Law Firms Made to Pay for Failure to Honor Medicare Subrogation

Medicare makes conditional payments to health care providers on behalf of its beneficiaries who are injured or killed and later assert personal injury or wrongful death claims.  Federal law requires that the monies advanced by Medicare be paid back subject to a formula that allows for the reduction of the advanced, conditional payments for certain expenses incurred by the beneficiary in securing the funds.  Occasionally, further reductions are granted. Law firms have the obligation to use reasonable efforts to determine if Medicare has made conditional payments and if so, work with Medicare to determine the proper amount of its gross and net financial interest and then ensure those monies are withheld from the proceeds and paid to Medicare.

The federal government has recently collected money from three plaintiff’s law firms for the alleged failure to do so.  One firm was required to pay $28,000, another $250,000, and, most recently, another $90,000.  It is unclear from the attached documents whether the payments in each case were entirely from firm funds or whether the payments also included client monies.   It does seem clear, in the case involving the $28,000 payment, the monies came from the owner of the firm:

Under the terms of the settlement with the DOJ, the firm’s principal agreed to pay a lump sum of $28,000.00. In addition, the firm agreed to (1) designate a person responsible for paying Medicare secondary payer debts; (2) train the designated employee to ensure that the firm pays these debts on a timely basis; and (3) review any outstanding debts with the designated employee at least every six months to ensure compliance. In addition, the firm acknowledged that any failure to submit timely repayment of Medicare secondary payer debt may result in liability under the False Claims Act.

 

The report concerning the $90,000 payment seems to indicate that failure to pay occurred at another firm that jointed represented one or more plaintiffs with the subject firm. From the U.S. Attorney: “We intend to hold attorneys accountable for failing to make good on their obligations to repay Medicare for its conditional payments, regardless of whether they were the ones primarily handling the litigation for the plaintiff.”

Lessons:

  1. Understand Medicare’s legal rights.
  2. If Medicare has an interest reach out to them early and attempt to get a handle on the amount of their claimed financial interest.
  3. Review the Medicare payments to determine if the sums it paid were in fact related to the personal injury or wrongful death claim.
  4. Understand the claimed subrogation interest (less appropriate reductions) before finalizing a settlement with the tortfeasor.
  5. Understand whether the circumstances under which you are likely to successfully persuade Medicare to take an even greater reduction on what it is owed and, if appropriate, work to accomplish that result.
  6. Pay the claimed subrogation interest (unless it is too high) at the same time other settlement proceeds are distributed.

Those of us who work with Medicare on a regular basis know that the process can be frustrating and slow.    I had a horror story about twenty years ago when Medicare and I disagreed about the amount of a subrogation interest – the amount at issue was (if my memory serves me correctly) about $500 on a $100,000 claim.  We went back and forth for months, with me trying to explain why Medicare was not entitled to the “extra” $500 and Medicare claiming, without explanation, that it was.  The situation was eventually resolved favorable to my client, but I cannot tell you how hours of time were spent trying to bring the matter to a close.

The potential for liability to failure to make payments by an associated firm should be considered by all law firms that refer out / use co-counsel in personal injury or wrongful death cases.  If monies that should have been paid to Medicare are turned over to the client, the odds are high that the client will not have those monies (or other assets) available for payment if and when Medicare realizes it has not been paid, and Medicare will seek reimbursement from the lawyers involved in the case.  So, before you associate with another lawyer, make sure you are associating someone who (a) understands the law of Medicare subrogation; and (b) actually does what the law requires.

While we are on the subject, also make sure that the lawyer you associate with has professional liability insurance.   Any of us is capable of making an error.  Responsible lawyers purchase professional liability insurance, not only to protect themselves from some of the adverse financial consequences of making an error that causes harm to a client but also to help protect the client from loss as a result of the error.  Professional liability insurance also protects referring counsel – referring counsel are jointly and severally liable for the errors of each other which occur during the representation of the client – from financial loss in the event the lawyer making the error does not have assets from which to satisfy a judgment.