payments made by third party payers.11 Of note for defense attorneys is the fact that Medicare has a direct right of action to recover from any entity responsible for making primary payment, including an insurance carrier.12
This pertains even if
the third party payer has already reimbursed the beneficiary or other party.13 If reimbursement is not made to Medi-
care within 60 days of receipt of third party payment (for our purposes, settle- ment) interest accrues until reimbursement is made.14
Interest accrues
even if no notice of Medicare’s lien has been provided.15
The general interpretation of
Medicare’s right to recovery has been that it establishes a lien, or even a “super lien,” requiring prudent plaintiff’s attorney to resolve Medicare’s lien before paying out the proceeds of a tort settlement to the client.16
affirmative duty to notify Medicare that there is, or may be, a personal injury award due to the client. The attorney’s only duty is to advise the client of Medicare’s recov- ery program rules and let the client decide how he or she wishes to proceed, vis-a-vis, Medicare.19
One problem with this ar-
gument is that 42 C.F.R. 411.24 (g) provides Medicare a right to recover pay- ments from “any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a third party payment.” However, proponents of a limiting view of the attorneys responsibility to Medi- care assert that this language applies only when the attorney has actual possession of the settlement proceeds.20
They further However, there has been some
debate over whether Medicare’s interest is actually a lien, and whether a plaintiff’s attorney can truly be held accountable for disbursing settlement funds to the client without satisfying Medicare’s interest.17 The argument that Medicare’s interest is not a lien arises from a very careful pars- ing of statutory and regulatory law and the decision out of the United States Dis- trict Court for the Northern District of California in Zinman v. Shalala, 835
F.Supp. 1163 (N.D. Cal. 1993), affirmed, 67 F.3rd 841 (9th Cir. 1995). In Zinman, the court held that Medicare’s right of re- covery does not constitute a “lien” on settlement awards. Under the Zinman Court’s analysis, Medicare does not have a lien against specific property (the settle- ment proceeds), but only an unperfected claim against beneficiaries or primary pay- ers for reimbursement of benefits paid.18 The thrust of the argument is as follows: If Medicare’s secondary payer recovery claim does not have lien status, under ex- isting law a plaintiff’s attorney has no
11
42 U.S.C. 1395y(b)(2)(A)(ii). 1242 C.F.R. 411.24(e). 1342 C.F.R. 411.24(i)(2).
14 42 U.S.C.A. 1395y(b)(2)(B)(i).
15Id. 16
17
Randal Kaufman, The War of the Cockatrice, 60 Tex.B.J. 310, April, 1997.
See Sally Hart, Recovery Powers Under Medicare’s Secondary Payor Program, TRIAL, September 1997; Bradford and Ward, The Medicare “Super Lien” Revisited, 56 J. Mo. B. 44, January-February, 2000.
18Zinman v. Shalala, 835
F.Supp. at 1171. Summer 2000
Trial Reporter 9
assert that under 42 C.F.R. 411.24(2)(i)(1) (allowing Medicare an action against certain entities that trans- fer proceeds without satisfying Medicare’s claim), there are no special rules applicable to parties other than insurance companies and employer health plans who receive third party payments, i.e., Medicare is given no specific right of action against
19See, Bradford & Ware at 47. 20Id.
attorneys who distribute funds to their clients after properly advising them of potential recovery claims.21
The argument
follows that Medicare’s only recourse against the attorney exists during the short time frame in which the attorney actually has possession of third party payments subject to Medicare’s recovery rights. However, this seems to be a dangerous position to take, particularly in light of the case of United States v. Sosnowski, 822
F.Supp. 570 (W.D. Wis. 1993). In Sosnowski, the government found the Medicare beneficiary and his attorney jointly and severally liable to the govern- ment for failing to reimburse Medicare after receiving judgment proceeds in a personal injury case. In addition, the ar- gument that we as attorneys have liability to Medicare only during the time in which we actually hold the client’s settlement funds in our escrow account seems too narrowly focused on the attorney’s inter- est and fails to address the attorney’s duty to the client, which arguably includes a duty to maximize the client’s recovery by minimizing Medicare’s claim to the ex-
(Continued on page 10) 21Bradford & Ware at 36.
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