Medicare Conditional Payments – Lawyers Beware

Most lawyers who practice injury law know at least vaguely of the existence of the Medicare Secondary Payer Act.  In general, the Medicare laws require that if there is a primary payer, such as a health insurance plan, workers’ compensation, or automobile insurance, which covers an individual’s medical expenses, Medicare should always take a back seat; i.e. Medicare should always be a secondary payer.  42 U.S.C. § 1395y(b)(2)(A)(ii).  Some lawyers may not know that they could potentially have personal liability if they fail to protect Medicare’s interests.  There are two such interests in the realm of injury law: the future potential interest, which could require a Medicare Set Aside trust, and the past interest, dealing with conditional payments.  This article will discuss only the latter, and particular pitfalls for attorneys.

Conditional payments, loosely defined, refer to payments made by Medicare when there was another primary payer, like workers’ compensation, which should have paid the bill.  These situations can occur frequently in the beginning of a claim, where the person has been injured recently and the medical provider is unaware of the primary payer or the primary payer’s claim has not even been set up yet.  In the case of a denied workers’ compensation claim, an injured worker might go for months without workers’ compensation accepting liability for the injury.  In these cases, Medicare often pays the bills.  But when liability is established against the primary payer, Medicare wants its money back.  This is the essence of the conditional payment – Medicare is paying, conditionally, until liability by the primary payer is established.

The pitfall for attorneys was recently brought into focus by a case out of the United States District Court for the Eastern District of Virginia, Humana Ins. Co. v. Paris Blank, LLP , 2016 U.S Dist. LEXIS 61814 (May 10, 2016).  In that case, Humana, a Medicare Advantage provider under Medicare Part C, made conditional payments on behalf of its enrollee who had been injured in an automobile accident.  The enrollee engaged Paris Blank, LLP as her lawyers, and they initiated a lawsuit and collected personal injury proceeds.  Despite a request, the lawyers did not pay any money to Humana to resolve Humana’s claim for reimbursement of its conditional payments.  Humana then sued the lawyers under the Medicare Secondary Payer law.

The Medicare law generally “establishe[s] a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”  42 U.S.C. §1395y(b)(3)(A).

The lawyers moved to dismiss the case, essentially arguing that the Medicare law does not allow a private right of action for a Medicare Advantage provider to bring a claim to pursue conditional payments.  The District Court rejected this argument, allowing the claim against the lawyers to move forward.  It noted that the Federal Third Circuit Court (which covers Pennsylvania) has already found that a Medicare Advantage Organizations could maintain a private right of action to recover conditional payments, citing In re Avandia Marketing, Sales Practices, & Products Liability Litigation (“In re Avandia”), 685 F.3d 353 (3d Cir. 2012).

The lawyers also tried to argue that since they were not primary payers, they should be immune from suit.  The District Court countered that “the law does not carve out exceptions for attorneys and law firms” and noted that the Medicare regulations identify attorneys as an entity from which recovery may be sought under the Medicare law.

The takeaway for lawyers is to beware.  Attorneys who dabble in injury claims and attorneys who practice primarily injury law alike should be sure to verify that no conditional payments have been made before making distributions to clients.  Failure to account for Medicare’s interests can land them in hot water.

Levi S. Wolf, Esquire is a shareholder in the law firm of Wolf, Baldwin & Associates, P.C. with offices in Pottstown, Reading, and West Chester.  He is certified as a specialist in the practice of workers’ compensation law by the Pennsylvania Bar Association’s Section on Workers’ Compensation Law as authorized by the Pennsylvania Supreme Court, and focuses his practice on workers’ compensation law and family law.  Mr. Wolf can be reached at 610.323.7436 or by e-mail to Lwolf@wolfbaldwin.com.

like0