Medicare Secondary Payer Compliance in Liability Cases: The Importance of Getting it Right


For years, many assumed that Medicare Secondary Payer issues only applied in the workers’ compensation context. Within the past year, however, some significant developments have occurred that counter that assumption. CMS issued a Notice of Proposed Rulemaking indicating that Medicare intends to establish guidance for handling future medicals in liability as well as workers’ compensation cases. CMS also issued a Notice of Proposed Rulemaking with regard to the imposition of Section 111 penalties. Both of those are expected to be finalized this year. In addition, more aggressive recovery efforts by CMS, Medicare Advantage Plans and Prescription Drug Plans have been targeted at the liability industry, not just workers’ compensation. With that in mind, we wanted to provide some guidelines for liability clients with regard to when the Medicare Secondary Payer Act applies and what actions are needed to ensure compliance.


Potential Medicare issues exist when a liability claim with a Medicare beneficiary settles that involves any of the following:

  • Medical treatment expenses that have been paid, wholly or in part, by Medicare, a Medicare Advantage Plan and/or Prescription Drug Plan;

  • The claimant will likely need future medical treatment for the injuries at issue; and/or

  • Settlement language includes a “general” release of ALL claims, even if no physical injuries occurred.

Without taking appropriate action, liability insurers or self-insureds may face:

  • Medicare asserting claims for reimbursement of conditional payments (garnishing federal tax refunds or filing a lawsuit seeking double damages);

  • Private causes of action for reimbursement of conditional payments (with double damages available);

  • Medicare denying payment for future accident-related treatment or making payments and pursuing reimbursement from the primary payer;

  • Medicare Advantage Plans or Prescription Drug Plans asserting claims for reimbursement (with double damages available); and/or

  • Section 111 fines of $1,000 per day, per claim if reporting is not handled properly.

To protect our clients, we assist with the following in appropriate situations:

  • Determining the Medicare status of claimants;

  • Researching and resolving Medicare conditional payment claims, Medicare Advantage Plan and/or Prescription Drug Plan liens;

  • Determining the reasonable future medical treatment costs Medicare would otherwise cover;

  • Reporting or helping ensure proper reporting pursuant to Section 111;

  • Assisting state defense attorneys with settlement language for Releases;

  • Coordinating with structured settlement brokers; and

  • Coordinating professional administration, when needed.

We help ensure that all claims involving Medicare beneficiaries are handled correctly and consistently.


Why Not Just Let the Claimant’s Attorney Handle Medicare Issues?


Though some defendants and/or insurers may prefer to let the plaintiff’s attorney resolve conditional payment claims and Medicare Advantage Plan or Prescription Drug Plan liens, that is not always prudent. The Eleventh Circuit case of Humana Med. Plan v. W. Heritage Ins. Co., (2015 U.S. Dist. LEXIS 31875) demonstrates this point.


Prior to the liability settlement, the defendant, Western Heritage Insurance (“Western”), attempted to resolve a lien asserted by Humana by listing Humana as a payee on the settlement check. Due to a disagreement regarding the amount owed on the lien, however, the state court ordered Western to pay the full settlement amount to the plaintiff, Ms. Reale, and Ms. Reale’s attorney. The funds were to be held in trust and used to reimburse the liens. As a result of the state court’s Order, Western paid the full settlement to Ms. Reale with the understanding that she would then satisfy the existing liens, including those asserted by Humana. When Ms. Reale failed to pay those liens due to a continued disagreement about the amount owed, Humana filed a lawsuit against Western.


Humana filed a Motion for Summary Judgment seeking a declaration that Western was liable to Humana for charges paid on Ms. Reale’s behalf, despite the fact that the claims were already settled directly with Ms. Reale. Humana further asserted entitlement to double damages under the MSP private cause of action provision.


In addition to finding that Humana had a private cause of action under the MSP against Western, the Court also held that Humana had a right to recover double damages. The Court determined that, upon settling the case with Ms. Reale, Western, as a primary payer, had a responsibility to reimburse Humana for medical expenses it paid on behalf of Ms. Reale, and failed to do so. As such, the Court held that Western’s independent obligation to reimburse Humana and their failure to do so entitled Humana to double damages.


The Western case demonstrates the fact that Medicare Advantage Organizations (“MAOs”) continue to gain momentum and favor with courts when it comes to recovery rights. It further demonstrates that, similar to the reimbursement rights of traditional Medicare, the reimbursement rights of an MAO cannot be limited by the terms of a settlement agreement. Accordingly, defendants should be very careful when settling cases involving Medicare beneficiaries to ensure that these issues are handled correctly and completely. Call us and we will be happy to assist.

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