Cubbon & Associates
Medicare Subrogation Obligations of Attorneys and Claimants Stuart F. Cubbon Cubbon and Associates Co., LPA
Q. Medicare had paid bills for my automobile accident and now I can't get my case settled. Why?
A. Attorneys and personal injury claimants (plaintiffs) seeking compensation for injuries often face an uphill battle in light of tort reform laws, insurance company tactics, and crowded court dockets, to name a few. Resolving their cases has become even more difficult lately because of the manner in which Medicare has begun to enforce its subrogation rights.
Q. What is subrogation?
A. Subrogation literally means to substitute one creditor for another. In personal injury cases, a medical insurer that has paid an injured party's medical bills may have subrogation rights. These allow it to stand in the shoes of the claimant and to be reimbursed for the medical bills it paid from the insurer of the responsible party (tortfeasor.) Subrogation is nothing new and we have long had to work out reimbursement agreements with legitimate subrogated parties at the time of settlement, making sure that the rights of all parties, including the injured parties, were fully protected.
Q. Does Medicare have subrogation rights?
A. Medicare has long had statutory rights of subrogation which allow it to recover amounts paid for accident related medical expenses from an at-fault party, his or her bodily injury insurer or the injured party's own uninsured/underinsured carrier. Most, if not all, private medical insurers (e.g. Paramount and Blue Cross) and most automobile insurers that pay bills on medical payments coverage also have subrogation rights based on contract as opposed to statute.
In all cases where a party makes recovery for his or her injuries, it is important to reimburse his or her medical insurance company for bills it has paid for accident related care. This can be complicated and confusing, however, when it is unclear whether particular medical treatment is causally related to the accident and/or when the settlement or verdict recovered does not adequately compensate the injured party for the entirety of his or her damages, including medical expense, lost wages and pain and suffering. Usually we are able to negotiate the actual amount paid to reflect at least attorney fees and expenses.1 Failure to resolve subrogation issues with a medical insurer could lead to a personal injury victim later being sued for reimbursement and is, of course, a loose end that must be tied before a case is resolved.
Q. What is unique about Medicare subrogation?
A. In recent years Medicare promulgated new regulations which impose significant sanctions, including a $1000 per day fine for failure to honor its statutory subrogation rights, and this fine could apply to the Medicare recipient, his or her attorney and the liability insurance company. Implementation of these regulations was delayed several times but became effective in 2010.
While the $1000 per day civil sanctions are new to Medicare subrogation, the obligation is not. The requirements to reimburse or subrogate is even more complicated in substantial cases where Medicare benefits may have to be paid in the future, as a Medicare set-aside fund needs to be established to satisfy those requirements.
Because of the potential sanctions, insurance companies today are understandably not willing pay settlements until they have a final payoff amount from Medicare. The practical and incredibly frustrating problem that ensues is that Medicare has a Byzantine and internally inconsistent process of determining what it has paid and what it is entitled to. Although it has farmed collection out,2 the process of obtaining documentation from Medicare necessary to satisfy its subrogation rights can take up to a year or more. This may further be complicated by disputes on whether treatment is or is not related to a particular legal claim, and sorting that out can again start a merry-go-round of delays.
Q. Will Medicare waive or reduce its subrogation rights?
A. Possibly. Once Medicare has determined the amount it believes it is owed, it will then require parties to pay this within 60 days. If a party disputes the amount owed, he or she can request a reduction and/or waiver. They have the choice of paying the demanded amount and requesting that Medicare ultimately make a refund (this can take more than a year) or withhold payment pending the resolution of the request, but with the understanding that Medicare will impose interest and perhaps fines if the request for waivers is ultimately denied. The first option is particularly frustrating but the second option creates much greater risk, so it is a choice of two evils!
Q. Does Medicaid have the same subrogation rights?
A. Yes. Medicaid recipients are subject to similar statutory subrogation rights but the good news there is that in Ohio, the Ohio Department of Jobs and Family services has contracted with the Ohio Tort Recovery Unit to handle these matters and they can generally resolve them within a month or so. People have the same obligations to reimburse Medicaid but do not have to be endlessly bogged down in the bureaucratic abyss of trying to work out a reimbursement plan.
Q. Do private insurance carriers have subrogation rights?
A. Generally they have subrogation rights written into their insurance contracts. These are contractual and not statutory, so they are not subject to the civil fines Medicare can impose. But they should not be ignored. The good news is that health insurance carriers and auto med pay carriers are generally able to at least set forth their subrogation claims within a couple of weeks if not sooner. All of these are at least subject to further negotiation.
1Even these negotiations have become challenging since 2004 when the Ohio Supreme Court ruled in N. Buckeye Edn. Council Group Health Benefits Plan v. Lawson that Ohio is not a "make whole" state and that if an insurance policy unambiguously provides that the medical insurer is entitled to recovery before the injured party is "made whole," then that language will be upheld.2 US Department of Health and Human Services Center for Medicare and Medicaid Services, which in turn employs Medicare Secondary Payor Recovery Contractors (MSPRC).