary. See Bradley v. Sebelius, 621 F.3d 1330 (11th Cir.2010) (U.S. was denied the ability to recover Medicare’s conditional payments when no medical expenses of decedent Medicare Beneficiary were claimed in wrongful death action by survivors).

g. Medicare conditional payments are most often thought of as payments made prior to settlement for which CMS has a lien right to recover and a cause of action for double damages if not reimbursed by the proceeds of settlement other than MSA money. This is why most insurance carriers and their defense counsel insist on including language in settlement releases to the effect that the injured party receiving the settlement acknowledges, accepts complete financial responsibility for, and will pay all Medicare conditional payment liens with the settlement proceeds as a condition of settlement. Strong consideration should be given to including liens of Medicare Advantage Organizations and Medicaid (which has its own secondary payer statutes per respective state law, with lien rights to settlement proceeds that are below the lien rights of Medicare, but enforceable against settlement proceeds to the extent of the medical bills paid under the Ahlborn case in the same or similar statements in the release.

h. Attorneys representing self-administering applicants or plaintiffs should take steps to document their files advising clients of the MSP and all rules and regulations associated with properly administering them and ideally, will help their clients stay compliant or recommend professional administration to help ensure proper exhaustion of funds set aside to protect Medicare’s future interests

i. Medicare Part C-Medicare Advantage and Part D-Prescription Drug Coverage

a. Medicare Advantage Organization (MAO) lien claims are addressed in a separate article in this issue.
b. Medicare Part D – Prescription Drug Plan (PDP) Coverage

This insurance is provided by private carriers but funded by Medicare. The same MSP regulations in 42 C.F.R. § 422.108 are extended to Medicare Part D Plans via 42 C.F.R. § 423.462. Therefore, Part D Plans would likely be held to have the same MSP recovery rights as MAOs including the possibility of seeking double damages under the MSP private cause of action should a primary payer deny the Part D Plan reimbursement of due conditional payments

5. Conclusion

Prior to settlement, steps should be taken to determine Medicare entitlement and/or SSDI status to determine if Medicare may have made conditional payments related to the claimed injury. Steps should also be taken by all parties to expand their lien search inquiries beyond traditional Medicare and SSDI searches to rule out MAO and/or PDP membership. A first step is obtaining a copy of the front and back of each and every type of insurance the injured client had from the time of the accident until the time retained (and beyond). You should ask whether they have switched or enrolled in different plans from the time of the accident until the present. Steps should be taken to get any conditional payments reimbursed promptly. Carriers will often require beneficiaries to make payment of these conditional payment/lien reimbursements a condition of the settlement. Regardless of the type of Medicare lien, always first confirm that the amounts requested relate to the claimed injury/body areas and are not associated with pre-existing conditions. Next, make sure to request a reduction of attorney’s fees and costs for any type of Medicare lien. Follow the logic set forth in 42 C.F.R. §411.37 for a reduction of conditional payments by the attorney fee percentage as well as the attorney’s costs. While the referenced regulation is in the portion of the MSP regulations dedicated to WC cases, based on cases like the Hinsinger v. Showboat Atl. City, 420 N.J. Super. 15, 19, 18 A.3d 229, 232 (N.J. Super. Ct. Law. Div. 2011) case, CMS seems to now recognize this reduction formula for liability cases as well as WC cases. This process of performing a pro rata reduction is mentioned in the regulations in 42 C.F.R. §411.39 (ix) “Once settlement, judgment, award, or other payment information is received, CMS applies a pro rata reduction to the final conditional payment amount in accordance with § 411.37 and issues a final MSP recovery demand letter.” Thankfully, when it comes to the conditional payment demand process for traditional Medicare liens, it is standard operating procedure for CMS, once notified (through the MSPRP or by written correspondence) to reduce its Medicare lien/conditional payment reimbursement claim by the pro-rata percentage of attorney’s fees and reduction of costs associated with procuring settlement prior to issuance of its Final Demand. Lastly, if the amount your client will be receiving as a net settlement is low in comparison with the amount being requested by Medicare, evaluate whether a request for a compromise or waiver may be appropriate and decide whether you will assist your client with this or outsource to attempt to reduce or waive the Medicare related lien.

* Attorney Natt Reifler is Vice President of Medicare Secondary Payer Compliance for Medivest. Medivest offers attorneys a variety of public and private lien resolution services as well as MSP compliance services, including Medicare and Medicare Advantage Plan lien resolution, Medicare Set-Aside allocation reports, Medical Cost Projections, Professional Administration, and Trust Advisor Services. Natt received his undergraduate degree from the University of Maryland Baltimore County and is licensed to practice law in the State of Florida. He graduated Cum Laude from Stetson University College of Law in 1995, practicing with the personal injury firm of Best & Anderson, P.A. until 1997. He then worked with a recovery law firm handling corporate creditor and collections matters for twenty years prior to joining Medivest in 2017. Natt has researched Medicare Secondary Payer law, manages Medivest’s Lien Resolution Department and has written many lien resolution and MSP related articles for the Medivest.com blog. He can be reached at nreifler@medivest.com.

“Table of Contents”

Under the Medicare Secondary Payer Act, Medicare has a right to be reimbursed for payments it has made for a Medicare beneficiary’s medical treatment when the Medicare beneficiary is compensated for the treated injury by a third-party source. That does not mean that your client has to always pay the full amount requested by Medicare. This article explores ways to secure Medicare lien resolution, focusing on satisfactory resolution of traditional Medicare liens.