When Medicare Wants Reimbursement of Medical Costs in a Personal Injury Case

Many Medicare recipients, who are injured in an accident giving rise to a personal injury claim or lawsuit,  don’t realize that Medicare is going to seek reimbursement of the medical costs it paid for the injuries suffered.  In fact, Medicare takes a very hard line in seeking reimbursement and normally refuses to negotiate a significant reduction.  While resolving Medicare liens in most personal injury cases is a straight-forward process, sometimes the Medicare lien presents a barrier to settlement because the payment required is unreasonable in light of the facts of the particular case or claim.

This article is intended to provide an overview of how Medicare liens are handled in the context of a personal injury claim or lawsuit and the difficulties caused by Medicare liens in achieving a fair result in settlement.

How the Fees and Costs Lien Reduction is Determined:

Normally, Medicare will reduce the amount it is seeking to reflect the amount paid in attorney fees and costs.  For example, if Medicare paid $100,000 in medical costs, and the claim was settled for $200,000 with the attorney receiving $66,000 in fees and $20,000 for costs, Medicare would normally reduce its lien by the percentages of fees and costs as compared to the total settlement.  In this example, Medicare would reduce its lien by 43%, because the attorney fees were 33% and the costs were 10%.  Thus, the $100,000 lien would be negotiated down to $57,000.

Determining What Medical Costs Make Up the Medicare Lien:

Medicare is only allowed to seek reimbursement of medical costs attributed to the treatment and care for the injuries suffered as a result of the incident giving rise to the personal injury claim.  Many Medicare recipients go to the doctor’s office or are admitted to the hospital for numerous health issues, some of which are completely unrelated to the injuries at issue in the personal injury claim.  It is vital that your lawyer examine the list of medical expenses for which Medicare is seeking reimbursement to identify and remove those expenses for unrelated treatments received by the injured client.

Resolving the Medicare Lien Can Take Months:

Normally, Medicare liens take three or more months to resolve.  Occasionally, the lien is settled in less time, but if Medicare is seeking reimbursement for unrelated treatments, such that your attorney and Medicare are involved in a negotiation of what medical expenses are “related” and which are not, the process can take considerably longer.

Financial Hardship Can Cause Medicare to Waive Its Lien:

In some instances, clients with little or no assets can appeal to Medicare to have the lien waived in whole or in part.  In one case I handled recently, I appealed to Medicare three different times (over a 9 month period) seeking to have the lien waived before finally succeeding.  The application for waiver is a comprehensive 15 page document which requires listing of all of the client’s assets in addition to the synopsis of the claim and the reasons supporting a waiver.

One great feature of the Medicare lien waiver process is that each time an appeal is made, the appeal is reviewed by a new group of individuals who take a “new look” at the material and are not guided by the decisions of the individuals who may have denied the waiver in an earlier evaluation.  Thus, the applicant gets more than one bite of the apple in seeking a waiver.

The Impact of the Smart Act:

On January 10, 2013, the SMART Act was passed into law which should speed up the Medicare lien resolution process in personal injury cases.  The SMART Act required Medicare to establish a website allowing lawyers to obtain current lien information to assist in resolving liens.  Further, the SMART Act imposes deadlines for the resolution of claims and the provision of lien information.

What Happens When The Client Is Partially At Fault:

In some personal injury cases, the injured client is partially at fault for the incident.  In such cases, a Medicare lien can make settling the client’s personal injury case extremely difficult.

For example, suppose a client who suffered for a year and incurred $50,000 in medical costs goes to mediation to settle the claim.  Further assume that during mediation the parties agree that the case is worth $140,000, but that because the client is 50% responsible for the accident, they agree to settle the claim for $70,000, with the attorney to receive 33% of the settlement amount (for simplicity, assume no litigation costs).

Thus, Medicare (which will not reduce its lien to reflect apportionment for fault if the case is settled) will want 66% of $50,000 (or $33,000); the lawyer is entitled to receive $23,100 (33%); thus leaving the client with $13,900.  Many clients will view this result as extremely unfair and refuse to settle the claim.  Of course, if Medicare agreed to reduce its lien by the 50% apportionment for fault, then the client would receive another $16,500, (or $30,400 in total), which is much more palatable.

On the other hand, if the case goes to trial and the jury decides the client/plaintiff is 50% at fault, then Medicare will reduce its lien accordingly.

What Happens When the Defendant Does Not Have Adequate Insurance:

Probably the most frequent scenario creating a barrier to settling a case (when a Medicare lien exists) arises from the failure of the defendant to have adequate insurance or financial resources to fairly compensate the injured client for his or her injuries.  While insurance companies will almost always take into account the fact that a plaintiff failed to make a fair recovery due to inadequate policy limits and reduce their liens accordingly, Medicare normally won’t.  Similar to those cases where the client is partially at fault, these case are extremely difficult to settle because the client will not receive adequate compensation unless Medicare reduces or waives its lien.

The above information is intended to provide a basic outline of the issues and tactics involved in settling Medicare liens.  Other insurance entities may also have liens, such a Medi-Cal or your private insurance company (such as Blue Cross, or Anthem).  While similar to Medicare liens, such liens are handled differently.  Please call with any questions you may have regarding this article of the handing of personal injury cases in general.

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William E. Waddell is the principal of the Law Offices of William E. Waddell and is also “of counsel” to the firm of Yuhl Carr, LLP. He is a graduate of the University of the Pacific, McGeorge School of Law; where he was awarded the “Best Trial Advocate Award.” With offices in Cerritos and Marina Del Rey, CA, Mr. Waddell handles personal injury, employment law and other matters.
Website: www.wewlawfirm.com; Email: [email protected]; Telephone: (310) 318-6398