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Plaintiff's Lawyers Can Be Individually Liable When Judgment or Settlement Proceeds Owed to Medicare Are Not Paid

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Some lawyers apparently believe that:

  • The Medicare Secondary Payer Statute is limited to Workers’ Compensation Claims.
  • Medicare will not look to plaintiff’s lawyers for payment of their client’s debt to Medicare.
  • Medicare will not bring recovery actions for money owed from small settlements.

If you believe this to be the case, we urge you to read U.S. v. Harris (Civ.Act. No.5:08CV102, U.S.Distr. Ct., No. Distr. of W. Va., 11/13/2008).

Harris represented a client who suffered injuries when he fell off a ladder bought from a local retailer. He was retained after the Centers for Medicare and Medicaid (CMS) paid the client’s Medicare claims of $22,549.67. Payment was conditioned on CMS’ right of recovery from any entity responsible for making primary payment.

Harris obtained a settlement from the ladder retailer of $25,000. He notified Medicare of the settlement and of his attorney’s fees and costs. Medicare then determined that it was owed $10,253.59. When this was not paid within the statutorily-required sixty-day time period, Medicare brought an action against Harris for $11,367.78 that included an interest charge and a denial of a portion of his attorney fees and costs.

Harris moved to dismiss the case because “a lawyer, in representing a client, cannot be held individually liable … when he … distributes settlement funds with the knowledge and consent of the government.” Since he provided the details of the settlement to Medicare, the settlement funds were distributed to his clients with the Medicare’s knowledge and consent, and he is, therefore, not individually liable to repay the debt.

The Court found Harris’ argument to be without merit. The Court’s key findings were:

“The federal regulations … provide the entities in which the government can recover primary payments:

Recovery from parties that receive primary payments. CMS has a right of action to recover its payments from any entity, including a beneficiary provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment. 42 C.F.R. § 411.24(g) (emphasis added).”

“In this case, [the client] and the defendant received a $25,000.00 settlement and primary payment from the ladder retailer. Because the ladder retailer took responsibility for the payment of [the client’s] medical services, demonstrated by ‘a payment conditioned upon the recipient’s compromise, waiver, or release …’ the government can now seek reimbursement for the medical services paid for by Medicare. Furthermore, because the government can recover such payments “from any entity that has received payment from a primary plan,” including an attorney, the defendant’s argument that he cannot be held individually liable to reimburse the government … is without merit.” (citations omitted)

We have previously offered risk management advice on avoiding liability for unpaid Medicare debts. Now seems like a good time for a review.

  • Read Harris – This case clearly explains an attorney’s exposure for repayment of a client’s Medicare payments complete with statutory and regulatory citations.
  • Advise eligible Medicare clients at the inception of a personal injury representation that any recovery may be reduced because recovered medical expenses for which conditional Medicare payments were received must be reimbursed.
  • Include in the client’s letter of engagement that reimbursement of Medicare medical payments will come from the client’s share of any recovery – not from the lawyer’s fee. In cases of substantial Medicare payments, alert clients that reimbursement of these benefits will significantly reduce the recovery. Get the client’s written consent for the lawyer to pay Medicare’s claim from the award.
  • If a client disputes reimbursement to Medicare from a recovery received by you, be sure to comply with Kentucky Rule of Professional Conduct 1.15, Safekeeping Property, in resolving the dispute.
  • If the client receives the recovery and indicates he intends to ignore Medicare’s interest, contact the KBA Ethics Hotline for guidance (SCR 3.530). Protect yourself from an allegation that you assisted a client in conduct that you knew was criminal or fraudulent.
  • Ascertain from Medicare how much they are claiming and then attempt to negotiate a reduction. Be sure to conduct the negotiations with Medicare before a case is settled or tried so litigation strategy can be adjusted, if feasible.
  • Examine every bill to verify what portion Medicare paid. Be sure that medical expenses not related to the award are not included in the Medicare claim.
  • Do not rely on the client to pay Medicare. The safest practice is for the lawyer to pay Medicare from the award before making disbursement to the client.

 


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