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Medicare Liens

By John L. Tate and Demetrius O. Holloway
March 29, 2006

Faced with rising litigation costs and unpredictable juries, it is understandable that many product liability litigants ' on both sides of the courtroom ' eventually think about settlement in lieu of trial. In cases involving catastrophic injury, however, staggering medical expense liens often control the feasibility of reaching an acceptable agreement. Some lawyers have long dreaded settlement negotiations when Medicare is the major lien holder, because Medicare can be the proverbial 800-pound gorilla at the table. Unfortunately, with the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MPDIMA) the gorilla has only gotten bigger. To have any chance at taming the Medicare beast, lawyers on both sides need to understand the reach of a Medicare lien, as well as potential avenues for reducing or eliminating Medicare's interest in the settlement proceeds.

Medicare Liens

Under certain circumstances, the Medicare Secondary Payer statute (MSP) allows Medicare to pay a person's medical treatment as a 'secondary payer' and gives Medicare the right to recover the expense outlay from a 'primary plan.' 42 U.S.C. '1395y(b)(2)(B). Simply put, the federal government is entitled to bring an action to recover its expenditures from a so-called 'primary plan' and assert a lien against any person or entity receiving payment from a primary plan. Because the government writes its own rules, the MSP statute gives Medicare a right of recovery that takes priority over the claims of any other party.

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