A recent trend in the settlement of personal injury matters involves demands by the tortfeasor's liability insurance company requesting a plaintiff to produce final lien information in regard to Medicare before the matter can be finally concluded and a settlement draft issued. This is so because of the potential penalties that may arise if Medicare liens are not addressed out of the settlement funds.
In response to these demands by liability carriers, there has been a more recent push back by plaintiffs counsel objecting to such requests for documented lien information, particularly where there has been previous confirmation that no such Medicare liens exist.
It seems that the Medicare rules and regulations surrounding the payment of Medicare liens are so obtusely intertwined and worded that even lawyers need other lawyers to fully explain the mandates and requirements of the law.
This makes lawyers nervous. And when lawyers get nervous, litigation is likely to result as they turn to the courts for guidance on how to proceed.
The recurring dispute over whether or not final lien letters from Medicare are required before a settlement can be completed has resulted in a number of recent court decisions. All of these decisions appear to support the conclusion that the settlement of a personal injury action cannot be held up by a demand that a final lien letter be secured from Medicare.
Framework of Medicare Liens
As noted, the Medicare rules on liens are difficult to follow. However, Allegheny County Court of Common Pleas Judge R. Stanton Wettick Jr. aptly summarized the framework of the law in his opinion in the case of Wimberly v. Katruska, PICS Case No. 12-1060 (C.P. Allegheny Co. May 23, 2012 Wettick, J.).
Wettick explained that, under the federal Medicare Secondary Payer Act, Medicare can only pay bills not paid by a "primary payer." Under the law, if Medicare initially makes a payment of a medical expense and a primary payer is later identified, the primary payer must reimburse the U.S. government for the payment made.
Wettick went on to note that under the Medicare Secondary Payer Act, automobile or liability insurance carriers meet the definition of a primary payer. Therefore, under the law, a liability insurance company paying a settlement can be required to reimburse Medicare under the applicable regulations. The regulations also give Medicare and the Centers for Medicare Services a direct right of action to recover the lien amount from any primary payer.
Thus, there is a valid fear for automobile and liability insurance carriers that, if they pay out a settlement, Medicare could later come after the insurance carrier to pay back a Medicare lien if that lien is not satisfied by the injured party plaintiff out of the settlement proceeds. To guard against this, the insurance carriers have demanded, before the settlement check is issued, that the injured party plaintiffs provide written confirmation from Medicare that there is no Medicare lien to be addressed. In some instances, as a further means of protection, some insurance carriers have even demanded that Medicare be listed as a payee on the settlement draft.
Guidance from Superior Court
In its 2010 decision in the case of Zaleppa v. Seiwell, 9 A.3d 632 (Pa.Super. 2010, Allen, Mundy, and Colville, JJ.), the Pennsylvania Superior Court addressed the propriety of a liability carrier's demand that Medicare be listed as one of the payees on a settlement check.
In Zaleppa, the plaintiff obtained a $15,000 jury verdict against the defendants, $5,000 of which was for future medical expenses and the remainder of which was for pain and suffering.