Medicare Change Means Those with Small Personal Injury Claims Can Settle Cases Quickly


Beginning on October 1, 2014, Medicare will no longer attempt to obtain reimbursement from personal injury plaintiffs with claims worth less than $1,000, and those beneficiaries will no longer have to give Medicare notice of their settlements.  This means that these cases can be settled much more quickly.

Under the Medicare Secondary Payer provisions of the Social Security Act, Medicare is not typically allowed to pay for medical services incurred by a Medicare beneficiary who is injured by someone else if another party (such as an insurance company) is responsible for paying for the plaintiff's care.  However, when prompt payment by a responsible party is unlikely, Medicare may pay for some medical services with the expectation that it will be paid back through a lien when the beneficiary settles his personal injury claim or wins his case at trial.  

In order to enforce these rules, personal injury plaintiffs are required to inform Medicare of a pending settlement so that Medicare may enforce its liens on the settlements.  Currently, settlements worth less than $300 do not need to be reported to Medicare, and Medicare will not attempt to recover conditional payments from these settlements.

Under the terms of the SMART Act of 2012, Medicare must annually adjust this reporting threshold so that it is not spending more to collect small liens than it is taking in through the recovery process.  On February 18, 2014, the Centers for Medicare and Medicaid Services Office of Financial Management issued an alert stating that it will raise the reporting and recovery threshold for most personal injury claims from $300 to $1,000.  In response to confusion over when the new threshold would be implemented, CMS issued a clarification on February 28th saying that the changes would take effect for cases that settle on or after October 1, 2014.

These changes mean that Medicare beneficiaries with small personal injury claims will not have to wait for the government before settling their cases and receiving their settlements.  (In the past, beneficiaries had to see how much they owed the government before deciding whether to settle or not.)  While the increased reporting requirement is still very low, it will certainly speed up the settlement process of many litigants.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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