Will Medicare and Medicaid Affect My Personal Injury Settlement?
Here’s a question we get all the time at Patton and Patton, “Will Medicare and Medicaid affect my personal injury settlement?” The short answer is yes. Medicaid and Medicare are allowed to make a recovery against your personal injury settlement for reimbursement of medical bills they paid because of your injury.1 The right to recovery funds from your settlement is called a lien. Besides considering their recovery, you also have to consider Medicare’s future interest when you settle. Medicare is not responsible for paying for future medical care for your accident injuries if your settlement specifically included funds to pay for that future care. Let’s unpack this and go through the details below.
Medicaid is a government program administered by individual states in which the government pays medical bills through a health plan for those who qualify based upon income. On the other hand, Medicare is a federal health insurance for people over 65 and for certain younger people with disabilities. If you were injured in an accident and your Medicaid or Medicare program paid for some of your medical bills, the law provides that they would have to be reimbursed out of your recovery. There are a few steps to take to resolve a Medicare or Medicaid lien or subrogation. We will discuss below some details involved in dealing with a Medicare lien.
Step 1: Notify Medicare of your Personal Injury Claim
Medicare Part C Advantage Plans are offered by private companies, like United Healthcare or Aetna.2 approved by Medicare. These companies rarely, if ever, handle recovery from injury claims in-house. Instead, they usually hire a third party to collect the funds on their behalf. In these situations, you will notify one of these third-party companies directly. Familiar companies that administer these liens against your settlement include, Equian, Rawlings, or Optum. First, call the company and tell them you would like to notify them of an injury claim. Next, they will ask you questions about your injury and accident. After you give them all the information, the case is assigned to a specialist who will send a series of letters, including one letter that will summarize the payments made on your behalf and list the current amount that your insurance company believes they may recover out of your injury settlement.
Basic Medicare plans are not administered by a private insurance company. Here, you will deal with Medicare directly. Medicare has set up a website called the Medicare Secondary Payer Recovery Portal (MSPRP) to facilitate all the steps involved in their recovery process.3 You can coordinate with Medicare directly by creating an account on the MSPRP and following these steps to resolve their lien.
Step 2: Negotiate a Reduction
If you are dealing with a Medicare Advantage plan, or a hospital lien, it’s essential to negotiate a reduction with the lien holder. Without a reduction, a lien can take your entire injury settlement. The lien reduction process is very complicated, and every situation is different. Therefore, it is not advisable to negotiate a reduction to a lien without speaking to an attorney. There are a few grounds on which to make a reduction offer.
Pro-Rata or Equitable Reduction
Pro-Rata is a fancy word that means proportionally.4 If the lienholder asks for more money than you are likely to recover from your injury settlement, then a pro-rata reduction is often warranted. A pro-rata reduction means the lien holder would reduce their lien to a set proportion of the total settlement amount. For example, here’s a standard pro-rata agreement for individuals with attorneys: the beneficiary receives a third of the settlement, their attorney receives a third for their attorney fees, and all other lien holders divide them the last third in proportion to their size lien.
Reasonable Cost Reduction
This reduction is much more common when hospitals are issuing liens, but a reasonable cost reduction is a reduction based on real the medical care costs before all the high, for-profit markups. Hospitals will often charge ten times the amount a particular procedure costs them. Usually, state laws have a provision that says hospitals only may recover a reasonable value of services rendered in their lien.5 Hospitals report their costs to Medicare every year. You can find these cost reports on Medicare’s website or from a website called Cost Report Data. If you can document the actual cost of your treatment and offer a modest 50% profit margin on the cost, you stand a good chance of securing a significant reduction to the lien.
Rights of Recovery
A lienholder only may recover if the beneficiary receives a settlement. Suppose the size of the lien to too large to make settling the case worth it. There, the beneficiary might decide not to accept an injury settlement, giving the beneficiary some negotiating leverage. The lienholder is inclined to find an agreement that is acceptable to everyone to ensure they are able to make some kind of recovery. This negotiation is much more common with third-party companies like Optum or Rawlings. When dealing directly with Medicare, they are much less flexible. Medicare has very specific grounds and criteria by which they will reduce their lien amount.
If you can secure a reduction, get the reduction in writing. When you receive a letter specifying a reduction amount, pay close attention to any deadlines. For example, a letter will sometimes create a thirty-day window to make payment on the reduction amount before the offer expires. If an offer expires, you must contact the lienholder to either negotiate a new reduction or get a new letter with the same reduction amount before issuing any payments. Medicare’s final letter stipulates a deadline that, if missed, will begin accruing interest on the lien amount. It is a good idea to negotiate reductions when you are close to settling with the liability insurer. That way, you can issue payment soon after a reduction agreement is reached.
Step 3 Consider Medicare’s Future Interest. VERY IMPORTANT STEP
If this step is not handled correctly, Medicare could deny coverage in the future. This nightmare scenario is one you’ll want to avoid. Because this step is so important, we advise speaking to an attorney about how best to consider Medicare’s future interest. This step is required because of a provision in federal law that protects Medicare from paying for future medical care funded by an injury settlement. If, for example, funds for a future surgery were included in your settlement, the law states that payment for that surgery should come out of the settlement funds instead of out of Medicare’s pocket. There are a few ways to consider future medical properly.
Signed Certification of Completed Treatment
If your treating doctor signs a letter specifying that the treatment for injuries related to your auto accident was completed before your settlement, you are in the clear. Note we said treating doctor not an independent doctor that gives an opinion without actually providing the treatment. Suppose you injure the same body part in the future, and Medicare claims it is treatment related to your accident. In that case, you can show the letter to Medicare that confirms this treatment is not associated with your accident. This method is the simplest and easiest method to protect your future Medicare benefits.
Certify That the Settlement Did not Include Future Medical
Sometimes a settlement is reached that doesn’t fund future medical care. Maybe there is an issue with unclear liability, or perhaps there isn’t much available to recover. For whatever reason, if the settlement does not fund future medical, Medicare is responsible to pay for treatment of the same body parts that were injured in your accident. Unfortunately, this path is a little riskier. Medicare might not take your word for it or the word of the liability insurance company. We recommend having the case reviewed by an independent expert like the experts at Synergy Settlement Services in these situations. Synergy can generate a letter verifying that the settlement didn’t fund future medical and that Medicare’s future interest was considered correctly.
Set Up a Medicare Set Aside Trust
If future medical is provided for in the settlement and future medical is clear and defined, the best thing to do is set up a Medicare Set Aside Trust.6 In this situation, you would need a physician to determine what future medical would be required. Next, you would need an attorney to set up the trust. Next, you would need an estimate of that future medical care from a company like Accumed Healthcare Research. Finally, you would either need to administer the trust yourself or find a third party to issue medical payments. A trust is the most complicated and challenging way to consider Medicare’s future interest, but sometimes it is the only legal path.
Step 4: Notify Medicare of your Injury Settlement
This last step is less complicated than step two or three. Provide the settlement details to Medicare, including total settlement amount, expenses associated with your case, attorney fees, and any other liens in your case. After about ten days, the lien holder will mail a final demand. They lock in the amount they believe they are entitled to recover. Pay close attention to these letters. In Medicare’s case, a deadline is given for payment. If you miss the deadline, the amount will accrue interest. After receiving the demand letter and receiving settlement funds, you can mail the lienholder a check. Again, make sure you have a good address. They are often listed in either the first letter you receive or the last letter you receive from the lien holder.
If you have Medicare, there are many ways these health plans could affect your injury settlement. A dozen pitfalls could cause situations where you lose Medicare coverage for certain kinds of treatment and body parts. You could lose your entire injury settlement, or worse. This is true whether the injuries came from a car accident, motorcycle accident, truck accident, slip and fall, or any other personal injury claim. We highly recommend consulting with an experienced injury attorney to make sure none of these regrettable situations happens to you. At Patton and Patton, we have handled thousands of these types of cases. In one case, we secured $296,767.34 in lien reductions for our client. Talk with one of our experienced attorneys today.