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Articles Posted in Subrogation

Hot off the press this morning from AAJ:

As all of you are aware, the Centers for Medicare & Medicaid Services’ (CMS) implementation of the Section 111 reporting requirements of the Medicare Secondary Payer Act (MSP) for liability settlements and the penalties associated with improper lien resolution has created turmoil and delay for anyone trying to reach a settlement in any liability case.

After several months of working with the Department of Health and Human Services (HHS) and CMS, we are pleased to inform you that today CMS is announcing a one year delay in implementation on Section 111 reporting requirements for claims involving liability insurance, retroactive to October 1, 2010 through October 1, 2011. This delay should facilitate settlements and allow for faster resolution of certain cases. In addition, we believe that during this period, CMS will suspend the issuance of MSP guidance documents, which have often been contradictory and a source of confusion.

The United States Court of Appeals for the Eleventh Circuit has ruled that Medicare is not entitled to rely on its field manual and argue that a subrogation interest be reduced under a "made whole" type of analysis only if a judgment is entered in the case.

In Bradley v. Selbelius, plaintiff settled a wrongful death case for policy limits, $52,500, and put Medicare on notice of the settlement.  Medicare asserted a $38,000+ lien, less procurement costs.  Plaintiff filed suit in the probate court and asked the court to determine the value of the case and the amount that needed to be re-paid to Medicare.  Medicare refused to participate.  

The trial judge ruled that the value of the case exceeded $2,500,000 and that Medicare’s reimbursement should be cut to $787.50.    Medicare refused to recognize the probate court’s decision, saying that its field manual provided that it need not rely on a court order allocating proceedings unless the court order was based on the merits of the controversy.   The estate paid Medicare under protest, exhausted its administrative remedies, and then filed suit in federal court.

There are more and more tort cases arising after criminal acts, and one might forget that the State of Tennessee has subrogation rights to monies received in the later tort action.

T.C.A. Section 29-13-113 grants the state a subrogation right in proceeds recovered by the victim in a later torts suit.   The statute also requires that the district attorney be given notice of the filing of the tort suit and copied on all pleadings after the suit is filed.

Dealing with Medicare on subrogation issues can be a nightmare.  This bill, HR 4796, the Medicare Secondary Payor Enhancement Act, would help make things easier by requiring the Center for Medicare Services to respond to requests for their lien amount within 60 days.

A defense lawyer and I were having a drink the other day and he told me that from time to time he has difficulty getting cases settled at mediation because plaintiff’s lawyers don’t have information about subrogation interests.  Here are some tips to avoid such problems:

  1. At the initial client meeting, as you help you client understand his or her rights and go through the outline of the types of damages he or she can recover if the case is successful, explain the law of subrogation.  To do so you have to ask whether any insurance company or governmental entity  paid the outstanding medical bills.  Then, explain that usually it will be necessary to re-pay  the entity that paid these bills monies from the proceeds of any settlement or judgment.  This not only informs the client of his or her obligation to re-pay the bills but also sets client expectations at an appropriate level.
  2. If the bills are paid by a private entity get a copy of the applicable insurance policy or summary plan description to determine if a right of subrogation or reimbursement exists and if the plan is an ERISA plan. 
  3. If the bills were paid by a governmental entity (in Tennessee this usually means either Tenncare or Medicare) you need to either know the law of subrogation or look it up.  The bottom line:   government payors have a right to be re-paid and it is your obligation, as a lawyer,  to help them get re-paid.  If you don’t do so you (the lawyer) will be on the hook to re-pay these bills, so it is in your best interest to understand this law and help your client fulfill their  obligation.
  4. Remember that your client’s medical bills may have been paid by worker’s compensation.  If so, the payor has a statutory right of subrogation.  Ignore it at your peril.
  5. Gather all of the medical bills and determine who paid them.  Your client may not have given you accurate information about the entity that made the payments on the bills.  For instance, sometimes a client receives both Medicare and Tenncare benefits.  You need to know each entity that paid bills.   It is also possible that your client’s auto insurance carriers paid some of the bills under a medical payments provision in the policy.  Get a copy of the policy to be sure, but auto insurance carriers almost certainly have a subrogation right for any such payments.
  6. Private health  insurers routinely send letters asserting subrogation interests.  Tell your client that they may be receiving such letters and make sure you get them.
  7. Ascertain the amount paid by each third-party before the mediation of the case.  This can be difficult, especially with Medicare, but start early and keep at it.  Do not accept numbers over the phone – try to get the payment amounts in writing.  If you get a total-payment figure over the phone confirm the number in an email or letter.   Do not wait until the day or even the week before the mediation to do this – you will not get the information you need before the mediation.
  8. You will need to check the claimed subrogation interest versus the amount actually owed.  Sometimes insurers include bills for care unrelated to the incident.  Thus, you must get a print-out of who the insurer paid and the date of service for that payment and compare it with your client’s medical records.
  9. Get the name and telephone number of a contact person at the third-party payor that you can contact during a mediation.  Make sure you understand if their office is on Central time, Eastern time, or some other time – you need to know how late you can reach them.   Advise them that you have a mediation on a given day and that you will need to be able to reach them during the mediation.  
  10. Some payors will reduce the subrogation amount if the client is not "made-whole" even if they have no legal obligation to do so.  A version of the  made-whole doctrine is statutory for Tenncare payments and the common law made-whole doctrine applies to med-pay and non-ERISA health insurance policies in Tennessee.  Understand the law applicable to each third-party payor before the mediation.  
  11. In the days or weeks before the mediation as you explain the process to your client remind them once again of the need to re-pay the entities that paid the medical bills.  By doing so  you are reminding them of their legal obligation and at the same time setting a reasonable level of expectation of what will occur at the mediation.
  12. Have the relevant contact information and the claimed subrogation amounts with you at the mediation.  How often you contact the payor during the mediation is subject to many factors, but generally speaking as want to call them as the settlement appears to be coming together.  You can often negotiate the amount due, but be armed with the facts that will help you do so.  The best fact to use to negotiate a reduction is a liability insurance policy that is totally inadequate given the injuries and the lack of any assets from the defendant.   There are a multitude of other factors, such as immunity for one or more defendants, a damage cap for a governmental entity, very difficulty liability facts, etc.  If the made-whole doctrine is applicable all arguments must be marshaled and presented.  Some carriers are willing to cut their subrogation amount if you demonstrate a willingness to help get a difficult case resolved by reducing your fee.  Confirm any deals made in writing or by email.
  13. Try to have the subrogation issues resolved before you leave the mediation.  If that is impossible, then attempt to make the settlement subject to a satisfactory resolution of subrogation interests in the next few days.  Be sure the language of the agreement with the defendant provides that it is you (and your client) that must be satisfied with the resolution of the subrogation interests.
  14. As I mentioned above, it is difficult to get a straight, final answer out of Medicare.  Start early, and write to them often.  Try to get the name and number of  a human being.  If you cannot get an answer out of Medicare before the subrogation, you will be forced to estimate the amount of their subrogation interest.  You will usually be safe if you assume that Medicare paid 40 cents on each dollar charged by a health care provider.  In other words, if the hospital bill shows $10,000 you can assume that Medicare paid $4000.  It will usually be less.  However, this will help your client understand his or her "net" recovery and will help you negotiate with reasonable comfort.

Why should you care about all of this?  If you do not have a knowledge of subrogation law it will be more difficult to settle your client’s case because your client will not be able to understand the "net" recovery.  If the client thinks that he or she is going to receive "X" and then finds out that "X" has to be reduced by a subrogation payment, he or she going to be upset.  If the subrogation interest is one that imposes an obligation of the lawyer to protect, you risk financial loss and/or disciplinary action for failure to fulfill that obligation.

In summary, part of being a plaintiff’s lawyer is having a good grasp on the contractual and statutory rights of those who have paid your client’s medical bills.  Another part of being a plaintiff’s lawyer is addressing such matters directly in a manner consistent with the law, with both the payor and the client, to avoid future unpleasantness.

From time to time I will see a question posted on the trial lawyers’ listserve asking whether Medicare has a subrogation interest in wrongful death proceeds.  The answer is "yes," and this opinion helps explain why.

Tennessee wrongful death law permits the recovery of medical expenses incurred between the injury caused by negligence and the death.  Missouri has  similar law, and the Eighth Circuit Court of Appeals affirmed the right of Medicare assert a right to a portion of the proceeds.

The case is Mathis v. Leavitt, No. 08-1983 (8th Cir. Jan. 30, 2009).  Read it here.

Plaintiff’s lawyers:  do you want to have the hell scared out of you?  Read this article by Rick Swedloff on Medicare subrogation entitled "Can’t Settle, Can’t Sue:  How Congress Stole Tort Remedies From Medicare Beneficiaries."  The article appears in Volume 41.2 of the Akron Law Review.

[A 2003 amendment to the Medicare Secondary Payor Act, which grants rights to Medicare in personal injury cases where Medicare pays benefits] significantly affects the ability of Medicare beneficiaries to bring or settle individual tort claims, the incentives for attorneys to represent Medicare beneficiaries in individual and mass tort litigation, and the tort system generally. Because of this – and despite the fact that courts and academics have largely ignored this amendment – attorneys from around the country have sounded alarm bells since the government first took the litigation position now reflected in the MSP. Lawyers have raised serious concerns about their ability to bring and settle individual and mass tort litigation under the MSP’s harsh liability rules.   [Footnotes omitted.]


We all know that Medicare and Tenncare has a subrogation right in PI and wrongful death cases, but new information being sought by Medicare has lead some lawyers to believe that Medicare will now be looking at case proceeds for payment of future medical bills.

 The Medicare, Medicaid and SCHIP Extension Act of 2007, §111, which requires liability (including self-insured), no-fault and workers’ comp insurers to report certain information about injured parties who are entitled to Medicare.  New rules have been proposed on the subject and will go into effect on July 1, 2009. 

The data required by the new rules will give the government a significant amount of information about PI and WD claimants and the concern is that the data will be used to insist that case proceeds be used to pay future bills.

The Tennessee Supreme Court has released its opinion in Health Cost Controls, Inc. v. Gifford,  No. W2005-01381-SC-R11-CV  (Tenn. S. Ct. Oct. 17, 2007).  If the style of this case sounds you familiar you are not losing your mind – this case was before the Supreme Court  on the made-whole four years ago earlier.

This time the case was before the court on the issue of whether the plaintiff was made-whole.  The Supreme Court said this about the responsibilities of lawyers and judges in resolving this important issue in any particular case:

Trial courts should support their made-whole determinations with specific findings of fact regarding the monetary value of the injured party’s recovery from all sources and the monetary value of the injured party’s total damages. Furthermore, trial courts should make specific findings as to the value of each separate element of an injured party’s damages. Finally, if the trial court finds that the injured party has been made whole, reimbursement should be awarded to the insurer only to the extent that the injured party’s total recovery exceeds the injured party’s total damages. These requirements are necessary to ensure that the made-whole doctrine is consistently applied and to facilitate appellate review of made-whole determinations.

This decision from a federal judge in Pennsylvania will cause excitement throughout the tort bar:  he ruled for a plaintiff who worked to  protect assets from a claimed ERISA subrogation interest by having the proceeds of a settlement go from the defendant to a special needs trust.  published this article about the decision from Judge John P. Fullam.  The article does a nice job of explaining the articles put forward by all parties.

If you want to read the full decision in Mills v. London Grove Township, 2005-00122 (July 19, 2007), click here.

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