Department of Justice Settles Numerous Outstanding Claims Against Plaintiff Law Firm for Alleged Failure to Reimburse Medicare Conditional Payment Debts

In a press release issued on February 23, 2023, the United States Attorney for the District of Maryland announced that Kandel & Associates, P.A. (“the Firm”), a Baltimore-based law firm, and Nelson R. Kandel, Esq., had entered into a settlement agreement with the United States to resolve allegations that they failed to reimburse the United States for Medicare conditional payments that the government had previously made to medical providers on behalf of the Firm’s clients.

The government alleged that, over many years, Medicare made conditional payments to healthcare providers to satisfy medical bills for the Firm’s clients. During that period, the Firm negotiated for and received settlement proceeds for the Firm’s clients, but neither the Firm nor its clients repaid Medicare for conditional payments it made to medical providers. 

According to the press release, the settlement resolves the government’s claims that the Firm and Mr. Kandel failed to resolve at least twelve (12) MSP debts. The government alleged that the Firm disbursed settlement proceeds to clients without confirming the existence of an MSP debt. Under the terms of the settlement agreement, the Firm and Mr. Kandel agreed to pay the United States $39,828.66 to resolve the government’s claims without admission of liability. 

Going forward, the Firm and Mr. Kandel also had to agree to designate a person at the Firm responsible for paying MSP debts; training the designated employee to ensure that the Firm pays MSP debts on a timely basis; and periodically reviewing any outstanding MSP debts with the designated employee to ensure compliance. 

The Department of Justice further commented: “Plaintiffs’ attorneys cannot simply rely on their clients’ representations about their status as Medicare beneficiaries and ignore their obligations to reimburse Medicare for its conditional payments,” said U.S. Attorney Erek L. Barron. “This is the third matter our office has resolved with attorneys who fail to make good on their obligations to repay Medicare for its conditional payments, and we will continue to investigate these matters, regardless of when settlement distributions are made, and regardless of what clients tell their attorneys regarding their status as Medicare beneficiaries.”

As noted by the quote above, this is the third time that the Department of Justice has pursued a plaintiff firm for ignoring its conditional payment reimbursement responsibility. The other instances occurred in 2018 (https://www.justice.gov/usao-edpa/pr/philadelphia-personal-injury-law-firm-agrees-start-compliance-program-and-reimburse) and 2020 (https://www.justice.gov/usao-mdpa/pr/harrisburg-law-firm-pays-53295-reimburse-medicare-program) and involved two separate Pennsylvania law firms. At least one of those Pennsylvania law firms, Rosenbaum & Associates, similarly agreed to designate a person at the firm to reimburse MSP debts, train a designated employee to ensure that MSP debts are timely repaid, and periodically review any outstanding MSP debts.

Sanderson Firm Commentary:

This recent Department of Justice settlement is a stark reminder that it is imperative that all parties to a workers’ compensation, no-fault/PIP/MedPay, and liability settlement with Medicare beneficiaries must consider and address Medicare Secondary Payer obligations. All parties to the settlement include not only the primary payer, but also Medicare beneficiaries, their attorneys, and even medical providers.

Although it is common in many Medicare beneficiary settlements, particularly in liability claims, to designate one party as responsible for reimbursing Medicare, it should be understood that delegating the responsibility of reimbursement does not fully absolve the non-reimbursing party’s obligation to Medicare. If the party designated to reimburse Medicare does not do so, Medicare may recover from any other party to the settlement, even if the settlement funds were already paid.

The Code of Federal Regulations, specifically 42 CFR 411.24(e) and (g), provide that Medicare has a right of action to recover its conditional payments from any entity, including a Medicare beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment. Further, pursuant to 42 CFR 411.24(c)(2), if Medicare must take legal action to recover, Medicare may recover twice its conditional payment from a primary insurance payer. Lastly, pursuant to 42 CFR 411.24(d), Medicare may recover by direct collection or any offset monies Medicare owes the entity responsible for refunding the conditional payment.

Medicare and Medicare Advantage Plans have full authority to pursue primary insurance payers, law firms, and make an example of such entities as it has here with the Firm, to demonstrate that Medicare will ensure that it is reimbursed where it makes conditional payments that are not reimbursed. Further, recent case law is extremely rampant wherein Medicare Advantage Plans (MAPs) and their assignors, such as MSP Recovery LLC, have been extremely litigious as of recent years and continue to file MSP double damages private cause of actions against insurers across the country. A recent 11th Circuit Court of Appeal decision deciphered an appeal brought by MSP Recovery filed against two insurance companies for their alleged failure to reimburse the MAP and discusses an interesting interplay of how state statute of limitations might preempt the MSP Act. For more information on this 11th Circuit decision, click here.

How should primary payers and law firms avoid being kept up at night by Medicare conditional payment obligations? Work with an MSP expert on how to ensure your settlement is tight around any MSP obligations, to include addressing the reimbursement of any Medicare/MAP conditional payments, Section 111 reporting obligations and potential Medicare Set-Aside (MSA) have been handled. Sanderson Firm has an over 80% success rate in reducing Medicare/MAP conditional payment demands, and as a full-service law firm, offers MSP settlement agreement review services. For questions, please contact me.