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Medicare "Liens": Departure From The Past Continues With Medicare Advantage Plans and Private Causes of Action

June 2018

When Medicare was created in 1965, the original legislation made Medicare "secondary" to workers' compensation (WC), and Medicare was not supposed to pay for any expenses that were covered under a WC claim. In 1980, Congress expanded this idea into the area of liability and no-fault cases. For years, insurers, attorneys, and parties to litigation could simply contact Medicare and negotiate a resolution of any medical bills paid by Medicare that were related to a particular claim. In the past decade or so, Medicare has ramped up its efforts to collect "conditional payments," so-named because Medicare pays the bills on condition that the "primary" insurance will later reimburse Medicare. The Centers for Medicare and Medicaid Services (CMS) has set up two different contractors to handle conditional payments: the Benefits Coordination & Recovery Center (BCRC) and the Commercial Repayment Center (CRC), and different procedures apply to each contractor, including differentiating the party or parties with whom Medicare will even communicate. Failure to pay back conditional payments can subject a primary plan to double damages, interest, and litigation costs. As labyrinthine as this system may already seem, any liable party or insurer needs to beware that the BCRC and CRC only handle "traditional" Medicare, which includes Medicare Part A (hospitalization) and Part B (medical) coverage where Medicare has made payments directly to the health care providers.

With the addition of Medicare Part C (1997) and Part D (2006), a whole new world of exposure was created for WC and liability carriers and self-insureds. Part C, often referred to as "Medicare Advantage Plans," or MAPs, is a system in which Medicare contracts with private health insurers to provide medical coverage to Medicare beneficiaries. Medicare pays the premiums to the health plan, and the health plan provides coverage as it would any of its other policyholders. Part D provides a similar system for private health plans to cover prescription medications. Often, Parts C and D are packaged together in a combined plan for the beneficiary. An ongoing controversy is currently being litigated across the country as to whether these private MAPs are entitled to the same rights as Medicare itself when seeking reimbursement from a WC, liability or no-fault plan. At least two federal circuit courts of appeal, and several district courts have already ruled in favor of the MAPs, holding the MAPs can collect double damages, interest, and costs just like Medicare could. The trend appears to be heading toward nationwide adoption of these holdings. However, there is no centralized, national center where Medicare Advantage Payments can be researched or addressed. Defendants, employers, and their insurers have no way to know which private company may be providing MAP coverage to a particular claimant, and the claimant can change MAP carriers each year during the pendency of the litigation.

But here is some potentially good news: On May 18, 2018, the U.S. House of Representatives introduced the "PAID Act," which is an acronym for "Provide Accurate Information Directly Act." If passed into law, this legislation will require CMS to allow WC, no-fault or liability parties or insures to directly contact CMS, and will further require CMS to "identify by plan name and address any Medicare Advantage plan under part C and any prescription drug plan under part D in which the claimant is enrolled or has been enrolled…"

In addition to actions by Medicare and MAPs to obtain reimbursement, current federal law also provides a private cause of action to any beneficiary to enforce the right to reimbursement of Medicare conditional payments, including the double damages and interest. This law has seen a recent uptick in litigation as well. For a recent example, in Netro v. Greater Balt. Med. Ctr., Inc., 2018 U.S. App. LEXIS 14835 (4th Cir. June 4, 2018), at least one federal circuit court expanded the private cause of action to include not only a beneficiary, but also the representative of the beneficiary's estate. More disturbing decisions have held a "primary" plan liable to an individual beneficiary, even after reimbursement was paid directly to Medicare. The trend seems to be in favor of holding entities liable for double damages to the beneficiary if the conditional payments are not paid prior to initiation of the private lawsuit.

In the face of the increasing complexity of conditional payments reimbursement and the potential for significant exposure for WC, no-fault, and liability carriers, there is no "one-size-fits-all" solution. We recommend getting the earliest possible start as soon as a claimant's Medicare beneficiary status is discovered or disclosed. At BCM, our Medicare Compliance Department is ready to assist and provide a custom plan of action to defend against conditional payments exposure, so that our clients can stay ahead of any adverse litigation and additional exposure for interest, double damages and costs.

  • Chicago Bar Association
  • Workers' Compensation Lawyers Association
  • IRTB
  • DRI - The Voice of the Defense Bar
  • The Illinois Association of Defense Trial Counsel
  • Illinois Self-Insurers' Association
  • Chicago Bar Association
  • Workers' Compensation Lawyers Association
  • IRTB
  • DRI - The Voice of the Defense Bar
  • The Illinois Association of Defense Trial Counsel
  • Illinois Self-Insurers' Association
10 South LaSalle Street, Suite 900
Chicago, IL 60603
Phone: 312-425-3131
211 Landmark Drive, Suite C2
Normal, IL 61761
Phone: 309-862-4914
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