How Does Medicare/Medicaid Affect My Personal Injury Claim?
What is a Medicare Lien?
A Medicare lien is a right created by statute that requires anyone involved in the transfer of money to settle or resolve a personal injury claim to reimburse the Federal Medicare program for benefits it has paid or will pay in the future for benefits paid for medical care to a Medicare beneficiary that was the responsibility of a negligent third party.
What is a Medicaid Lien?
A Medicaid lien is a right created by statute that requires anyone involved in the transfer of money to settle or resolve a personal injury claim to reimburse the State Medicare program for benefits it has paid in the past for medical services rendered to a Medicaid beneficiary that was the responsibility of a third-party tortfeasor.
Medicare and Medicaid are government programs that provide qualified individuals with medical care benefits. Medicare is a Federal program while Medicaid is a state-run program. Both programs create a statutory lien for benefits paid for past medical expenses that arose due to a personal injury. However, Medicare is different from Medicaid in that federal laws also require that money be “set aside” to cover the cost of anticipated future medical care.
Is Repayment of a Past Medical Lien Required?
Anytime Medicare or Medicaid has paid for medical benefits, there is an obligation on the part of both the client and the attorney to repay the lien if money is recovered from a negligent third party for damages suffered out of the incident that produced the medical bills. It is important to note that the statute does not differentiate what the settlement money was paid for. (i.e. medical bills vs pain and suffering) The lien is on the entire settlement. Failure to repay a Medicare Lien carries with it the ability of the Federal Government to sue the lawyer for double damages plus interest for knowingly ignoring a Medicare lien. State Medicaid lien laws vary from state to state, but you can rest assured that at a minimum, the state can sue the client and the lawyer for the amount of the lien with interest. Medicare requires that you fill out a form and notify them of every personal injury case so that they can check to see if they have a claim for medical bills paid, Thus, a prudent personal injury lawyer handling a personal injury claim must take steps to confirm and take into account any Medicare and/or Medicaid liens.
Medicare and Medicaid Reimbursement Rates
Medicare and Medicaid have enormous bargaining power with medical professionals due to their volume of patients covered. As a result, they are able to negotiate huge discounts for the services their clients receive. It is basically a mass volume discount. So, whereas an individual might get charged 10,000.00 for a particular procedure, the Medicare and/or Medicaid reimbursement rate may be $500.00 for the same procedure. The other $9,500 gets written off.
This is important because under Texas law, not only can you not seek recovery for the part written off against the tortfeasor, but a jury may not be told the “sticker price” of a medical bill that was paid at a discount. The amount of medical bills often influences how much a jury awards for pain and suffering. So when a jury hears that a patient only received $500.00 in medical damages, they are much more likely to give an award commensurate with $500.00 than they are $10,000.00 in damages. A personal injury attorney evaluating whether it is cost-effective to spend the money to bring a personal injury claim must take this into consideration. Unfortunately, this makes some legitimate personal injury claims cost-prohibitive since you can easily spend $5000.00 to bring to trial even the simplest of auto collision cases.
What is a Medicare Set-Aside?
In addition to repayment of past medical benefits, Medicare requires that both worker’s compensation and personal injury claimants set aside funds to pay for any future medical expenses anticipated to be paid by Medicare under certain circumstances. The rules on this are ill-defined and in constant flux. However, currently, the government requires you to create a Medicare Set-Aside if you are either:
- A current Medicare recipient settling a personal injury claim for more than $25,000, or;
- Not a current Medicare recipient but you settle for more than $250,000 and can be expected to receive Medicare within 30 months of settlement.
Failure to create a Medicare Set-Aside could result in Medicare coming after you and your attorney. Additionally, they could cut off your benefits in the future to recoup money paid out.
The Cost Factor of Medicare Set-Asides
Medicare Set-Asides are not free to set up nor are they easy. You generally will need to have a qualified medical professional review all of the medical records, approximate the future needs, estimate the costs of those needs and come up with a rational basis for the amount you ultimately set aside. There are companies that can be hired to do this. In the typical case, they will charge $3,000.00-5,000.00. In more complex cases, this may be much higher. This additional cost must be factored into the determination of whether it will be profitable to handle the case.
Anytime Medicare or Medicaid pays for your medical expenses that arise from a personal injury suffered due to the negligence of a third party, this has several negative impacts on the personal injury case. It creates a lien that must be reimbursed for past medical. It reduces the amount that can be claimed as damages and may reduce the anticipated pain and suffering award. Lastly, Medicare creates a costly obligation to create a Medicare Set-Aside if future Medicare benefits may be anticipated. As a result, a personal injury lawyer must weigh the effects of Medicare and Medicaid against the anticipated recovery in deciding whether or not to take a personal injury claimant’s case. Call Simmons and Fletcher, P.C. for a free consultation on your case: (713) 932-0777.