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Medicare Recovery Against Settlement Funds
Attorneys whose practices include personal injury or Medicare representation need to be aware of the portions of the Medicare statute and regulations known as Medicare as Secondary Payer (MSP). 42 USC 1395y(b); 42 CFR 411.20411.206. The MSP provisions shift the order of payment to require alternative private sources to pay health care costs first as the primary payers in order to allow Medicare to pay as the secondary payer.
NOTE: The MSP statute gives the Medicare program subrogation rights to the third party payment, not lien rights, although the Medicare program often talks about MSP as lien rights. 42 USC 1395y(b)(2)(B)(iv); 42 CFR 411.26.
Under the MSP provisions, Medicare coverage is secondary to coverage by automobile, liability, no-fault, and workers' compensation insurance. 42 USC 1395y(b)(2)(A). Medicare is also generally the secondary payer when a beneficiary has employer group health insurance.
Personal injury attorneys and injured parties encounter problems when Medicare has made conditional payment for medical services under 42 USC 1395y(b)(2)(B)(ii) and then seeks recovery from a beneficiary's judgment or settlement award. The MSP provisions allow CMS to recover reimbursement for funds paid conditionally to a Medicare beneficiary for injury caused by a liable third party, in an amount equal to the Medicare payment or the amount payable by the third party, whichever is less. 42 CFR 411.37.
When, because of low limits of coverage under an insurance policy or to liability disputes, clients have had to settle for smaller amounts than their actual damages, Medicare's demand for reimbursement can cause considerable hardship. Under MSP, Medicare demands full reimbursement for its conditional payments, reducing its recovery only by a prorated share of the attorney's fee and costs. Medicare does not recognize any apportionment of medical expenses that may be specified in a settlement agreement. See Zinman v Shalala (9th Cir 1995) 67 F3d 841.
Beneficiary's Right to Waiver:
When a beneficiary requests a waiver under USC 1395gg(c), the Medicare contractor determines whether the beneficiary meets the criteria for a waiver. See 42 CFR 405.355, 20 CFR 405.506405.512. CMS may waive all or part of its recovery in either of the following circumstances:
As a general principle, Medicare beneficiaries are not found to be with fault in the MSP liability context. Thus, the usual review of waiver requests emphasizes the financial hardship factor, i.e., whether recovery would deprive the beneficiary of income required to meet current ordinary and necessary living expenses (including medical expenses). See Medicare Intermediary Manual (MIM) 3418.13(B). The factors that the Medicare contractor considers in deciding whether to grant a waiver include the beneficiary's out-of-pocket expenses; the beneficiary's age; the beneficiary's assets, monthly income, and expenses; and the beneficiary's physical or mental impairments (if any). MIM 3418.13. The category of out-of-pocket medical expenses is quite broad and includes, among other things, adult diapers and housing adaptations to accommodate a disability. MIM 3418.14.