Avoiding Double Damages

Conditional payments and/or Medicare Advantage Liens are essential aspects of Medicare Secondary Payer (MSP) compliance. Under the MSP Act, Medicare is intended to be the “secondary payer” when other insurance coverage is available. However, Medicare may initially cover a beneficiary’s medical expenses if the primary insurance has not yet paid on the condition that they may seek reimbursement for that payment.

MSP Act [42 U.S.C. § 1395y(b)] states that Medicare does not pay for items or services to the extent that payment has been, or may reasonably be expected to be, made through a no-fault or liability insurer or through a workers’ compensation entity. Medicare may make a conditional payment when there is evidence that the primary plan does not pay promptly, conditioned upon reimbursement.

The Benefits Coordination & Recovery Center (BCRC) is responsible for recovering conditional payments when there is a settlement, judgment, award, or other payment made to the Medicare beneficiary. When the BCRC has information concerning a potential recovery situation, it will identify the affected claims and begin recovery activities. Beneficiaries and their attorneys should recognize the obligation to reimburse Medicare during any settlement negotiations. It is important to note that Medicare has a priority right of recovery, meaning they may seek repayment for conditional payments from any party to the settlement despite any settlement language specifying the responsible party. 

Medicare Advantage Plans/Medicare Advantage Organizations (MAPs/MAOs), through private insurers, can also make conditional payments, and they are widely considered to be entitled to reimbursement just like traditional Medicare. The entitlement to reimbursement established for the MAPs was gained through litigation. This litigation asserted that MAPs have the right to utilize Medicare’s private cause of action which includes a double damages provision.

Decisions have been reached in the Second, Third, and Eleventh Circuits affirming MAPs entitlement to bring these causes of action. Failure to reimburse liens asserted by the MAPs can now lead to serious consequences, including double damages, and potential litigation by the Medicare program or the MAO Plan. Ensuring timely reimbursement of these liens is critical to maintaining compliance and avoiding substantial financial penalties for all parties involved.

Of note, courts have ruled in favor of MAPs having the same rights as traditional Medicare. Specifically, In re Avandia Marketing [685 F.3d 353 (3rd Cir. 2012)] held that MAPs may seek reimbursement for medical expenses from primary payers. This was based on the plain language of the MSA Act, which does not differentiate between traditional Medicare and MAPs.

Additionally, Humana Medical Plan, Inc. v. W. Heritage Ins. Co. [832 F.3d 1229 (11th Cir. 2016)] held that the rights of MAPs are entitled to double damages if a primary payer fails to reimburse medical costs. Here, the court also found that the MSP Act applies equally to MAPs as it does to traditional Medicare, further supporting their ability to enforce reimbursement rights.

Recently MAP enrollment increased to over 50% of the Medicare population. This increase means that if a carrier is not conducting MAP lien investigations on their settling claims, they are facing potential litigation exposure on over half of their settlements involving Medicare beneficiaries. Additionally, most beneficiaries have been enrolled in numerous MAP plans throughout the life of their claim, meaning that a single claim could incur multiple suits for unaddressed MAP liens, exponentially increasing exposure. 

It is important to take a moment here to understand why double damages litigation is more common when dealing with MAPs as opposed to traditional Medicare. Medicare can refer claims to the Department of Treasury (DOT). When a conditional payment debt has gone unaddressed, and exceeded the established appeal timelines Medicare will refer the debt to the DOT. That conditional payment debt post-settlement will be tied to the Medicare beneficiary’s social security number and any payments that were due to the beneficiary may be offset by the DOT to satisfy the conditional payment debt. Common payments that might be offset include, tax refunds, social security income, and social security disability payments. This practice means that often Medicare can recoup money without the need to file suit or to pursue the primary payer instead.

MAP plans are unable to refer claims to the DOT. This hinders their ability to conduct subrogation and leaves only the private cause of action provision as a vehicle to recovery. MAP plans are also not motivated to recover from their members. These are private plans, and the Medicare beneficiaries are their customers, they do not have an incentive to attempt to seek recovery or litigation from their customers who could shop elsewhere for insurance coverage. Thus, we often see MAPs employ the priority right of recovery to pursue conditional payment reimbursement from the deeper pockets of the primary payers.

Carriers and claims professionals, along with beneficiaries and their attorneys, can take additional practical steps to mitigate exposure and ensure Medicare secondary payer compliance.

First, implementing a robust Medicare compliance process is essential. Early identification of Medicare beneficiaries and investigation of potential conditional payments or MAP/MAO liens during the claims review process and prior to settlement is critical. Ensuring open communication with the BCRC and engaging MAPs/MAOs to promptly provide detailed information about potential liens can help avoid post-settlement surprises including litigation, double damages, and offsets against a beneficiary’s Social Security or tax refunds by the Department of Treasury.

Second, integrating MAP/MAO lien searches into claims-handling workflows is increasingly vital, given the significant rise in MAP/MAO enrollment. Leveraging The PAID Act (Provide Accurate Information Directly Act) to identify a beneficiary’s applicable MAP/MAO and prescription drug plan (PDP) enrollment history ensures Medicare’s interests are protected, facilitates smoother claim resolutions, and mitigates litigation risks. Collaborating with lien resolution experts can streamline these investigations, particularly when beneficiaries have a history of enrollment in multiple MAPs/MAOs, which can complicate lien identification and resolution.

Finally, proactive education for claims professionals is crucial. Training on the differences between traditional Medicare and MAPs/MAOs, the risks of double damages litigation, best practices for timely reimbursement, and the importance of thorough documentation ensures compliance and reduces financial and reputational risks. By knowing the full scope of Medicare-related obligations, claim professionals can negotiate settlements that address lien reduction, particularly in cases involving disputed liability or limited settlement funds, future medical needs through Medicare Set-Asides (MSAs), and protective settlement terms to minimize future financial exposure.

By embedding these measures into claims processes, stakeholders can effectively navigate conditional payments complexities and safeguard against penalties and litigation.