The Future of Medicaid Secondary Payer Reporting Regimes (Part II) – Medicare Secondary Payer Reporting and Medicaid Liens

In my last post, I offered a general overview of the federal-state Medicaid partnership and the impact of the Affordable Care Act (ACA).  So now we know about the broad framework of Medicaid and how it’s funded.

Let’s switch gears and talk about a new subject – secondary payer issues.  Oftentimes, when someone requires medical care for an accident, some third party is legally responsible for the injury.  Some good examples are an employer being responsible for a workplace injury, or a toxic tortfeasor being held responsible for injuries it causes.  In that scenario, if Medicare or Medicaid pays for care related to the injury, the agency will have a statutory lien against any judgment or settlement obtained from the third party.

But a lien is worthless if no one knows about the settlement or judgment, right?  Historically, the Centers for Medicare and Medicaid Services (CMS) tried to overcome that obstacle by requiring Medicaid beneficiaries to refund any judgment or settlement owed to Medicare within 60 days.  The problem is that sort of “honor system” approach left a lot of secondary payment dollars on the table.  So, since 2007, CMS has used the Section 111 program (called that because it was enacted as Section 111 of the Medicare, Medicaid and SCHIP Extension Act) to require reporting of certain entities (mostly insurers) that are likely to pay money subject to a Medicare lien.  In other words, Section 111 effectively puts the burden on the payer – as well as the beneficiary – to report any settlement or judgment.  (There’s actually a lot of academic and practice-based criticism over Section 111, but since these posts are mostly about Medicaid, I’ll refrain from getting into them.)

As I mentioned above, state Medicaid programs have a similar requirement that the state agency must have a lien over any settlement or judgment intended to pay for medical treatment that was already paid for by Medicaid.  I should note – although it’s not directly relevant to my point – that in its 2006 Arkansas Department of Health and Social Services v. Ahlborn decision, the U.S. Supreme Court interpreted  the federal anti-lien statute to restrict the amount of the lien to the portion of the settlement attributable to health care costs.  Colorado’s, for example, is at C.R.S. 25.5-4-301 (I can’t link to the specific statute, but interested readers can click through here).  It allows:

When the state department has furnished medical assistance to or on behalf of a recipient pursuant to the provisions of this article, and articles 5 and 6 of this title, for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department’s lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.

Note:  The italicized phrase is what makes the statute consistent with Ahlborn, as the U.S. District Court for the District of Colorado recently observed (click through for a Word version of the decision).  Disclosure:  This case was litigated by my friend and former boss while I worked at the Colorado AG’s office, though I had no involvement with it.

So what’s the difference between the Medicare and Medicaid lien programs?  It’s Section 111 and the absence of anything remotely resembling it in virtually every state (with the notable exception of Rhode Island).  Most states have some sort of reporting requirement – Colorado, for example, requires Medicaid recipients and their representatives and attorneys to report any settlement or judgment that might be subject to a Medicaid lien.  But anything that relies on a beneficiary doing something that might take significant dollars out of his or her pocket is problematic at best.

One last thing:  Remember how Medicaid funding is structured from Part I?  It’s not all state money, not even close; instead, the federal government provides at least 50 percent and (depending on the state) as much as 75 percent of Medicaid dollars.  When a state Medicaid agency collects on a Medicaid lien, the feds want their share back as well.  Still, getting a quarter-to-half of a judgment or settlement back is better than nothing, right?  Discerning readers should see where I’m going with this.  Stay tuned.