Medicare & Liability Settlements – Changes Ahead


Medicare: An Abbreviated History In 2003, the Medicare Modernization Act (MMA) expanded the Medicare Secondary Payer (MSP) to make clear Medicare’s status as a secondary payer and expanded the definition of primary plan to include liability insurers as well as strengthen Medicare’s right to recover conditional payments. Prior to 2003, the MSP primarily applied to workers’ compensation claims.

Beginning July 1, 2009, the Medicare/Medicaid SCHIP Extension Act (MMSEA) required liability insurers and self-insureds – whenever there is a settlement, award, judgment or other similar payment, regardless of an admission of liability – to:


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  •  Determine if a claimant is entitled to benefits from Medicare on any basis; • Provide information on the plaintiff to CMS in a format to be determined by CMS; and • Failure to comply will result in a civil penalty of $1,000 for each day of non-compliance with respect to each claimant.

While it has not issued any guidelines, the Centers for Medicare and Medicaid Services (CMS) which administers Medicare, is finally considering issuing new rules. In the Business Insurance article, “Medicare set-aside rule changes could pose problems,” Sheena Harrison interviewed, Washington-based Medicare Advocacy Recovery Coalition attorney, David Farber, who said, “This is a major issue for lawyers, insurers, retailers, Medicare beneficiaries and all other stakeholders in the (Medicare secondary payer) process.”

What This Means to Parties Involved in a Settlement Medicare has, in effect, a super-lien and is entitled to reimbursement for payments made on behalf of the claimant. This reimbursement right accrues when a liability carrier pays an injured claimant for an expense for which Medicare initially paid, whether by settlement, judgment or other means. (See 42 U.S.C. § 1395y(b)(2)(B)(ii).)

More and more liability cases are responding to the MMSEA concern by establishing Medicare Set- Asides (MSAs) to ensure that Medicare’s interests are met in the settlement. In Cribb v. Sulzer Metco, 2012 U.S. Dist. LEXIS 125729, Sept. 5, 2012, the parties to a liability settlement brought a motion before the U.S. District Court for approval of a Liability Medicare Set Aside (LMSA) to protect themselves from Medicare.


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Medicare Set-Asides are often funded with a structured settlement annuity, set up during the settlement process. Aside from the above benefits of protection from Medicare, there are also benefits to both the defendant and to the claimant or plaintiff. The defendant is able to pay less in present-value, which frees up the funds to allocate to other areas of the settlement. Structuring the MSA also allows for the claimant to have access to Medicare-eligible benefits sooner than if a lump sum MSA is established.

For more information about Medicare Set-Asides, I invite you to contact me. Jay Scarola


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