“They Usually Don’t Come Back at All” – A Plaintiff’s Theory on Why Medicare had no Interest to Protect

Medicare Set-Aside Blog on March 27, 2012
Posted by

Interesting 3 Party Check case reported out of Georgia this week. The ruling itself is not interesting because we know that there is no statutory or regulatory requirement to include Medicare as a payee so absent agreement among the parties, the act will not be upheld by the courts. What made this opinion interesting was plaintiff’s counsel’s assertion that because Medicare had not asserted a lien against the suit, that it was not going to therefore there was no Medicare reimbursement obligation. See what you think of this story…

Minnie Hearn was injured November 2002 in a Dollar Rent A Car rental owned by DTG Operations whose claims are administered by the TPA, York. Ms. Hearn retained attorney Guy Michaud to file a complaint against DTG, York & Dollar, asserting from day one that despite evidence that Hearn was on disability and that Medicare had paid some of her accident related bill, that Medicare “did not have an enforceable lien.” In October 2004, a York adjuster secured a $20,000 settlement and following various discussions about Medicare’s interests, agreed that Medicare would not be made a payee on the check due to the representations that Medicare had no lien. Plaintiff did however agree to indemnify Defendants against Medicare actions. Regardless, a supervisor at York did not take the attorney at his word and insisted that the settlement check be issued with Medicare as a payee anyway, which of course he refused to accept. After a lot of whining, Plaintiff got herself a new attorney and ran back to court to file a complaint for breach of contract. The trial court was not terribly sympathetic and ruled for defendants every chance it got, in addition to awarding it attorneys fees. It concluded that any agreement not to include Medicare as a payee was unenforceable because York relied upon an erroneous assurance by Michaud that “Medicare had no enforceable claim of any kind.” The trial court found that York was entitled to add Medicare as a payee on the check as a good business practice when it “subsequently realized that Michaud’s statement was incorrect.” Additionally, the trial court found that it would not assist the “Plaintiff to evade her duty to reimburse Medicare” because doing so “would clearly contravene the public policy in favor of reimbursement.” On appeal, the court unfortunately found reversible error in the determination that plaintiff had no valid claim for breach of the settlement agreement and therefore much good was undone – the judgment affirmed in part, vacated in part and the case was remanded with direction.

But back to my favorite part. In every great MSP opinion, there’s always an attorney who thinks he knows a thing or two about Medicare. In plaintiff attorney’s testimony about his settlement negotiation with the York adjuster, the court wrote this:

Michaud testified that before he sent his November 17, 2004 letter, he discussed Medicare with the adjuster. Because neither of them had received any notice and were not aware that Medicare was asserting its right of reimbursement, they “agreed that the check – the settlement draft would not have Medicare on it.” He explained that when parties receive written notice from Medicare that it plans to seek reimbursement, it is commonly referred to as a lien, and that he and the adjuster agreed that there was “no lien” in connection with Hearn’s injury. He also testified that it was his belief that he had no duty to notify Medicare of the settlement if Medicare had not notified anyone of its intent to seek reimbursement. He would take steps to protect his client, however, by holding back a portion of the settlement in a trust account to satisfy any claim that might be made by Medicare after completion of the settlement. In his experience, if Medicare does not assert a claim within two years of an injury, “usually they don’t come back at all.”

Now there’s a guy who is intimately familiar with the Medicare Secondary Payer Act. Medicare had not asserted a lien, as he calls it, because MSP liability had not attached yet. In a liability insurance situation, there is no Medicare overpayment for which reimbursement demand would be made until there is a settlement, judgment, award or other payment. The MSP manual describes that as the obligation “arising by operation of law” upon one of those events.

Second piece of entertainment was when Hearn’s counsel learned that defense counsel, Frank Harris, contacted Medicare shortly after the lawsuit was filed and notified it of a claim in this case, he amended the complaint to assert a claim against Harris based upon the theory that Harris became an “active participant in the deeds of his clients,” without of course seeking leave of the court to do so. Perhaps a quick read of 42 CFR 411.25 would have been in order had the claim survived. Because York was in fact on notice that Medicare had made related payments in this case, upon “settlement” of the claim, it became primary payer for purposes of the MSP and as such, had an obligation to notify Medicare of its reimbursement responsibility, a task that was performed by its representative attorney. To get sued over it personally – really?

The level of MSP ignorance that survives today remains astounding and I thank you all for continuing to drag your righteous indignation through the courts because these opinions are certainly better than the news with my coffee in the morning…

2012 Ga. App. LEXIS 338
March 26, 2012, Decided