New federal rules regarding Medicare have made life miserable for personal injury claimants and the lawyers who represent them. The crux of the matter is that money must be withheld from the settlement or verdict amount in order to repay Medicare any money it may have paid for the plaintiff's medical expenses. But getting a straight answer from Medicare is enormously burdensome, and often delays settlements for months.
To combat this broken system, the plaintiff bar has joined forces with a natural opponent, the U.S. Chamber of Commerce. This strange alliance, and the reasons behind it were discussed in a recent article at Law.com. Here are excerpts:
An imposing new obstacle is getting in the way of the nation's personal-injury lawsuits. It has nothing to do with the merits of the cases, or how the courts are operating. The obstacle is Medicare, the federal health insurer for the elderly. Lawyers say the program is disrupting a countless number of their settlements.
Court papers in Connecticut describe one example: After a minor is hurt in a traffic accident, his family agreed to a settlement of $7,500 with the other party's insurer, but the settlement broke down when the insurer, United Services Automobile Association, said it needed to run the minor's case by Medicare. Minors aren't eligible for Medicare, but the insurer said it had no choice under federal law.
The disruptions are happening because, under a 2007 law, Medicare is making a new effort to collect money it's owed. The effort is targeting auto insurers, worker's compensation insurers and other third parties that are liable for injuries, like a grocery store in a slip-and-fall case. Under federal law, third parties are supposed to reimburse Medicare if the federal program has paid an injured person's medical costs.
But lawyers say they often have difficulty getting a final number, or even a good estimate, for how much Medicare is to be paid. The number is vital to determining how much a settlement should be. Even in cases where the number will be zero, as with the minor in Connecticut, the parties want to be sure because they could face sanctions of $1,000 a day per claim if they shortchange Medicare, even by accident.
Medicare officials say their effort has the potential to save taxpayers billions of dollars, but they acknowledge the amount of paperwork is overwhelming and is causing delays. Between the fiscal years 2007 and 2010, the number of cases involved grew by 86%.
In Washington, an unusual set of organizations doesn't want to wait for Medicare to work through the bureaucracy. The American Association for Justice, which lobbies for plaintiffs' lawyers, and the U.S. Chamber of Commerce, the largest lobbying group for business, are on the same side. Joining them are major corporations such as the Walt Disney Co. and Wal-Mart Stores Inc., as well as defense-side law firms and their trade group, the Defense Research Institute.
"We're typically not on the same side of issues. The fact that we are shows how broken the system is," said Sarah Rooney, regulatory counsel for the American Association for Justice. Rooney said her organization's membership has become increasingly frustrated with the issue.
The groups are pushing legislation that would rein in Medicare. The bill would set a hard deadline for Medicare to notify the parties to a claim how much the program is owed, or else Medicare would lose its right to collect the money at all. It would create a "safe harbor" from the $1,000-a-day penalties based on willfulness and other factors. It would also require Medicare to resolve its claims to reimbursement within three years of a settlement — whereas now there is no statute of limitations. Reps. Tim Murphy (R-Pa.) and Ron Kind (D-Wis.) are the bill's lead sponsors.
Lawyers who interact with the system say it's already costing taxpayers money because it's so inefficient. In one example that has made the rounds on Capitol Hill, Medicare sent a demand letter in 2009 in a personal-injury case asking to be reimbursed for $1.59 out of a $4,500 settlement. A provision in the pending legislation would exempt from Medicare's collection efforts any cases below a certain threshold, to be determined later.
"It's truly ironic that trial lawyers can't get the government to take back money that belongs to the taxpayers," said Marianne LeBlanc, a partner at Sugarman and Sugarman. "The problem is that they won't tell us how much we owe them, so we can't pay them."
William Cremer, who represents insurance companies as a partner at Cremer, Spina, Shaughnessy, Jansen & Siegert in Chicago, said the Medicare rules affect every case his firm handles, even if they don't think Medicare paid any medical bills in a case. That's because the firm still has to ask and verify, so it doesn't get hit with a penalty. "That's why it has this paralyzing effect on getting these cases done," Cremer said.