Are Medicare Advantage plans required to account for procurement costs when issuing a final lien demand?



Question: In a recent case, the only proceeds we recovered were medical payments from the facility where the accident occurred. However, the Medicare Advantage lien is much higher than our recovery of damages. We have requested procurement costs in an effort to recoup our attorneys’ fees. However, the Medicare Advantage provider has denied this and requested the full med pay amount. Are we entitled to our attorneys’ fees out of the med pay amount?


AnswerIn the lien resolution/insurance world, med pay refers to first party auto coverage for reasonable expenses incurred for necessary medical and funeral services because of bodily injury the insured suffered, in an auto accident. In addition, Medicare Advantage (Medicare Part C) allows Medicare entitled individuals to receive healthcare services through a non-governmental organization – and often private insurers administer these plans. As a replacement to traditional fee-for-service Medicare, Medicare Advantage plans must cover all of the services that traditional Medicare (Parts A and B) cover. This coverage is provided by organizations, primarily insurance companies, who contract with the Centers for Medicare and Medicaid Services (“CMS”) to independently insure and administer benefits in accordance with the Medicare regulations. Thus it would follow that Medicare Advantage plans must treat this scenario like Medicare would.

Assuming the proceeds came from a med pay policy then the Medicare Advantage plan would not be required to reduce its lien for attorneys’ fees. Med pay benefits would qualify as primary payments and are paid as such so no procurement offset is afforded. The procurement offset is only afforded to conditional payments and med pay benefits should have been exhausted prior to the plan’s payment of claims.

Generally speaking, if injuries are covered under automobile med pay or no-fault insurance and the individual also files a claim against a third party for injuries suffered in the same accident, a claims determination must first be made by the automobile medical or no-fault insurer before a claim for Medicare benefits can be paid. Conditional payment may be made to the extent that payment is not made under the automobile medical or no-fault insurance. The payment is subject to recovery if the individual later receives payment from a liability insurer. For example, an individual incurs $20,000 in covered medical expenses due to an automobile accident. The individual receives $5,000 in no-fault insurance benefits toward covered medical expenses and also has a liability claim pending against the driver of the other car. Medicare does not pay benefits for the $5,000 in expenses paid for by the no-fault insurer but pays conditional benefits based on the additional $15,000 in expenses. The Medicare payment is subject to recovery when the liability claim is paid and procurement offset is applied to calculate Medicare’s final demand amount.

In the scenario you describe the Medicare Advantage plan should not have paid for claims. Claims should have been paid by med pay as the primary coverage. Because this coordination of benefits did not happen and the Medicare Advantage did not make conditional payments the procurement offset would not come into play.

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