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Attorneys representing parties in litigation have not had a clear understanding about possible liability for settling a workers’ compensation or personal injury case without adequately dealing with Medicare issues. However, a new case filed by the United States against a plaintiff lawfirm in Texas may help to clear up any misunderstandings about attorney liability exposure.

Franco Signor reports that a lawsuit filed in in the United States District Court for the Southern District of Texas by the U.S. alleges that the plaintiff attorney in a personal injury action (Carrigan & Anderson, PLLC and Attorney Stephen P. Carrigan individually) failed to reimburse Medicare’s demand for conditional payments in full.

It is not unusual for U.S. Attorneys to file litigation against personal injury law firms for failure to comply with the Medicare Secondary Payer (MSP) act requirement to reimburse conditional payments. The instant case is different.

Here the personal injury attorney Defendants corresponded often with the Benefits Coordination & Recovery Contractor (BCRC) regarding Medicare conditional payments owed on behalf of their Medicare beneficiary client, Tomas R. Tijerina prior to settling the claim. Defendants did not agree with the amount demanded and sought state court protection in an Order that reduced Medicare’s conditional payments rather than undertake the administrative appeals process to dispute the conditional payment amount owed.

As alleged by the U.S. Attorney in the Complaint, on April 14, 2016, Defendants first notified the BCRC about Tijerina’s car accident on April 13, 2014. Additionally, on March 30, 2017, Defendants notified BCRC that Tijerina had settled his lawsuit with the responsible parties for $70,000.00. On April 10, 2017, BCRC sought to recover the Conditional Payments and sent Defendants an Initial Determination demanding reimbursement of $46,244.74 that the Medicare program paid for Tijerina’s medical expenses related to his lawsuit.

On April 19, 2017, Defendants filed a motion with the 278th Judicial District Court in Waller County, Texas, that challenged the Initial Determination by the Medicare program. The Defendants sent BCRC copies of their motion. On July 20, 2017, BCRC renewed its demand on behalf of Medicare for the full amount of $47,343.05, ignoring the State Court ruling.

On August 3, 2017, the Defendants without responding to BCRC’s Initial Determination or Demand Letter, sent BCRC a copy of an order issued by the 278th Judicial District Court in Waller County, Texas, that reduced the recovery of Medicare’s Conditional Payments by 90% to $4,700.00 and a check for $4,700.00. The District Court agreed with the Defendants assertion that the U.S. Supreme Court’s decision in Arkansas Dept. of Health v. Ahlborn applied, and that Medicare or the Centers for Medicare & Medicaid Services (CMS) is only entitled to the portion of the settlement that actually constitutes reimbursement for payments made. However, the District Court seemed to fail to realize the distinction between Medicaid and Medicare’s recovery rights, and that the underlying recovery in the Ahlborn decision pertained to Medicaid, and not Medicare (two distinct programs with distinct third-party recovery rights).

The lawsuit alleges that that to date, Medicare had not received additional payments to reimburse Medicare’s full conditional payment demand, and that the 278th Judicial District Court lacked subject matter jurisdiction to adjudicate a challenge to Medicare’s recovery of conditional payments. Further, the District Court’s order reducing or otherwise limiting Medicare’s recovery is void and unenforceable per the United States’ sovereign immunity. Lastly, the current amount alleged owed by Defendants to Medicare for its Conditional Payments is $53,445.93 ($42,643.05 principal, $10,802.88 interest).

Attorneys at Franco Signor claim that it is likely the U.S. Attorney will prevail in its lawsuit against Defendants and recover not only its full amount owed, plus interest.  Historical case law has clearly established that responsible parties under the Medicare Secondary Payer Act (MSP) cannot avoid exhausting administrative remedies and go straight to Court to adjudicate conditional payment amounts. Further, the District Court’s application of Albhorn, a Medicaid decision to a Medicare claim for reimbursement, will likely be questioned upon further analysis by the Court in this lawsuit. What is surprising is that the U.S. Attorney’s office is seemingly refraining from seeking twice the amount claimed from the plaintiff attorney firm, although it could potentially amend its lawsuit.

The takeaway here is to always address conditional payments before settlement takes place. Disputing unrelated charges to the underlying case is easier before a determination in the form of a Demand is made by Medicare. Allowing plaintiff or their attorney to manage the matter creates exposure for the responsible party to potential claims.