Medicare lien – How do I negotiate it down?

You can reduce a Medicare lien in a personal injury case by challenging the amounts in the Conditional Payment Letter or Final Demand. If Medicare’s conditional payments are higher than the settlement amount, you may also be able to negotiate a lien reduction. Medicare may also agree to a lower rate when mass tort cases settle.

Can I challenge Medicare’s claimed payments?

One way to reduce a Medicare lien is to challenge the accuracy of its conditional payments. You can also challenge the amount listed in its Final Demand letter.

After your personal injury lawyer has notified the Medicare Secondary Payor Recovery Center (MSPRC) of your case, the Medicare program will send a Conditional Payment Letter. This Letter from the MSPRC generally arrives within 65 days. This Letter lists the medical care that Medicare says it has paid for and tells you that it will seek reimbursement for it. The payment summary will include the Internal Control Number (ICN) of each medical treatment that was provided and covered by Medicare.

In many cases, though, the treatment listed and the conditional payment amount on the Letter are inaccurate. The medical care mentioned in the Letter can be:

• from before your accident,
• duplicative,
• unrelated to the injuries from the accident,
• medically unnecessary,
• incorrectly coded, or
• treatment that was never provided.

You can challenge the claims that are unrelated to your case. You can do this by:

1. crossing out or circling the unrelated claims on the Conditional Payment Letter,
2. returning a copy of the marked up Letter back to the MSPRC, and
3. demanding that MSPRC remove unrelated claims from its future correspondence.

MSPRC should remove the unrelated claims from its Conditional Payment Letter and resubmit it within 30 days. Without the unrelated claims, the new version of the Letter should have a lower amount at issue. This reduces the lien that Medicare will seek to enforce against your personal injury award.

You can also do this process when Medicare issues its Final Demand. This is issued after your case settles or reaches a verdict. Once notified of your claim’s resolution, Medicare will sum up the medical expenses that it has covered for you. These will be itemized in its Final Demand.

If the amount in the Final Demand is incorrect, you can appeal it. You can also request a waiver of the lien.

What if the Medicare lien is higher than my personal injury settlement?

If your Medicare lien ends up being higher than your settlement amount, you may be able to negotiate with Medicare to take a lesser amount.

Generally, if Medicare has paid more for your medical care than you recover in your personal injury case, Medicare is entitled to:

• the total judgment or settlement, minus
• the total costs of procuring that amount.¹

Your procurement costs are generally your:

• attorneys’ fees, and
• court costs.

While Medicare is entitled to this amount, the agency may settle for less in some cases. This is more likely to happen if pursuing the lien would cause bad publicity and would not recover much.

Your personal injury attorney can open a dialogue to initiate these negotiations with Medicare.

Will Medicare enforce its liens against everyone in a mass tort case?

Medicare liens may also be negotiated in mass tort cases. These cases often take the form of:

• class actions, or
• multidistrict litigation (MDL).

These are personal injury claims where numerous people have been hurt from a single course of conduct. When these cases settle, it can end hundreds or thousands of individual claims. Many of these claims would involve Medicare liens.

Handling all of these claims at once would overwhelm Medicare’s lien enforcement personnel. To prevent this from happening, they may negotiate an expedited process for resolving the liens. This often involves a reduction in the amount subjected to the Medicare lien.

How do Medicare liens work?

Medicare liens are a specific type of medical lien. These liens help victims receive medical care after an accident. Rather than paying their medical bills right away, the victim lets his or her healthcare providers take a medical lien against the proceeds of their future personal injury case. Once the case settles or there is a judgment, the healthcare provider enforces their lien by invoking their subrogation rights. They take a portion of the settlement or award. This keeps the victim from receiving a windfall. If it were not for the lien, the victim would receive both:

• their medical care, and
• compensation for that medical care.

The Medicare Secondary Payer Act (MSP) is a part of the Social Security Act. It gives Medicare, Medicaid, and Medicare Part C plans super lien rights over your personal injury award or final settlement.² Medicare benefits cover your healthcare costs upfront. When your personal injury case settles or reaches a verdict, you will receive financial compensation for your medical expenses. Medicare will then enforce its lien to take that compensation from you because it was Medicare, not you, that paid for the medical services you received.

If you are covered by Medicare, your personal injury lawyer will notify Medicare’s Benefits Coordination and Recovery Contractor (BCRC) of your accident and provide proof of representation. Medicare will then find which expenses it has covered, so far. These expenses are listed in a Conditional Payment Letter. You should receive this Letter within 65 days.

Once your personal injury case ends with a settlement agreement or award, your lawyer will tell Medicare:

• that your case is over,
• when the case settled or ended,
• how much was awarded, and
• the costs of procuring the award or settlement.

Medicare will then issue a Final Demand. This is the total amount that Medicare claims it is owed for covering your medical treatment. The demand amount follows this formula:

1. find the ratio of your costs of procuring the settlement to the total amount of the settlement,
2. apply that ratio to the expenses incurred by Medicare for your treatment to get Medicare’s share of the procurement costs, then
3. subtract that number from the Medicare payments.³

For example: Ben gets hurt in a car accident. His health insurance is through Medicare. Ben settles his personal injury claim against the at-fault driver for $200,000. His attorneys’ fees and court costs are $50,000. This is 25 percent of the settlement amount. Medicare has spent $40,000 on Ben’s medical treatment. 25 percent of $40,000 is $10,000. Medicare’s Final Demand states that its lien against Ben’s settlement is for $30,000.

The Medicare lien has to be paid before your settlement funds can be disbursed. This can cause a delay in receiving your settlement proceeds.

Once the lien is paid off, you will receive a Clearance Letter from the agency. This Letter officially states that you have satisfied your legal obligations of repayment to Medicare.

What happens if I do not pay the lien?

If you do not immediately pay a Medicare or Medicaid lien, interest will accrue on the lien amount. Additionally, Medicare will send the bill to the U.S. Department of Justice or the Department of Treasury for collection. The lien can be collected from:

• you, as the Medicare beneficiary,
• your lawyers or the law firm that represented you, or
• the defendants in your case.

If a lawsuit has to be filed to collect the lien, federal law empowers Medicare to collect a civil penalty of twice the amount owed.⁴

If a settlement or award is not reported to Medicare, a penalty of $1,000 per day can be imposed.⁵ It is often the responsibility of the liability insurance company, workers’ compensation insurer, or no-fault insurance company to do this.