The federal government has a right of subrogation for medical care payments made under the Medicare Act. Because of the unlimited scope and reach of the lien, it has been referred to as a super lien. The statute gives the government rights far in excess of traditional subrogation rights.
Under the Medicare Secondary Payer Act, medical bills paid by Medicare for tort victims are conditional payments. If there is a tort recovery, Medicare is required to be reimbursed.
The administrative process for this reimbursement is a nightmare. It will confuse and anger the most patient of lawyers. However, my suggestion is that you not buck the system, and instead seek to comply. Further, failure to comply not only has negative consequences for your client, but also personal liability for the attorney.
Medicare Subrogation for Past Medical Expenses
Use the Medicare website for assistance. They have many mandatory forms. The following is a step-by-step analysis I drafted for our firm of how to navigate through this mine field. Be mindful that this all relates to past medical bills.
- STEP #1: Phone the Coordination of Benefits Coordinator. (COBC) 1-800-999-1118. Be prepared to give them the following information.
- The client’s/beneficiary’s name.
- The Health Insurance Claim Number (HICN). Typically this is the client’s Social Security Number, plus an alpha character.
- The gender and date of birth.
- The client’s/beneficiary’s address and phone number.
- The date of the incident/accident.
- A description of the injury by body part. If possible, they would prefer ICD-9 codes. You can get such codes at www.icd9.chrisendres.com.
- The type of claim. For these claims it would be a liability insurance claim.
- Your attorney and firm name along with your address and phone number.
Now, here is the disconnect. Step #2 is to a DIFFERENT ENTITY! In a different location.
- STEP #2: Proof of Representation to Medicare Secondary Payer (MSPRC) in Oklahoma City, OK. Use their PROOF OF REPRESENTATION form.
- Check the box for attorney.
- Provide the attorney name, your relationship as an attorney, the firm name and address and phone number.
- Fill in the client’s name and HICN and the date of the incident.
- Have this signed by the client and dated.
- Fax this to them at 405-869-3309.
- STEP #3: They will now send you a RIGHTS AND RESPONSIBILITIES LETTER. This will be a standard form but with the particulars regarding your claim. You should then prepare a tickler for 65 days later in order to monitor the process as shown below.
- STEP #4: In response to the RIGHTS AND RESPONSIBLITIES LETTER, you need to respond and send the following:
- Send a copy of your retainer agreement. Be sure it is fully filled out and signed by both the client and by your firm.
- Place on the top of the retainer agreement the client’s name and the HICN number.
- Send them the name, address and telephone number of the insurer and also the adjuster.
- STEP #5: 65 days from the date of the RIGHTS AND RESPONSIBILITIES LETTER, they will send you a CONDITIONAL PAYMENT LETTER (CPL). This will be a listing of the conditional payments that Medicare has made up to that time. You do not need to make a request for this. It is supposed to come automatically. However, if it has not been received by this time, you may want to call and inquire. (Do not call in less than 65 days; if you do, your request will put you at the end of the line. Each call is considered a new request and, as such, the time restarts.) At this time, they post all conditional payments information under the “MyMSP” tab of the www.MyMedicare.gov website, which is updated weekly. Thus, you can track it thereafter whenever necessary.
It is at this point that they will have also sent you a CORRESPONDENCE COVER SHEET which includes pre-printed information on your case and will have boxes to check. This will facilitate all matters with them.
NOTE: Sometimes the treating provider is having trouble getting paid by Medicare. It will assist the provider if they check the box for a conditional payment. This will facilitate their getting paid by Medicare.
- STEP #6: Now is the time when you need to review the CPL and send back a letter to MSPRC if you claim that some payments are not related. This is a big deal with a Medicare client. A Medicare client may, and probably will, be receiving other medical services unrelated to the injury claim. So you have to review these bills carefully and be sure that they are bills related to your case. This is all part of why you sent a description of the injury and why when possible you want to include the ICD9 codes.
If you object, this will trigger another 65 day wait for a NEW CONDITIONAL PAYMENT LETTER. So put in another tickler for 65 days. Once again, do not call in less than 65 days. But after 65 days, if you call they will escalate the review.
- STEP #7: The next step is after you have reached a settlement. At this point, you need to send a letter to MSPRC with all the pertinent information. Again, they have a form. Use their FINAL SETTLEMENT DETAIL DOCUMENT.
- The date of settlement or judgment.
- The amount of the settlement or judgment.
- An itemized statement of the attorney fees and costs.
- Whether or not any PIP or Med-pay was applicable.
- If the case has been dropped, or lost, send them the documentation so that they can close their file.
Do remember that Medicare pays its proportionate share of attorney fees and costs. They will make that calculation.
- STEP #8: They will now send you a final demand. It will have an itemization of the bills they paid. Once again, carefully check to be sure that these are accident related bills. If not, you must file a letter contesting that fact.
You have 60 days within which to pay their demand. You have to pay the demand even if you are contesting it. You pay the demand, and file the contest. They will reimburse you when you win. If you fail to pay within 60 days, they will charge interest and penalties.
NOTE: Another matter of interest. It is possible to claim a hardship and ask them to reduce their demand even though they did pay all the bills listed. 42 U.S.C. § 2652. But they do not negotiate at this level. Negotiations will go through the regional offices. For Washington cases that is in Seattle. There are specific guidelines for this. We have been successful in obtaining a hardship reduction, but it required repeated appeals of the initial denials.
Irrespective of these administrative steps, the process is often not smooth. The delays are exasperating. One way to aid in the process is to register your client’s Medicare account at www.mymedicare.gov. Once you are registered, you can scroll to “MyMSP” and print out the conditional payment ledger, along with the total amount Medicare is currently assigning to your claim. This is not a final demand letter, and you must be careful with this information. In a recent case we found double billings and non-related care. It runs the risk of creating even greater confusion.
Practice Tip: Liability insurers have become obsessed with demanding Social Security numbers of all claimants, claiming that Medicare requires them to do so. Medicare does not require liability carriers to obtain this information in all instances. It is only if the claimants are eligible for Medicare or will reasonably soon be eligible. If your client is not Medicare eligible, then there is no obligation to provide the Social Security number. The reporting form itself confirms this fact. Further, any information that is required is not until the settlement of the case. You need to do no more than to fill out the Medicare form relating to Social Security numbers.
Practice Tip: Many liability insurers are insisting that Medicare be named on the settlement check or that a separate check be written to cover the amount of any Medicare claim. Medicare does not require this, and in fact doesn’t want to deal with this. Adding Medicare to the settlement check interferes with contractual and business relations and is actionable in tort law. Suggestions to solve this problem include: 1) Have the settlement check made out to your firm in trust for your client and Medicare; 2) offer a hold harmless agreement signed by your client; 3) have a separate check made payable to the trust account of defense counsel for the benefit of Medicare and your firm to hold the funds until final numbers are determined with Medicare; or 4) file a motion with the court to enforce the settlement.
Practice Tip: It may be good practice to insert a “settlement czar” clause in any CR2A agreement following mediation. “To the extent that there are any disputes concerning the form or substance of settlement documents, all such disputes shall be submitted to the mediator for final and binding arbitration thereof.” In this way, you have an immediate forum to deal with the issue.
Medicare’s right to reimbursement is statutory, not equitable. As a result, they do not consider factors that limited the recovery, such as insufficient insurance coverage, comparative negligence, etc. However, Medicare does contribute its proportionate share for attorney fees and costs. But that is only as to past bills. With regard to future bills covered by Medicare Set-aside Accounts, they do not contribute. This is different from the Washington State Department of Labor and Industries scheme where attorneys’ fees and costs are provided for in the setoff.
Medicare Subrogation for Future Medical Expenses
The latest area of interest in Medicare subrogation is the Medicare Set-aside Account to cover future medical expenses. This issue has again prompted reactions from liability insurers that “the sky is falling.” First, the sky has not yet fallen; and even if it ultimately does (they have postponed the applicable date three times), there will be limited application except in catastrophic damage cases.
A Medicare Set-aside Account (MSA) is a separate account established after a settlement or judgment which a claimant uses to fund his/her reasonably expected future medical expenses related to the injury which is the subject of the tort case. Medicare’s interest in the establishment of an MSA is to provide for future payment of injury-related healthcare expenses which would otherwise be covered by Medicare. Medicare’s concern is that following a settlement or judgment, responsibility for payment of future medical expenses is not shifted from worker’s compensation or liability insurance to Medicare.
The Centers for Medicare and Medicaid Services (CMS) have published various memos, answers to Frequently Asked Questions (FAQs) and checklists regarding the required contents of an MSA and submission of a proposed MSA to CMS for approval. The primary task in establishing an MSA is to determine the amount necessary to fund the set-aside arrangement in order to ensure payment of injury-related future medical expenses. The CMS-required contents in an MSA include rated age information or life expectancy, a life care plan, any proposed settlement agreement, medical records, medical expense payment history, and a future treatment plan.
Importantly, all of the CMS published information regarding MSAs is in reference to workers’ compensation. In those CMS publications, there is no reference to the use of MSAs in liability insurance claims which do not involve workers’ compensation. However, the statutory basis for the CMS memos regarding the use of MSAs in workers’ compensation cases to ensure payment of future medical expenses by available sources other than Medicare, is the same statutory basis for Medicare’s status as a secondary payer in cases where liability insurance is available. The statutory basis for both scenarios is 42 U.S.C. § 1395y(b)(2), which provides that Medicare payment is not available (or must be reimbursed) where “payment has been made or can reasonably be expected to be made under a workman’s compensation law or plan … or under an automobile or liability insurance policy…” Accordingly, when a Medicare recipient is a claimant in a claim or lawsuit involving liability insurance, the claimant (and his or her attorney) cannot ignore the statutory proclamation that Medicare will not pay post-settlement or post-judgment future medical expenses when payment “can reasonably be expected to be made … under an automobile or liability insurance policy.”
There is no current law, nor any regulations, which require the establishment of a Medicare Set-aside Account (usually an annuity funded trust) for a third-party liability settlement. Current legal advice is that it is not necessary. If insisted on by a liability carrier, “Just say no!” But watch this area of the law. It may change in the future. If it does, CMS will have to promulgate new regulations and we will be put on notice.
CMS has issued 10 memoranda addressing workers’ compensation settlements or judgments involving Medicare beneficiaries. As part of this guidance, CMS advises that it must review any workers’ compensation cases involving currently enrolled Medicare beneficiaries where the gross settlement value is greater than $25,000. For beneficiaries who are not enrolled in Medicare at the time, CMS advises that beneficiaries and their attorneys should seek CMS approval for any cases where they expect to be enrolled in Medicare within 30 months of settlement and the gross settlement value is greater than $250,000.
In the case of a workers’ compensation settlement, Medicare will not pay for future injury-related medical expenses until the amount of the settlement that was specifically allocated to the MSA to pay for such care has been properly exhausted.
The size of the MSA depends on the amount of future care that Medicare would otherwise pay and is usually determined by a team of professionals that the client’s lawyer or insurer retains. This team includes a financial consultant to address funding options and a nurse or other medical professional to determine the expected future medical expenses that Medicare would otherwise pay for. A medical examiner will review the client’s medical records and recommend how much of the settlement or judgment should be placed in the MSA, and then he or she will send a report to CMS, which administers Medicare, for review and approval, assuming the case meets CMS’s review thresholds. There are several entities out there that provide the service of both drafting these MSAs and later administrating them.
On approval, the MSA will be funded from the settlement proceeds. Then the client must file yearly accountings with CMS until the account is exhausted. If an MSA is not set up in a case where CMS thinks it should be, CMS may suspend or stop Medicare payments.
CMS will not automatically respond to and accept or reject a proposed MSA. They are understaffed. This is not presently a priority for them. In fact, CMS approval of an MSA is not required. But their lack of response is not necessarily an approval of a submission and does not create a safe harbor. This is of course fraught with danger for the attorney and his/her client. I submitted an MSA eight months ago to CMS and have yet to hear back from them.
Practice Tip→It is good practice to put into any settlement documents in the third-party case that the parties have considered and provided for the interests of Medicare in the settlement. However, do not be bullied into overfunding the MSA by an aggressive defense attorney or insurance company. A letter to the file that the insurance company has recommended a larger funded MSA and Plaintiff has refused should suffice to protect the insurer from any future Medicare claim.
Practice Tip→ Twice I have been involved in catastrophic injury cases where the need for an MSA has come into play. We had our own life care planner in the tort action who the defense said was setting the figures too high. The defense had their own life care planner in the tort action who we argued was setting figures too low. Now with the settlement of the case, the liability insurer demanded an MSA funded consistent with our life care plan. We wanted to use theirs. But these life care plans are not necessarily consistent with the needs for an MSA. The MSA only covers expenses paid by Medicare. For instance, Medicare does not cover attendant care which is often a huge component of a life care plan. The MSA need only cover Medicare reimbursement rates, not reasonable rates in the medical community. Again, this can make a big difference in the total costs. Life expectancy is another huge variable that can make a difference in the size of an MSA as compared to evidence in your life care plan. These issues need to be carefully considered.
Sometimes, a health insurer will say its insurance policy does not have a specific subrogation clause, but it is a Medicare Supplementation policy and as such a specific clause is not required since its payments are dependent upon Medicare’s conditional payments. Actually, in Care Choices HMO v. Engstrom, and Nott v. Aetna U. S. Healthcare, Inc. the courts held that the Medicare Act did not create a subrogation right for health insurance companies. It only permitted them to include a subrogation provision in their plan with the beneficiary. Without that, there is no subrogation interest.
Medicaid is administered in Washington State by the Department of Social and Health Services. Washington statutory law states that when DSHS provides assistance for injuries to a recipient, “. . . the department shall thereby be subrogated to the recipient’s rights against the recovery had from any tortfeasor or the tortfeasor’s insurer, or both, and shall have a lien thereupon to the extent of the value of the assistance furnished by the department.” 
Practice Tip No. 15
RCW 43.20B.070 requires the attorney representing an injured party who is receiving DSHS benefits to notify the Department of the filing of any claim, commencement of any lawsuit or settlement of any tort case. We do make sure that we provide that notice when we undertake a case. Our practice, however, is not to notify the Department if we are settling just one portion of the case. This may be UIM proceeds, settlement with one of several defendants or other partial settlement of the case. You don’t yet have enough information to resolve any subrogation claim. You don’t know yet what the full amount of the recovery will be. However, do be sure to withhold sufficient funds to protect DSHS from whatever it may ultimately be entitled to recover. You can base that calculation on a preliminary analysis that this partial recovery is all that will be obtained, and calculate the Department’s share from those numbers. Hopefully, further legal action will increase your tort recovery, which will then correspondingly increase the subrogation rights of DSHS.
RCW 74.09.185 prohibits DSHS from reducing or prorating its subrogation rights:
Recovery pursuant to the subrogation rights, assignment, or enforcement of the lien granted to the department by this section shall not be reduced, prorated, or applied to only a portion of a judgment, award, or settlement, except as provided in RCW 43.20B.050 and 43.20B.060. The doctrine of equitable subrogation shall not apply to defeat, reduce, or prorate recovery by the department as to its assignment, lien, or subrogation rights.
But because federal funds are involved, federal law also applies. Under 42 U.S.C. §1396a(a)(25)(B) states are authorized to seek reimbursement from tort recoveries. The case of Arkansas Dept. of Health and Human Services v. Ahlborn, dealt with the clash between state and federal statutes. The Washington statutes are similar to the Arkansas statutes in question in that case.
I believe that Ahlborn will be the future of subrogation law. Its equitable pronouncements by the United States Supreme Court will drive the focus of all subrogation/reimbursement law in this country. As a result, I will present this decision in detail.
The U.S. Supreme Court Decision in Ahlborn
In Ahlborn, the Supreme Court held that when a Medicaid recipient settles a tort claim against a third party, federal Medicaid law prohibits a state from asserting a lien in excess of the medical expenses portion of the settlement proceeds.
In Ahlborn, 19-year-old Heidi Ahlborn suffered severe and permanent injuries in an automobile accident. She sued two alleged tortfeasors in state court. The Arkansas Department of Health Services (ADHS), which paid for her care under the state’s Medicaid plan, intervened in the case to assert a lien on the proceeds of any third-party recovery that Ms. Ahlborn might obtain. The case was settled for $550,000. The parties did not allocate the settlement between categories of damages. ADHS did not participate in the settlement negotiations nor seek to reopen the judgment after the case had been dismissed. ADHS did, however, assert a lien against the entire settlement proceeds in the amount of $215,645.30 – the total payments made by ADHS for Ms. Ahlborn’s care.
Under Arkansas law, when the amount paid by ADHS for the beneficiary’s care exceeds the portion of the settlement that represents medical costs, satisfaction of the lien requires payment out of proceeds meant to compensate the recipient for damages distinct from medical costs, such as pain and suffering, lost wages and lost future earnings. This is the same as Washington’s statute, RCW 74.09.185. The parties stipulated that Ms. Ahlborn’s entire claim was reasonably valued at $3,040,708.18, and that the settlement amounted to approximately one-sixth of that sum.
Based on its interpretation of federal third-party liability provisions, the U.S. Supreme Court agreed with Ms. Ahlborn that Arkansas law went too far, and held that ADHS could not lay claim to more than the portion of her recovery that represented medical expenses. In reaching its conclusion, the Court rejected ADHS’s position that 42 USC § 1396a(a)(25)(B)’s requirement that states seek reimbursement for medical assistance to the extent of such legal liability meant that the entirety of a recipient’s settlement is fair game. Instead, the Court concluded that the statutory language referred to “the legal liability of third parties … to pay for [medical] care and services available under the plan.”
The Court then noted that the tortfeasor in Ahlborn had accepted liability for only one-sixth of the overall damages and that ADHS had stipulated that only $35,581.47 of that sum represented compensation for medical expenses. The Court stated, “Under the circumstances, the relevant ‘liability’ extends no further than that amount.” In a footnote, the Court added: “The effect of the stipulation is the same as if a trial judge had found that Ahlborn’s damages amounted to $3,040,708.12 (of which $215,645.30 were for medical expenses), but because of her contributory negligence, she could only recover one-sixth of those damages.”
In response to ADHS’s concern that settlements would be manipulated without a rule of full reimbursement, the Court stated: “The issue is not, of course, squarely presented here; ADHS has stipulated that only $35,581.47 of Ahlborn’s settlement proceeds properly are designated as payments for medical costs. Even in the absence of such a post-settlement agreement, though, the risk that parties to a tort suit will allocate away the State’s interest can be avoided either by obtaining the State’s advance agreement to an allocation or, if necessary, by submitting the matter to a court for decision.”
In reaching its conclusion, the Supreme Court also held that the Arkansas statutory scheme “squarely conflicts with the anti-lien provision of federal Medicaid laws.” The federal anti-lien statute provides that “No lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan …” The court noted that, under the plain language of the statute, even though “the State can require an assignment of the right … to receive payments for medical care … that does not mean that the State can force an assignment of, or place a lien on, any other portion of Ahlborn’s property.”
The Washington Supreme Court Decision in Wilson
The Ahlborn ruling is the same conclusion reached by Justice Alexander concerning the Washington statutes relied upon by the Department in his dissent in Wilson v. State, a case considered by the Washington State Supreme Court before the U.S. Supreme Court decided Ahlborn.
As explained by Justice Alexander:
In my view, RCW 43.20B.060(2) and RCW 74.09.180 both directly conflict with 42 U.S.C. § 1396p (1994). I reach that conclusion because these statutes purport to allow the State to impose its lien on a Medicaid recipient’s entire recovery from a third party. Because of this direct conflict with a federal statute, the state statutes are preempted. Berger v. Personal Prods., Inc., 115 Wn.2d 267, 270, 797 P.2d 1148 (1990)…
…I part company with the majority’s conclusion that the State’s lien affixes to the Medicaid recipient’s recovery beyond that which represents reimbursement for medical expenses.
Justice Alexander then observed that, although the State may attach a lien to the portion of the recipient’s recovery that represents recovery of sums that it has paid for medical expenses, the Washington statutes go beyond what the State is authorized to charge because they allow the State to place a lien upon “any recovery” by the recipient:
42 U.S.C. § 1396p(a)(1) (1994) provides, in pertinent part, that “[n]o lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan[.]” On the surface, this federal statute would appear to prevent a state from imposing a lien on any portion of a Medicaid recipient’s third party recovery. The statute must, however, be considered in light of 42 U.S.C. § 1396a(a)(25)(H) (Supp.1998), which requires states to promulgate statutes under which “the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services[.] ” (Emphasis added.) Account must also be taken of 42 U.S.C. § 1396k (1994), which requires states to obtain an assignment of rights to recovery of payment for medical expenses from a third party as a condition of eligibility for medical assistance. When this statutory scheme is considered in its entirety, it is apparent that a state is vested with authority to require Medicaid recipients to assign to the State their right to obtain payments from another party for health care items or services. That coupled with the legislative declaration in RCW 74.09.185 that “the state is considered to have acquired the rights … to payment by any other party for … health care,” leads to a conclusion that the Medicaid recipient does not acquire a proprietary interest in that portion of his or her recovery representing payment for health care items or services. It is clear, therefore, that the State is free to attach its lien to the portion of the recipient’s recovery that represents recovery of sums that the State has paid for medical expenses. RCW 74.09.180 and RCW 43.20B.060(2), however, go beyond what the State is authorized to do in that they purport to allow the Department to place a lien upon “any recovery” by the recipient. This as the trial court properly observed conflicts with the federal statutory scheme.
Relying on Flanigan v. Department of Labor & Indus., Justice Alexander further emphasized that the State should not be allowed to “share in damages for which it has provided no compensation” because such a result would be “absurd and fundamentally unjust.”
 42 U.S.C. § 1395y(b)(2)(ii).
 Hoffman & Acosta, Beware of the “Super Lien”: Medicare Payments’ Effect on Personal Injury Cases, 81 ILL. B.J. 82 (1993).
 42 U.S.C. § 1395, §1862.
 42 C.F.R. § 411.24(g).
 See Tomlinson v. Landers, 2009 WL 1117399, U.S. Dist. Court, M.D. Florida.
 42 C.F.R. 411.37.
See Ctrs. Medicare & Medicaid Servs., Workers Compensation Medicare Set-aside Arrangements, www.cms.gov/WorkersCompAgencyServices/04_wcsetaside.asp.
See 42 C.F.R. §411.46(d)(2) (2010).
See Ctrs. Medicare & Medicaid Servs., Administering WCMSAs, www.cms.gov/Workers CompAgencyServices/07_administeringwcmasas.asp.
See Ctrs. Medicare & Medicaid Servs., Introduction to WC, www.cms.gov/Workers CompAgencyServices/02_workerscompensationoverview.asp.
 330 F.3d 786, 790 (6th Cir. 2003).
 No. 03-cv-4044 (E.D. Pa. 2004).
 RCW 74.09.180.
 RCW 43.20B.060(4) provides that, “If recovery is made by the department under this section and the subrogation is fully or partially satisfied through an action brought by or on behalf of the recipient, the amount paid to the department shall bear its proportionate share of attorneys’ fees and costs.”
 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006).
 Ahlborn, 547 U.S. at 283; see also Paopao v. State, 145 Wn. App. 40, 47-48, 185 P.3d 640 (2008) (recognizing that, under Ahlborn, “a state may place a lien on any recovery from a third party only in an amount that represents payments for medical care.”).
 Ahlborn at 272.
 Ahlborn at 279-280.
 Ahlborn at 280.
 Id. at 280-281.
 Id. at 281, fn. 10.
 Id. at 288.
 Id. at 280.
 42 U.S.C. § 1396p(a)(1).
 142 Wn.2d 40, 10 P.3d 1061 (2000).
 Wilson at 52-53 (Alexander, J. dissenting).
 Wilson at 53-54 (Alexander, J., dissenting).
 123 Wn.2d 418, 869 P.2d 14 (1994).
 Wilson at 55 (Alexander, J., dissenting), quoting Flanigan at 426.