The “Gory Story” – How a Medicare Lien Went Wrong

The “Gory Story” – How a Medicare Lien Went Wrong

A California Applicant claimed injuries AOE/COE to her bilateral upper extremities, neck and back on a continuous trauma basis through 8/21/2000. An Agreed Medical Examiner (AME) opined that all injuries were compensable except the neck. The Applicant was a Medicare beneficiary prior to the settlement, and Medicare paid for treatment to the neck.

On 11/5/07, a workers’ compensation Medicare Set-Aside Arrangement (WCMSA) was approved by the Centers for Medicare and Medicaid Services (CMS) in the amount of $98,205.00. The CMS approval notice says that the WCMSA does not cover conditional payments. The term “conditional payments” refers to payments that Medicare made for medical treatment obtained prior to the settlement of the workers’ compensation claim for parts of body claimed to be injured on the job. On 11/16/07, a Compromise and Release (C&R) was approved by a WCJ.

The C&R said “Defendant agrees to pay, adjust or litigate liens of record.” The Applicant was not held harmless from the liens. The only lien claimant was “United Government Services” who was the original “Coordination of Benefits Contractor” (COBC) for CMS. A COBC’s job is to identify and seek payments from workers’ compensation claims administrators or others that should have been the primary payer for medical treatment to parts of body alleged in a workers’ compensation claim. So if Medicare paid for medical treatment that should have been paid by a workers’ compensation claims administrator, the COBC seeks reimbursement on behalf of CMS and Medicare. See 42 C.F.R. § 411.47.

During the course of this case, the Defendant and its attorney did not know that United Government Services had lost the COBC contract with CMS and Medicare and was replaced by a new COBC named “Medicare Secondary Payer Recovery Contractor” or an MSPRC. The address and telephone number of the MSPRC are prominently displayed at the CMS public access website and has been for years. In any event, the WCJ, upon approving the C&R, set the matter for a lien conference and ordered Defense counsel to give United Government Services notice of the conference. No one appeared and the matter was taken off calendar. Thereafter, the Applicant’s attorney filed a Declaration of Readiness to Proceed in order to have the “Medicare lien” taken care of. Apparently, the Applicant was receiving letters from CMS demanding payments. This time, the WCJ set the matter for a lien conference and ordered United Government Services, the “MSPRC” and CMS “on behalf of Medicare”, to appear. Again, no one appeared on behalf of CMS/Medicare.

The WCJ ordered numerous noticed lien conferences and notices were given to these entities again with no one appearing at the WCAB on behalf of Medicare/CMS. On March 13, 2009 WCJ issued sanctions of $1,000.00 against “Medicare” for its failure to appear and issued an order granting Defendant’s Petition to Dismiss Medicare’s Lien.

Thereafter, the US Dept. of the Treasury sent the WCAB (not the WCJ – the feds went to the top) a letter objecting to the sanctions order, saying you can’t sue the US government unless and until the US government gives permission to be sued. In this case, the government did not give any consent to participate in any action before a state’s workers’ compensation tribunal. Then the WCAB granted reconsideration on its own motion and vacated the WCJ’s order of sanctions.

On December 8, 2008, the US Dept. of the Treasury, Debt Management Servicing Center notified the Applicant that they were garnishing her monthly SSD benefits to recover the costs Medicare paid for her medical treatment to her neck. The WCAB panel decision in its Decision After Reconsideration stated as follows:

“Defendant attempted to adjust, and ultimately litigated, the lien of UGS, which is the lien claimant’s name as it still appears in our records. In response to defendant’s Petition for Dismissal of Lien, the WCJ’s self-executing order of Dismissal of Lien issued on March 5, 2009. Lien claimant did not object, and we received no petition for reconsideration. The order dismissing the lien therefore became final. Applicant’s case before the WCAB had concluded. To our knowledge, defendant has performed its obligations under the C&R. Lien claimant’s lien has been dismissed with prejudice.”

What did the WCJ and the WCAB both do wrong in this case?

The WCJ should not have let the Defendant off the hook until Medicare agreed that the neck condition was not work related and withdrew its lien claim from the WC case. By dismissing the lien, the WCJ let the Defendant off the hook from taking care of the lien through the WCAB jurisdiction. The WCJ should have issued an Order Disallowing Lien after conducting an evidentiary hearing resulting in a “take nothing” finding on the evidentiary basis that the AME report did not support a claim of industrial injury to the neck. Defendant’s and Applicant’s attorneys could have taken this WCAB order and sent it to the US Dept. of the Treasury collections agency.

In other words, once a WCJ issues a “Take Nothing” order after receiving the AME report into evidence, the WCJ should have disallowed the Medicare Lien because the lien was only for prior medical treatment to the Applicant’s neck, which was found to be non-industrial by the AME. Medicare would have recognized the state judicial decision and given it full faith and credit. However, by dismissing the lien, the WCJ basically allowed CMS to directly seek reimbursement from the Applicant by garnishing her Social Security Disability benefits. In this case, Medicare properly paid for the medical treatment for the non-industrial neck condition.

The WCAB panel itself should have reinstated jurisdiction over the Medicare lien and remanded the case back to the trial level for a WCJ to take evidence on the lien claim and issue a take nothing on the Medicare/CMS lien since the neck condition was non-industrial and properly paid for by Medicare.

This case is a perfect storm for the Applicant since all of this could have been avoided if the Defendant had visited the CMS web site and discovered that inquiries for conditional payments by Medicare should be addressed to the Detroit, Michigan post office box where the claim is then assigned by CMS to a local COBC to negotiate with the Defendant. Instead, the Applicant’s monthly Social Security Disability benefits are reduced in order to pay reimbursement to Medicare for a medical condition that should have been Medicare’s responsibility all along in the first place.

See Gory v. U.S. Food Service, Inc., 2009 Cal. Wrk. Comp. P.D. LEXIS --, ADJ1180690 (OAK 0281569) (October 13, 2009) (WCAB panel decision).

The following information is provided directly from the CMS website ( and is current as of January 31, 2010:

All Workers' Compensation (WC) occurrences that involve a Medicare beneficiary should be reported to the Coordination of Benefits (COB) Contractor. If you would like to report a WC case, obtain conditional payment information, or have a general WC question, please contact the COB Contractor by phone or mail. Customer Service Representatives are available to provide you with quality service Monday through Friday, from 8:00 a.m. to 8:00 p.m., Eastern Time, except holidays. The COB Contractor's toll free number is 1 (800) 999-1118 or TTY/TDD: 1 (800) 318-8782 for the hearing and speech impaired.

Written reports of WC occurrences should be addressed to:

Medicare—Coordination of Benefits
MSP Claims Investigation Project
P.O. Box 33847
Detroit, MI 48232

NOTE: This mailing address is for reporting a WC occurrence, not for the submission of Workers' Compensation Medicare Set-aside Arrangement (WCMSA) proposals. WC settlements that include a proposed WCMSA for review should be sent to CMS C/O Coordination of Benefits Contractor, P.O. Box 33849, Detroit, MI 48232-5849.

When contacting the COB Contractor to report a new WC occurrence by phone or by mail, please be sure to have the following information available:

  • Your client's name
  • Your client's Medicare Health Insurance Claim Number (HICN) or SSN
  • Date of incident
  • Nature of illness/injury
  • Name and address of the WC insurance carrier
  • Name and address of the legal representatives
  • Name of insured
  • Policy/claim number

Once this information is received, the COB Contractor will apply it to the claimant's Medicare record, assign the case to a Medicare contractor, and inform you and your client of the applicability of the MSP program and Medicare's recovery rights. You will receive a notice advising you of the Medicare contractor assigned to handle the specifics of the case for recovery, Medicare's right of recovery and a beneficiary consent to release form. Once this process is completed, all further inquiries must be made through the assigned Medicare contractor. Please note that Medicare's interests cannot be determined until the claimant's record has been annotated with the specifics of the WC occurrence.

Make sure in any case in which the Applicant is eligible for Medicare that you confirm that there has been no conditional payments by Medicare for medical treatment for parts of body alleged to be injured in a workers’ compensation claim. This will avoid the financial consequences that Ms. Gory has faced in this case as a result of a deep misunderstanding of how federal law applies in workers’ compensation cases for anyone who has access to medical treatment under the Medicare program.

Since a lien for conditional payments by Medicare is filed in a workers' compensation case as a matter of law, a WCJ should not dismiss a lien from CMS/Medicare unless requested to do so by CMS's COBC. The WCJ should always retain jurisdiction over the lien and over counsel for the applicant and defendant to make sure that proper communication is occurring between Medicare's representative and the workers' compensation claims administrator.

  © Copyright 2010 Robert G. Rassp, Esq. All rights reserved. Reprinted with permission.