Part 1 of 2
Last week, my colleague, Marcy Spitz, wrote about the Medicare-imposed delay in insurance reporting for personal injury cases. We know that the Responsible Reporting Entities (“RREs”) are off the hook for any case settled prior to October 1, 2010, but, they still may report if they so desire.
More important, Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (“MMSEA”) of 2007 (codified as 42 U.S.C. §1395y(b)(8)) has, among other things, created a strict penalty for RREs and their related insurance companies. The first is the $1,000 per day per case penalty for noncompliance with the reporting rules. But the one that effects settlement? That’s the double damages plus interest for nonpayment the Medicare lien on a plaintiff-beneficiary’s case.
Why does this effect settlement? If you’re a personal injury attorney, you probably have already experienced it – now and for the first time since the Medicare Secondary Payer Act (“MSPA”) was passed in 1980, both the plaintiff and defense are on the hook for the lien. As a result, many defendant-insurers are requiring three-party checks that include Medicare, the plaintiff, and the plaintiff’s attorney as payees. The Medicare Secondary Payer Recovery Contractor (“MSPRC”) then takes six to ten weeks to process these checks and “reimburse” the plaintiff. It is clear that some of the smaller PI attorneys cannot continue their practice without quicker receipt of these funds.
42 C.F.R. §411.24(h) specifically names the beneficiary (the plaintiff) as the party responsible to reimburse Medicare. But 42 C.F.R. §411.24(i) creates the fear – and the problem for defendant-insurers. It states in part, “If Medicare is not reimbursed as required by paragraph (h) of this section, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” In personal injury cases, the primary payer is the defendant-insurer.
42 C.F.R. §411.24 has not changed. It has been a regulation for years. However, Section 111 of the MMSEA has changed. Beginning with cases settled after October 1, 2010, both plaintiff and defendant will be required to report liability cases to Medicare’s contractors. In the past, Medicare may never have known that a settlement occurred, so the penalties against primary payers (the defendant-insurers) 42 C.F.R. §411.24 have been overlooked. But don’t forget RREs may still report cases settled before October 1, 2010.
Now you have plaintiff’s attorneys worried about 11.25% interest if a lien is not paid in 60 days, and, defense attorneys worrying about double damages plus that interest if the lien is not paid. In practice, the plaintiff is the first party to be punished in the event of nonpayment. But defendants, their attorneys, and the RREs are afraid of the “what if” situation. What if the plaintiff never pays? The defense is going to owe a potentially large sum of money.
These penalties are causing a settlement nightmare for many PI attorneys. Some defendants are requiring a MSPRC “Final Lien Demand” before they will release settlement funds. Others want the Final Lien Demand and will only issue three-party checks (including the plaintiff, the plaintiff’s attorney, and Medicare). Some defendants are taking a sort of middle ground where they will issue two checks, one to Medicare for the final lien amount, and the other to the plaintiff and plaintiff’s attorney.
Are the good old days of one check direct to the plaintiff’s attorney gone?
That depends on your settlement agreement. I’ll post examples and analysis of these settlement and payment issues next week in Part 2 of this series.Ryan J. Weiner Co-Founder Lien Resolution Services www.lienresolutionusa.com https://lienblog.wordpress.com firstname.lastname@example.org