Recently, we have received several queries from attorneys about reimbursing Medicare. Specifically, the question they ask us is “What happens if I ignore the Medicare “lien issue?” If you are familiar with Garretson Resolution Group (GRG), you know that we have preached “verify, resolve & satisfy” Medicare conditional payment obligations as best practices. We do not support that position simply to create obligations that don’t exist. As the country’s leading Medicare Secondary Payer (MSP) compliance consultants, we want you to avoid the very real danger of the federal government pursuing you for double damages plus interest pursuant to the MSP Act. Let’s recall an opinion released just over six (6) years ago where an attorney faced that exact scenario.
On March 26, 2009, the United States v. Harris decision was released. Paul Harris was a plaintiff attorney representing Mr. James Richea, a Medicare-enrolled client seeking damages for injuries sustained in a fall. Medicare paid approximately $22,549 in claims submitted on Mr. Richea’s behalf. The liability insurance claim was resolved for $25,000 in July, 2005. Harris sent Medicare settlement details as well as his fees, costs and expenses. Medicare then provided Harris with a final demand amount of $10,253.59 via letter dated December 13, 2005. Harris declined to repay the debt. Once the sixty (60) day period for repayment lapsed per regulations, Medicare sued Mr. Harris in federal District Court as a third party who received payment from the defendant (a primary payer), to recover its share of the settlement award plus interest, an amount totaling $11,367.78.
The court sided with Medicare. It noted that the MSP Act provides a broad prohibition on Medicare to pay a beneficiary’s medical expenses where payment has been made by a liability insurance plan. The exception to the broad rule is Medicare’s ability to make a conditional payment. Such conditional payment is conditioned upon the obligation to reimburse Medicare subsequently if a primary plan or payer accepts responsibility for those same medical expenses and that responsibility is evidenced in a judgment, a compromise for release or other means. Once Medicare’s right of recovery ripens (as it is not automatic), that conditional payment converts into a priority right of recovery, permitting the federal government to seek recovery from any person or entity that makes or any person or entity that receives payment (including attorneys or their Medicare-enrolled clients). In this instance, the court held Mr. Harris, the attorney, individually liable for the debt, a decision consistent with the MSP Act. While Mr. Harris had the opportunity to pursue an appeal of the debt if he disagreed with it by following and exhausting administrative remedies, he declined the chance to pursue any such appeal. As such, the court granted the federal government’s motion for summary judgment and awarded a judgment in its favor, totaling $11,367.78 on what should have been a final demand figure of $10,253.59, payable by the Medicare enrolled-beneficiary out of settlement proceeds.
Ignoring the Medicare reimbursement claim is short-sighted at best and unethical at worst, as every jurisdiction has adopted some version of Model Rule 1.15 (attorneys holding client funds act as fiduciaries and owe a duty to third parties with valid third party claims against those funds). At the same time, recall that following the advent of Mandatory Insurer Reporting, Medicare is being made aware of every single settlement involving a Medicare beneficiary which exceeds $1,000, with this reporting threshold dropping to $300 starting on October 1, 2015. The federal government establishes a record of every instance, and then reviews the fact to determine if it made conditional payments to which it has a right of recovery. In hindsight, Harris appears to have gotten off “easy” as the federal government chose not to pursue double damages in his case. However, that is not always the case. Medicare has demonstrated the willingness to pursue both an award for double damages – against both plaintiffs counsel, and defendants; parties on both sides of the settlement table. While that sounds ominous enough in the MSP compliance world, steeper penalties may exist if the federal government or a relator successfully pursues a federal False Claims Act action.
GRG understands that it may be inconvenient for you to address Medicare’s conditional payments, or that you have done so and disagree with the amount ultimately asserted by Medicare as a final payback figure. But the dangers here are real. Medicare has all the data it needs, and has put millions of dollars into technological resources to identify overpayments and recover those overpayments. Knowing this objective reality, driven by the remedial nature of the MSP Act (to restore balances in the Hospital Insurance Trust Fund) best practices leads the prudent attorney to conclude that one should always start early to verify, resolve and satisfy Medicare’s conditional payments.
Even in situations where you “know” that the federal government has not been billed because the claimant has healthcare coverage through a Medicare Advantage plan, it makes sense to confirm that understanding. The prudent attorney will appreciate the comfort of having a letter in the client’s file from CMS stating that no claims have been paid and it is closing the file.
 42 U.S.C. § 1395y(b)(2).
 This amount is less than the total amount of claims submitted due to the procurement cost offset Medicare must provide under 42 C.F.R. § 411.37(a).
 42 C.F.R. § 411.24 (h).
 42 U.S.C. § 1395y(b)(2)(B)(ii).
 42 C.F.R. § 411.24 (e) & (g).
 42 U.S.C. § 1395y(b)(8).
 42 U.S.C. § 1395y(b)(3)(A).
 See, for example, United States v. Stricker, 524 F. Appx. 500 (11th Cir. 2013).
 31 U.S.C. §§ 3729, et seq.