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Haro v. Sebelius – How it Effects Settlement

We posted yesterday that the decision Haro v. Sebelius means no interest on Medicare liens during the pendency of a Medicare lien appeal or waiver request.   Today, we will discuss how Haro v. Sebelius effects settlements and distribution; but keep in mind this is a U.S. District Court of Arizona case.  It really is not cite-able authority (it will be interesting to see if HHS, CMS, and the MSPRC decide to appeal and risk creating mandatory authority in the 9th Circuit and then the Supreme Court).

Judge David C. Bury’s holding in Haro v. Sebelius includes the following statement:

“IT IS FURTHER ORDERED that the Defendant’s demand that attorneys withhold liability proceeds from clients pending payment of amounts claimed by the Defendant as MSP reimbursement exceeds her authority under the Medicare statute, and Defendant is enjoined from demanding that attorneys withhold liability proceeds from their clients pending payment of disputed MSP reimbursement claims.

That statement seems to mean that once you have settlement funds, you may disburse them to your clients immediately.  Obviously you should be careful of situations where court approval is necessary (like when the plaintiff is deceased).  The major change with this holding is that you can give your client some settlement funds prior to resolving the Medicare lien. Good news, right?

Sure – but doing so creates an enormous risk and potential legal liability.  I do believe partial distributions are reasonable; however, you must carefully hold funds in escrow to pay the Medicare lien.  If you distribute too much of the settlement and Medicare then claims a greater portion of it, it might be you (the attorney) who must pay the difference.  You can explain to your client it is technically his or her responsibility to pay the lien, but if he doesn’t listen you are liable for double damages (see U.S. v. Harris).  When comparing an attorney to a plaintiff, you as attorney have the deeper pockets.  You are likely to be sued for the unpaid lien.  We frequently see conditional payment amounts increase from Conditional Payment Letter to Final Demand.  Be careful when distributing prior to paying a lien.

Next, we can analyze how this effects payment of settlements.  In the past, defendants and insurance companies have been skittish to simply pay the full settlement amount on one check to plaintiff and attorney.  Instead, we have seen lien holders’ names added to the checks, or multiple checks (a good middle ground), or refusal to pay without proof of final liens.  The holding in Haro might change this process.  It certainly removes one of the arguments for defendants that allows them to withhold the settlement.  In the end, your settlement agreement will still create the best arguments for release of funds.

Yesterday we mentioned three possible changes as a result of Haro:

  1. Defendants can no longer require proof of Medicare lien prior to payment of the funds;
  2. Defendants can no longer require Medicare be paid prior to the remainder of the settlement funds; and,
  3. Plaintiffs can receive at least a portion of the settlement even prior to Medicare issuing a final demand (at both the attorney’s and their own peril).

If Haro were affirmed by a court with mandatory authority, number three would certainly be true.  Without affirmation it is a gray area, albeit one with some guidance.  Number two above is still not settled.  A defendant can require whatever it wants if the settlement agreement allows.  If the settlement agreement is silent, you can look to Haro, along with Zaleppa and Tomlinson (discussed throughout this blog) for more guidance.  Haro is just another in a growing list of cases which support immediate payment of a settlement.  Finally, number one above requires the same analysis as number two.  Only the settlement agreement requires actions, but Haro can’t hurt.

As has been the case for years, there are few examples of mandatory authority when it comes to the Medicare Secondary Payer Act.  We hope to see Haro, Zaleppa and Tomlinson become such authority, for now, they serve as guidance.

If you need assistance with Medicare liens, Medicaid liens, ERISA liens, or any other healthcare liens, contact LRS.

Ryan J. Weiner
Co-Founder Lien Resolution Services

This Blog/Web Site is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


About Ryan J. Weiner

Co-Founder of Lien Resolution Services, LLC, a national healthcare lien resolution firm. Our goal is to assist in the fair administration and resolution of healthcare liens on personal injury cases. Please visit our website for more information: www.lienresolutionusa.com.

One comment on “Haro v. Sebelius – How it Effects Settlement

  1. […] On Monday, we noted that collection activities are precluded against beneficiaries pending resolution of waiver requests or appeals on the Medicare lien.  And on Tuesday, we discussed Haro‘s effect on settlement and payment of settlement. […]

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