Recent Medicare Secondary Payer Lawsuit: United States of America v. Stricker

I attach for your information a recent lawsuit filed by the U.S. Department of Justice on behalf of the Secretary of Health and Human Services. The claim is to recover conditional payments under the Medicare Secondary Payer Act (42 USC §1395y(b)(2)) from a liability claims settlement that took place back in 2003. The attached complaint includes the release agreement of the underlying action as Exhibit 1.

This lawsuit is the first one that I am aware of that includes as defendants the insurance carriers that contributed to the underlying settlement. The allegation of the against those defendants is that they were required under 42 CFR §411.25 to notify Medicare of any settlement, award, judgment or other payment that was made when the case was resolved, but did not. The seeks reimbursement against these defendants under the recovery action section of the Medicare Secondary Payer Act (42 USC §1395y(b)(2)(B)(iii)) as well as double damages for any conditional payments that are owed. According to the complaint it did not matter that these defendants paid out the settlement proceeds as 42 CFR §411.24(i) allows Medicare to seek payment from the liability insurance carrier, regardless of whether payment has already been made to the Medicare beneficiary.

It is precisely this type of lawsuit that will cause insurance carriers and self insureds to be careful in how they distribute funds when resolving a case. Prior to this lawsuit being filed, it was unclear whether Medicare would file such actions. Now we know the answer. To avoid this exposure, the insurance carrier and self insured will have limited options to avoid this exposure. One way is to put Medicare on the settlement check, but there must be agreement of the parties ahead of time in order to enforce it. Short of that, it appears that the insurance carrier and self insured will need to know the conditional payment amount and pay it out of the settlement proceeds, with the balance going to the Medicare beneficiary. However, that process can only be effectuated if the settlement agreement is properly negotiated before arriving at the settlement amount.

Another important point about this lawsuit is that the plaintiff attorneys in the underlying settlement are also named defendants. This is helpful as it will allow us to impress with the plaintiff’s bar why we need cooperation to manage the Medicare Secondary Payer issues.

I will monitor this action as it progresses as I am interested in how the statute of limitations may apply.

This case serves as a reminder of why we need to work together to bring thoughtful change to the Medicare Secondary Payer Act. It makes sense to reimburse Medicare, but it has to be in a manner that does not interrupt our ability to promptly resolve claims and bring unintended exposures such as this.

Thank you for your time. Please enjoy the Holidays and be safe.