The Great and (Simultaneously) Terrible Medicare, Part IV

Like the honey badger, Medicare don't care about competing lien claimants.

Like the honey badger, Medicare don't care about competing lien claimants.

So yeah, it's been about five weeks since I updated the PI blog. Sorry about that! I've been buried under a mountain of work, coupled with some very important developments in my personal life (rhymes with "carriage"), and I have had absolutely zero time to write. But for better or worse, we're back with Part IV of our Medicare series!

How about a quick review?

Good thinkin'. From the last three installments, we know that Medicare is a federal Program set up as a secondary payer (meaning it won't pay anything until all other forms of coverage are used up. We know that Medicare has a right of reimbursement (distinguishable from a lien, mind you) against any and all forms of coverage in personal injury cases where the Program has paid for medical bills. We know that you have to set up your claim with Medicare, and that the road to recovery is fraught with peril as far as Medicare is concerned. So with that dire warning taken care of, let's get into today's newest Medicare rat-nest.

What is Medicare's cap on my recovery?

You'll remember that Medicaid, similar to medical provider liens under §§44-49 and -50, is capped at a cool one-third of your gross settlement (or judgment). So that cap applies to Medicare as well, right? Wrong! Medicare allows for attorney's fees and "procurement costs," but excluding those the Program can take whatever it's owed, even if that means that the claimant him-or-herself is left empty-handed. What's more, Medicare's right of reimbursement is going to take priority over practically every other type of insurance coverage.

Procurement costs and examples.

"Procurement costs" is normally going to contemplate the sum of your attorney's fees and hard expenses. When procurement costs apply, Medicare beneficiaries are allowed to reduce the Program's right of reimbursement by the prorated amount of the total recovery that the procurement costs represent. Let's look at a basic example.

Let's say we've got a total settlement of $60,000. The attorney's fees are a contingent one-third and the Medicare interest is $15,000. Since the attorney's fees are the "procurement costs" here, in this example the procurement costs are one-third of the total settlement. Therefore, the claimant gets to reduce Medicare's interest by one-third of its total. Using this proration, we reduce Medicare's amount from $15,000 down to $10,000. So the attorney gets $20,000, Medicare gets its $10,000, and the claimant gets the remaining $30,000. Simple enough, right?

Well, sure. But it can get a lot more complicated than that, as I'm sure you can imagine. Let's assume that Medicare has a $20,000 claim, and further that there's a Medicaid lien of $15,000 and a §44-49 lien of $10,000. Attorney's fees are again a contingent one-third, there are $5,000 in hard expenses, and the total settlement amount ends up being a meager $30,000.

The first thing you do is figure out the procurement costs; in this case, attorney's fees of $10,000 and hard expenses of $5,000. Since that's half of the settlement amount right there, you get to subtract half of Medicare's interest, which drops from $20,000 to $10,000. So that's $15,000 in procurement and $10,000 for Medicare; $25,000, leaving only $5,000 of the total settlement amount. Now, Medicaid's $15,000 lien is preempted because Medicare has already eaten up the full one-third of the total that Medicaid was entitled to, so Medicaid is out of luck and takes nothing. The §44-49 lien is also preempted, but only to the extent that the holder can legally claim a compulsory interest in the settlement. Keep in mind that partial payment of a §44-49 lien does not constitute full and final payment of the obligation, so if the claimant elects not to apply the remaining $5,000 against the total owed of $10,000, he or she will still owe the full $10,000 at the end of the day. The smart move here would be to go to the holder of the §44-49 lien and offer $5,000 in full and final payment, with the alternative being that the claimant walks away and nobody gets paid anything. This "bird in the hand" tactic puts pressure on the §44-49 holder as the only party holding up settlement and tempts them with money on the table. It works more often than you might think.

Dang, that sounds intense! How do I figure out Medicare's total amount, anyway?

Look at the initial CPL and any subsequent CPLs very carefully to make sure that the Program is only claiming related expenses. If they aren't, then you'll need to contact the Program and explain what costs are unrelated and why; you'll need as much information as you can get, such as dates, providers, diagnosis codes, and anything else that looks like it might be relevant.

If the CPL(s) look good, you'll want to demand the final payment letter from MSPRC and audit that carefully to make sure that there's nothing fishy being included. Once you and Medicare are in agreement about what the related treatments are, the total amounts that the Program has paid for those treatments will constitute Medicare's right of reimbursement.

Part V, the last installment in the Medicare series, is coming Friday. Get ready!