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FMG Law Blog Line

Obligation to Medicare when Plaintiff Is at Fault

Posted on: January 22nd, 2021

By: Jennifer Adair

You have a slam dunk case. Perhaps you have already won your case at trial or on summary judgment. Once the celebrations subside, defendants and insurers in such situations began to evaluate the fastest and most cost-efficient way to bring final closure to the matter. Frequently, that involves entering into a nominal settlement agreement with the plaintiff to foreclose appeals or future litigation costs.

But, when that plaintiff’s medical treatment was paid for by Medicare, who receives the funds? The answer may surprise you. The Medicare Secondary Payor Act requires insurers to reimburse Medicare for its payments made, even when there is a dispute as to liability and the payment is insufficient to cover the entire amount claimed. 

Under 42 USC § 1395y the insurer’s responsibility to reimburse Medicare is triggered “by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means.”

This is true even when the settlement amount is only a fraction of the amount paid by Medicare. Litigants and insurers should report the settlement to Centers for Medicare & Medicaid Services (“CMS”), and obtain a conditional payment letter. The plaintiff or claimant will then have the opportunity to attempt a compromise of the amount claimed by CMS.

Because of the interest and penalties that can attach when a party fails to comply with this requirement, insurers and self-insured defendants would be wise to consult with counsel when in doubt as to whether a payment must be reported.

For more information, please contact Jennifer Adair at [email protected].

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