Medicare Set Asides and Attorney Liability

Saturday, July 16, 2005 | 0

The following is an adaptation of postings made in the WorkCompCentral Professional Forums regarding the liability of attorneys representing injured workers and who fail to make provisions for reimbursement of Medicare via a Medicare Set Aside trust (MSA). Though written in the California section of the Forums, it has applicability nationally. It has been edited for readability and grammar.

I am intrigued by the notion that is generally being circulated that an injured worker's attorney could be liable for failing to establish an MSA. We have all heard this theme repeated over and over and while I tend to see it as more of a scare tactic by MSA providers to gather more business, there is some legal precedence to support the rumors.

We begin with 42CFR411.26, which provides:

"Subrogation. With respect to services for which Medicare paid, CMS is subrogated to any individual, provider, supplier, physician, private insurer, State agency, attorney, or any other entity entitled to payment by a third party payer."

"Third party payer means an insurance policy, plan, or program that is primary to Medicare." 42CFR411.20

"Third party payment means payment by a third party payer for services that are also covered under Medicare." 42CFR411.22

"Recovery from third parties. CMS has a direct right of action to recover from any entity responsible for making primary payment. This includes an employer, an insurance carrier, plan, or program, and a third party administrator." 42CFR411.24(e)

"Recovery from parties that receive third party 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 third party payment." 42CFR411.24(g)

The key here is "entitled to payment by a third party payer" and "received a third party payment."

An injured worker's attorney is not being paid by a third party, but instead is paid by the injured worker as has been established by a long line of cases both in civil aspects and comp aspects. So, the regulation itself would not seem to create a cause of action against the injured worker's attorney.

Also, consider this: will this section be as broadly construed as the MSA's suggest? For instance is the copy service who copied records liable? Is the interpreter who translated at hearing liable? Is the court reporter who recorded the AME depo liable, too? How about the sub rosa investigator? I think that is too broad under this framework and would lead to absurd results and unintended results. It is inconceivable that Congress intended that a court reporter could be on the hook when their only connection is taking an Agreed Medical Examiner's depo.

As can be gleaned from 42CFR411.24(g) the real intent here is recapture medical payments, not to ensnare court reporters, interpreters, copy services, etc. as the broad interpretation suggested by MSA vendors would suggest. That is why 42CFR411.24(g) specifically states "received a third party payment" which is defined as a payment also covered under Medicare. Obviously, attorney fees, depo costs, copy service costs, etc. are not covered by Medicare. The real targets here are medical providers, insurers, and the injured worker.

This may be somewhat academic since the carrier may insist on an MSA to protect itself if the triggers are there. (Some are even insisting when none of the three triggers are there which is weird.) And, of course, informed consent is always prudent. But we would not simply accept MSA vendors "opinions" about injured worker's attorney liability or the breadth of the statute. Still, if the case is litigated at some point the amicus lienup will make for strange bedfellows. The MSA's may actually be advocating the widest possible interpretation to gather more business even though that position is not in the interest of those they serve.

Two recent cases support, however, the notion that an injured worker's attorney may in fact be liable for reimbursement to CMS when one fails to institute the proper protections of an MSA. See:

United States v. Baxter Heathcare Corp, 345 F.3d 866 (11th Cir., 2003) and for another case where everyone including the plaintiff's lawyer was sued see, Brown v. Thompson, 252 F. Supp. 2d 312.

The lesson to be learned here is don't fool around with Medicare Set Asides. The government will go after you. And in case you didn't know it, every three months the California WCAB electronically sends CMS information about all cases on file at the Board. CMS transfers that information into their computer and in a matter of seconds they cross reference every Medicare recipient with the WCAB records to identifiy those with overlapping files. They will catch every single WCAB settlement that should but doesn't have MSA approval and they will go after the parties if Medicare's interests have not been considered.

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