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Managing Medicare's Interests in Third Party Liability Cases


In 2007, Congress enacted certain changes in the Medicare law in connection with the extension of the State Children's Health Insurance Program ("SCHIP"). Of particular note were the provisions of Section 111 of the law which mandated that insurance companies and other payers of third party liability claims report claims and settlements to Medicare through CMS. These changes were to be effective in July, 2009.

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As the effective date of the law approached there was substantial confusion, misinformation and rumor about the effect of the law. Many practitioners in the plaintiff's and defense bars and many carrier representatives had mistaken beliefs about the scope and effect of the changes. The most prevalent misconception was that the new amendments required the use of set-aside accounts in the settlement of third-party cases that might involve payment for future medical expenses. Confusion also existed whether the new provisions affected existing rules and procedures for reimbursing Medicare for payments made before settlement for medical services related to an injury which was part of a third-party claim.

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In 2009, we posted and circulated an article concerning the effect of the law and addressed the question whether set-aside accounts were required. With the passage of time and some additional "intelligence" from Medicare, we have some better insights into the issue.

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The real challenge that participants in the management of third-party liability cases face is not the question of whether set-asides are required but the broader question of how to appropriately "consider Medicare's interests" in connection with third-party liability settlements, and even trials, where payments relate in some part to compensation for future medical expenses. The requirement that Medicare's interests be considered in connection with settlements has been part of the law for many years. In the past, assuring that Medicare's interests were considered in settlements involving payments for future care has not been addressed by Medicare and, usually, has not been a factor for the participants in the resolution of cases. With the advent of mandatory reporting of claims and settlements to Medicare, the need to "consider Medicare's interests" is a practical necessity.

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Our 2009 article has been substantially revised with this theme in mind and in light of recent developments in the area.

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The new article can be found here: Meeting the Obligation to "Consider Medicare's Interests" in Third-party Liability Cases - Set-asides and Beyond

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We hope this article will be of benefit to practitioners in preparing for and in specifically addressing the need to consider Medicare's interests.

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This is an evolving area of law and administrative procedure. The purpose of this article is provided the reader with general background on the problem and some suggestions on how to approach and resolve the issue in particular cases. The discussion is not endorsed, approved or reviewed by Medicare. There is no "magic formula". The best we can do is to be thoughtful and creative in addressing the issue. There is no reason that the need to consider Medicare's interests should derail the settlement process.

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.Your comments and suggestions on the article would be welcome. Please email them to richardlgilbert@rgilbertadr.com.

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Also, please check this site for updates to include suggested settlement agreement language.

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Other Resources and Links:

Recent USDC (New Jersey) case on Medicare set-asides in third party cases.

Current CMS "User Guide for Section 111 Reporting. Includes important information on background, terminology and data reported.

Reporting "Quick Reference Guide". Quick summary of reporting requirements and processes.

Other Information on CMS Website:

- Mandatory Reporting

- "Medicare Secondary Payer and You" - Overview

- The "Patel Memorandum" - Set-aside accounts in Workers' Comp. Cases