In 2007, the federal government amended the long-ignored Medicare Secondary Payer Statute 42 USC § 1395y(b)(2) (“MSP”) to empower Medicare to recover funds from liability settlements and lawsuits. Regardless of how a settlement agreement characterizes the damages, the amended law allows Medicare to recover directly from the plaintiff’s law firm, the defendant’s insurer or the defendant’s law firm, even if the defendant or the insurer already paid the plaintiff. Additionally, the amendment established a legal obligation on the parties and the insurer to formally determine the Medicare lien, ensure that the lien is paid, and protect the future interests of Medicare. The law, however, clashes with several state laws requiring prompt payment of a settlement as well as long established local practices and case law regarding the mechanics of settlement. The amendment therefore raises a host of issues for the local courts who must balance the interests of encouraging settlements with the interests of Medicare and the defendant’s desire to “buy their peace”.
This CLE program discusses the amended law, the decisions from state and federal courts around the country addressing the competing interests and proposes a mechanism that protects the insurer and both counsels without discouraging settlement.