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Could Settling Cost You $1,000 Per Day?

By Robert G. Brody and Rebecca Goldberg
October 26, 2012

Imagine settling an employment discrimination claim for $450,000 and then getting a bill for $90,000 more than three months later! As of Jan. 1, 2012, this has been possible, and most private employers have no idea it could happen. Employers need to report details of certain settlements to the federal government. This requirement has been in existence for years, but now it may apply to the settlement of employment-related cases. And to make sure the government has your attention, Section 111 of the Medicare, Medicaid, and SCHIP Extension Act imposes a $1,000 per day penalty for any failure to report such settlements or other claim resolutions to the federal government.

Medicare, the federal health insurance program for those over 65 or who meet certain disability standards, makes “conditional” payments for medical treatment when a Medicare beneficiary is injured by a third party. If the injured party later receives payments related to the injury, Medicare can exert a lien on the funds to recoup its payouts. Thus, if you pay an employment settlement to a Medicare beneficiary, it is possible Medicare has a lien on the settlement funds. If you fail to advise Medicare of the payment you made (and thus allow them to secure their lien), they may come after you for that hefty $1,000 per day fine. Here is what you need to know to avoid heavy penalties.

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