One of the most difficult situations a personal injury lawyer faces is when a case doesn’t provide any effective recovery to a client. Just as corporate lawyers struggle with busted deals, plaintiff’s attorneys struggle with the busted personal injury lawsuit, in which the settlement value (after legal fees and Medicare lien reimbursement) leaves nothing for the plaintiff.
There are a number of reasons why a personal injury case may play out this way. It could be that your client was in an auto or personal injury accident and the defendant turns out have a minimal policy or worse is uninsured and judgment proof, which potentially leaves you only with recourse to a minimal recovery against defendant; or the plaintiff’s own SUM insurance policy or even worse MVIAC. With the cost of health care ever increasing and Medicare increasingly vigilant about asserting its reimbursement rights, it’s easy to see how that could leave a plaintiff with nothing to show for your efforts. Unfortunately, this is a scenario that’s occurring with increasing frequency whether your client is a Medicare beneficiary at age 65 or older or they receive SSD which forces them into Medicare.
We know some personal injury lawyers faced with this situation offer to waive part of their fees in order to provide at least a nominal recovery to their client. But we don’t recommend doing this. In fact, we think waiving your fees can end up being counterproductive. A much better approach if and when you face this scenario is to know how to effectively approach CMS with a request to compromise or waive their claim. If you waive attorneys’ fees it ends up being that much harder to get CMS to compromise its claim because you are taking away your cost of procurement argument to reduce the lien.
CMS has authority to compromise Medicare’s claim under the Federal Claims Collection Act (FCCA) at 31 USC, 3711 et seq. and 42 CFR 401.613. Under the FCCA, a Medicare Secondary Payer Recovery Contractor (MSPRC) has no authority to compromise a claim, so a compromise request generally must be submitted in writing to the MSPRC, who then forwards it to the appropriate CMS Regional Office (for requests of less than $100,000) or to the Central Office (for requests of > $100,000) for consideration.
A compromise request can be made before or after settlement. If the request is post-settlement, then settlement information must be submitted in writing before your request will be processed.
There are three key factors CMS consider in determining whether a compromise or suspension of a claim is warranted.
- Inability to pay – the cost of collection does not justify the enforced collection of the full amount of the claim;
- If there is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or
- Chances of successful litigation are questionable, making it advisable to seek a compromised settlement.
As an alternative to pursuing a compromise of claim, there is also a procedure to request a claim waiver under section 1870 of the Social Security Act. Waivers can only be requested after settlement and final determination has been issued by the MSPRC. All waiver requests must be in submitted in writing along with a completed questionnaire of form SSA-632K. This questionnaire requires information regarding the plaintiff/beneficiary’s monthly income, expenses and assets as well as the reasons for requesting a full or partial waiver. It is considered good practice if along with the completed questionnaire you also provide the MSPRC with a compelling story of the facts of the underlying case.
The statutory standard for waiver provides that CMS may waive all or part of its recovery in any case where an overpayment under Title XVIII has been made with respect to a Medicare beneficiary who is: without fault AND when adjustment or recovery would either defeat the purpose of Title II or Title XVIII of the Act (repaying Medicare would create a financial hardship), OR be against equity and good conscience for the beneficiary to repay Medicare.
“Without Fault” Standard. To determine if a plaintiff/beneficiary is “without fault,” the MSPRC will generally consider the following four factors:
- The amount of out-of-pocket medical expenses incurred by the beneficiary;
- Whether the beneficiary’s assets are insufficient to pay Medicare;
- The beneficiary’s assets, monthly income, and expenses; and
- The age of the beneficiary and whether he or she has any physical or mental impairments.
So we certainly hope this doesn’t prove to be a frequent occurrence in your practice. But if and when recovery proves relatively deminimis in a personal injury lawsuit, we strongly recommend that you pursue a compromise or waiver with CMS on the grounds outlined above instead of waiving your own fees and potentially making matters worse.
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