The Medicare, Medicaid, and SCHIP Extension Act of 2007: Medicare Gets Serious About Reimbursement in Personal Injury Liability Claims

Eleni S. Kastrenakes is an associate and Lyndall M. Lambert is a partner in our Miami office. Steven Raffaele is an associate our New York office.

Defendants, insurers, self-insureds and attorneys in personal injury litigation need to be aware of and comply with specific statutes and rules relating to Medicare in all cases involving plaintiffs who are Medicare beneficiaries or Medicare-eligible. Failure to comply with these rules can result in lawsuits, penalties and fines against defendants, insurers and self-insureds – even if they already have settled with the plaintiffs and closed their files. With stringent new reporting requirements taking effect on January 1, 2011, it is no longer sufficient for a settling defendant to attempt to protect itself by relying on the settling plaintiff to satisfy a Medicare lien. This article provides a brief overview of current law on Medicare liens, the new Medicare reporting requirements that will be implemented next year, and the need to consider Medicare's interests when settling with Medicare beneficiaries who will require future medical care.

The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA)1 is the most recent addition in a series of expansions to the Medicare Secondary Payer Act (MSPA). Enacted in 1980, the MSPA created a statutory duty for liability insurers and self-insured entities to protect Medicare's interests with respect to past and future benefits paid by Medicare. The Centers for Medicare and Medicaid Services (CMS) is empowered by the MSPA to collect Medicare reimbursements and to pursue damages against any entity that has responsibility to reimburse Medicare after settlement of a claim. The MMSEA provides that liability insurers and self-insured entities2 must register with CMS for online reporting and report settlements with claimants who are Medicare beneficiaries. Reporting requirements under the MMSEA apply to foreign and U.S. entities.3 Insurance carriers and self-insured entities that do not reasonably consider and protect Medicare's interests with respect to covered claims are subject to harsh penalties under the MMSEA.

CMS recently delayed the implementation date for the reporting requirements of the MMSEA until January 1, 2011.4 Nevertheless, liability insurers and self-insured entities already should be registered with CMS and testing data exchanges with the Coordination of Benefits Contractor using the Coordination of Benefits secure website. This testing will continue through the end of 2010, as needed.

Attorneys and insurers who are engaged in personal injury liability claims involving Medicare-eligible claimants must give serious consideration to the interests of Medicare when resolving these claims or risk facing significant penalties. This includes obtaining, through discovery or other means, the necessary information regarding a plaintiff's Medicare eligibility or benefits and reporting the claim to CMS. Similarly, attorneys and insurers (and self-insureds) must take the necessary protective and proactive steps when negotiating a settlement with a Medicare-beneficiary or Medicare-eligible plaintiff. Specifically, they must ensure that Medicare liens are paid and that future medical expenses are reasonably considered and accounted for, such as in a Medicare Set-Aside (MSA) Agreement that becomes part of the settlement agreement.

The Medicare Secondary Payer Act

The MSPA was enacted with the purpose of ensuring that Medicare would remain a secondary payer5 for medical expenses in general liability, no-fault and workers' compensation claims.6 Medicare often makes the first payment to providers for healthcare services. These Medicare payments, however, are considered "conditional payments" (commonly referred to as Medicare liens) under the MSPA.7

In situations where a primary payer is expected to pay, Medicare ultimately should not pay because Medicare is a payer of last resort. The MSPA mandates that in all situations where another entity is required to pay for covered services, that entity not only must pay before Medicare does, but must do so without regard to a patient's Medicare entitlement. Under the MSPA, primary payers must give "reasonable...