Medicare Stops Processing Lien Claim Paperwork, Holding Up Many Settlements

A recent decision by a federal judge has created a lot of uncertainty about Medicare liens, so much so that Medicare temporarily halted its usual lien processing procedures. This will result in a great deal of hardship for Medicare recipients who are currently involved in litigation or claims, since finalizing the amount to be repaid to Medicare is usually a crucial aspect of settlement. Medicare and its private contractors have historically been incredibly slow at processing the paperwork it requires its recipient to submit in these situations, frequently taking 6 to 9 months or more to process paperwork which insurance companies usually process in a matter of weeks. Medicare’s decision to nationally halt its paperwork on all of these pending settlements will likely affect tens of thousands of Medicare recipients and drag out what was already an interminably long Medicare lien resolution process.

This situation arises when a Medicare recipient is injured in an incident caused by the fault of a third party and Medicare pays some or all of the medical bills related to that injury. For instance, if a Medicare recipient is involved in a car wreck caused by another driver, Medicare will frequently process and pay that person’s medical bills. In that situation, however, Medicare will not pay those bills immediately, but instead wait to see if the third party pays the bills. If they don’t, Medicare will conditionally pay them. Medicare views itself as a “secondary payor” in that situation. If the patient then files a claim against the driver who caused the collision and receives a settlement, Medicare requires that it be reimbursed for the money it spent. Congress passed laws giving Medicare certain rights of reimbursement, and Medicare has created many procedures, rules and regulations dealing with many different aspects of this situation. Medicare Secondary Payer Recovery Contractor ( is a web site to assist the people involved in these matters understand the procedures. The Medicare regulations themselves, though, are far more complicated than a review of the web site would lead you to believe.

In particular, Medicare has regulations requiring its recipient to pay interest to Medicare if they don’t pay the money over to Medicare within 60 days of the recipient’s receiving the settlement money.

In the recent case, a federal judge in Arizona on June 4, 2011 imposed an injunction on Medicare preventing it from following some of its regulations on the grounds that those regulations exceeded the authority that Congress had given to Medicare. In addition, the judge granted class certification, meaning that the lawsuit will be pursued not only on behalf of the named parties to the suit but also other people who are similarly situated and affected by that situation. The particular situation involved in that case and directly affected by the judge’s ruling exists when a Medicare recipient appeals or contests Medicare’s decision about how much is owed. Under their rules, Medicare was requiring that recipient pay interest to Medicare starting 60 days after the recipient received the settlement money. The judge held that this is improper since the decision on the appeal would not have been issued in such a short time frame.

This decision is largely viewed in the legal community as a severe cutback on Medicare’s authority. Medicare’s lien had long been referred to in the legal community as a “super-lien,” meaning that they had much greater authority than other entities possessing liens, such as medical providers and insurance carriers. Medicare had also taken the position that the attorney for the recipient would be personally liable to Medicare if the attorney didn’t pay Medicare and instead turned the money over to the client/recipient. The judge’s opinion also held that the attorney is not liable to Medicare in that situation, overruling Medicare’s rules on that issue. That aspect of the decision is no doubt very troubling to Medicare since the threat of personal liability to the attorney was a significant factor in its efforts to force compliance.

This decision will no doubt be appealed by Medicare, and the landscape on these issues remains hazy at best. Even if the United States Supreme Court eventually gets the case and agrees with the recent decision, Medicare may appeal to Congress to pass laws giving Medicare specific authority to do what it has been doing all along. In the meantime, as is usually the case with Medicare, all we can do is wait.