The Medicare Secondary Payer Statute and Liability Cases

USC Title 42, Chapter 7, Subchapter XVIII, Section 1395y comprises the Medicare Secondary Payer Statute. The essence of the law is that Medicare is to be protected as a secondary payer for medical treatment relating to an injury when a primary payer exists.

According to the Code of Federal Regulations (CFR) Title 42, Part 411, Subpart B, Section 411.20 (2), “Section 1862(b)(2)(A)(ii) of this Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following:”

The Medicare Secondary Payer (MSP) Statute was originally passed in 1980 as part of the Omnibus Reconciliation Act. However, enforcement by federal authorities did not materialize until July 23, 2001. On that date, a memorandum was circulated by the Centers for Medicare and Medicaid Services (CMS) to the insurance industry. It announced that compliance to the MSP was required on workers’ compensation cases, specifically settlements involving future medicals. At that time, there was no mention about enforcement against liability and no-fault cases.

Since 7/01, there have been concerns by the P&C industry about the intentions of CMS to enforce the MSP on other than workers’ compensation claims. Several developments have transpired recently that indicate this enforcement is about to materialize.

1). On 9/15/03, the Eleventh Circuit U.S. Court of Appeals promulgated a decision in the case of the United States of America v. Baxter International, 345 F. 3d 866 (11th Circuit 2003). This was a class-action products liability case centered on a defective product (leaking silicone breast implants) that resulted in the requirement of medical care for a large number of women. Baxter International resolved the class-action lawsuit in 1995 for $4.2 billion with no admission of liability. The Office of General Counsel filed suit in 2001 on behalf of Medicare asserting a right of recovery consisting of payments Medicare made to treat the toxic condition of many of the claimants. The government’s case was dismissed at the district court level for failure to state a claim. However, the Eleventh Circuit U.S. Court of Appeals reversed and remanded the case, determining that Medicare did in fact have a right of recovery. The case is significant because it expands the reach of the MSP to civil litigation and upholds Medicare’s secondary payer rights.

2) Medicare Prescription Drug Improvement and Modernization Act of 2003 included changes to the MSP Statute that increase Medicare rights as a secondary payer. The legislation is written as if the changes noted in the Act were included in the original MSP, dating back to 1980. The Act closed loopholes and eliminated previous legal arguments used to defend against the MSP, including “prompt payment” and “self-insured plan” exclusions. The Act also added that an admission of liability is not necessary to have exposure to the MSP; it applies if any payments are made to settle the claim.

If you have any questions about the Medicare Secondary Payer Statute and liability claims, call now (866) 672-3453 (MSA-FILE). Gould & Lamb is the most experienced Medicare Set-Aside Allocation resource in the country. We have already completed numerous allocations for liability claims and have obtained CMS approval on these cases when required. When your company requires Medicare Set-Aside Allocations for liability and no-fault claims, look no further than Gould & Lamb, the industry’s MSA resource.

NOTE: Gould & Lamb is not a law firm and we do not provide “legal advice.” Please feel free to seek the advice of legal counsel before making any decisions on this information.