Strategies for protecting the Medicare lien post-settlement

ABSTRACT: A defendant settling a claim must take actual or potential Medicare liens into account, and must aggressively manage the process. 

When parties are considering settlement of a claim in which Medicare has a lien, or potential lien, it is incumbent on the defense to take a pro-active aggressive position ensuring Medicare’s lien is properly satisfied. The MSPRC (www.msprc.info) is the company which has been hired by Medicare to review the medical bills and provide the parties with the final Medicare lien. When considering your settlements, there are four possible ways to satisfy the obligations of all the parties to Medicare.

Method 1. Defendant, when tendering its checks and payment of the settlement amount, includes MSPRC as a payee on the check. This will put the onus on the claimant/plaintiff to contact the agency to ensure that the amounts necessary to satisfy any liens are satisfied. In fact the plaintiff will be unable to cash the settlement check without MSRPC’s endorsement. 

Example: The plaintiff and defendant have settled a claim for $100,000.00 and the plaintiff has a conditional Medicare lien letter of $20,000.00. One check is written to the plaintiff, his attorney and MSRPC for $100,000. 

Method 2. Defendant drafts two checks. It is substantially similar to option number one in that the defendant will send a check to claimant/plaintiff’s attorney that includes MSPRC on the check. Unlike method number one, however, here defendant must estimate the amount of the lien. One of the two checks is made out to plaintiff, plaintiff’s attorney and MSRCP is for an amount slightly higher than the lien. This has the same effect as option number one in that the claimant/plaintiff will be unable to cash or deposit the second check until the MSRPC has received and endorsed it. The prudent practitioner will draft the second check, including the MSPRC, for an amount in excess of the conditional to ensure, that if Medicare makes a higher claim as a final, the amount will be sufficient to cover the payment. 

Example: The plaintiff and defendant have settled a claim for $100,000.00 and the plaintiff has a conditional Medicare lien letter of $20,000.00. One check is written to the plaintiff and his attorney for $60,000 and the second is written to the plaintiff his attorney and MSRPC for $40,000. 

Method 3. The “holdback” approach. Similar to option number two, defendant here will utilize the conditional payment letter. The amount of holdback will need to be sufficient to cover the Medicare lien based upon the conditional letter. In this case, however, in lieu of actually sending a check to claimant/plaintiff, the defendant will negotiate in its settlement agreement a portion of the settlement that will be held back from the proceeds to cover the final determination. Once a final determination is issued by MSRCP, the defendant will send a check to MSRCP for the lien and the remainder to plaintiff and plaintiff’s counsel.

Example: The plaintiff and defendant have settled a claim for $100,000.00 and the plaintiff has a conditional Medicare lien letter of $20,000.00. The settlement documents will set forth that the plaintiff and plaintiff’s attorney will receive a check in the amount of $60,000.00 and the defendant will hold back $40,000.00 of the settlement and pay the final determination directly to the MSRPC upon receipt of the same. Any funds that remain after the final determination is paid are sent directly to plaintiff and plaintiff’s attorney.

Method 4. The “wait and see” approach. The method is preferred if, for some reason, the amount of the final Medicare lien is impossible to determine at the time of settlement. Here, the defendant and the plaintiffs will enter into a settlement agreement and no funds will be tendered to the plaintiff until after the final determination is received for Medicare. Once Medicare makes its final determination, the defendant pasy the MSPRC directly with the remaining funds going to plaintiff and plaintiff’s counsel.

Example: The plaintiff and defendant have settled a claim for $100,000.00 and the parties are unsure of the Medicare lien amount. A settlement is reached but no checks are issued until Medicare issues its final ruling. At that time a check is written to MSRPC for the lien amount and the remainder is sent to the plaintiff and his attorney.

In the past, defendants have only been moderately concerned regarding outstanding medical liens. It has typically been sufficient for defendants to provide in the settlement agreement that all liens would be covered by the plaintiff and that plaintiff would indemnify the defendants for payment of the same.

With the onset of the recent Medicare reimbursement laws, it is now absolutely essential for defendants to ensure that Medicare’s liens are covered in any settlement. The risk of failure includes payment to Medicare, irrespective of any previously paid settlement proceeds, possibly including fines for the failure to preserve Medicare’s liens. If defendants and plaintiffs can agree and follow one of the four methods set forth above, the parties should be protected from any problems related to the payment of Medicare liens.