The Remote Brief with Brendon: What Impact Can State Law Have on an Insurance Payer’s Ability to Reimburse Medicare Conditional Payment Liens?

Written by: Brendon De Souza, Esq., MSPA 

Welcome to the first article of a new series titled, “The Remote Brief with Brendon.” In this recurring series, Brendon will address common Medicare Secondary Payer (MSP) compliance questions received by Sanderson Firm experts. In this first article, Brendon addresses a question often posed by insurance carriers and self-insured entities in Illinois general liability settlements involving Medicare beneficiaries. *Note – if your organization is experiencing issues with similar laws from other jurisdictions, please contact us.

Question: “Brendon – I have received a bunch of pushback from Illinois plaintiff attorneys refusing to allow my organization [insurance carrier] to reimburse Medicare liens, and they refuse to allow any language stating otherwise in the settlement agreement. These plaintiff attorneys keep referencing an Illinois law and they state all they have to do is draft a letter to invoke this ‘right’. I received their letters, but what are they talking about?”

Answer: The Illinois plaintiff attorneys are referencing 735 ILCS 5/2-2301 (also known as the “Illinois Prompt Settlement Payment Act”), which grants the plaintiff the choice of determining how Medicare liens are reimbursed:

735 ILCS 5/2-2301 Settlement of claims; payment:

(c) In a personal injury, property damage, wrongful death, or tort action involving a claim for money damages in which there is a known third-party right of recovery or subrogation interest (including attorney’s liens, healthcare provider liens, or rights of recovery claimed by Medicare, the Centers for Medicare and Medicaid Services, the Illinois Department of Healthcare and Family Services, or private health insurance companies), the plaintiff may protect the third-party’s right of recovery or subrogation interest, where applicable, by tendering to the defendant:

*                             *                             *

(2) (ii) a letter from the plaintiff’s attorney agreeing to hold the full amount of the claimed lien in the plaintiff’s attorney’s client fund account pending final resolution of the lien amount

Unfortunately, the Illinois Prompt Settlement Payment Act (“Act”) does no favors for liability insurers or self-insured entities when it comes to Medicare conditional payment lien exposure. If the plaintiff attorney invokes the Act by sending a letter (as described above) to the defendant and there is an executed release, the defendant will have 30 days to provide settlement funds to the defendant — no excuses. The authority on conditional payment lien handling rests with plaintiff alone.

Unfortunately, there are no provisions within the Act addressing plaintiff’s failure to reimburse Medicare liens (e.g., penalties against plaintiff for reneging on their letter / agreement) if plaintiff invokes the Act, which is alarming because the liability insurer and/or self-insured entity can be penalized for the plaintiff’s non-reimbursement under federal law. Pursuant to 42 CFR § 411.24 (e), the Centers for Medicare & Medicaid Services (CMS) has a direct right of action to recover from any primary payer, regardless of whether the plaintiff has agreed to reimburse Medicare liens in the settlement agreement. CMS may pursue recovery against the primary insurance payer even if the primary insurance payer has already paid the full settlement to the plaintiff.

If you find yourself involved in settlement negotiations for an Illinois liability claim involving a Medicare beneficiary, it may be worthwhile to request to “opt out”[1] of the Act if plaintiff is agreeable. Otherwise, you will be at the mercy of plaintiff’s Medicare conditional payment handling wishes, and you may need to monitor lien reimbursement status (e.g., through the Medicare Secondary Payer Recovery Portal) to avoid any post-settlement surprise claims made by Medicare.

Sanderson Firm routinely assists our clients in all types of conditional payment research, appeal, and resolution. If you have a question regarding this article or have a question/idea regarding MSP issues for a future The Remote Brief with Brendon column, please email Brendon at brendon@sandersoncomp.com.

[1] The Illinois Prompt Payment Act allows parties to opt out pursuant to the language of 735 ILCS 5/2-2301(g).