Assume Medicare has paid a beneficiary’s medical expenses that were related to a personal injury claim. And assume that the beneficiary has successfully recovered a personal injury settlement from an at fault party. It is critical to understand that the federal government, through the Medicare Secondary Payer Program, holds important legal rights to recover a portion of the expenses out of such a settlement.
This blog focuses on just one of the many issues surrounding Medicare subrogation: How does the law determine just how much you must repay the federal government out of your legal settlement?
Federal regulation known as 42 CFR 411.37 addresses this issue. This regulation creates a formula that Medicare utilizes to create a “Final Statement” of money that you owe from your settlement. The formula takes into account the amount paid by Mediare, the amount of settlement, the amount of your personal injury attorney’s fee and costs. By way of example, here are three (3) common examples:
1. Medicare payment is less than the settlement amount the recovery is determined as follows:
Procurement cost = (attorney fees + expenses)
$30,000 + $5,000 = $35,000
Procurement ratio = (procurement costs/ settlement)
$35,000/$100,000 = .35
Medicare’s share of procurement costs (Medicare’s total claim x procurement ratio)
$6,000 x .35 = $2,100
Medicare’s recovery (total claim –share of costs)
$10,000 – $2,100 = $7,900
Medicare’s recovery = $7,900
2. Medicare payments equal or exceed settlement amount.
Medicare’s recovery = (total settlement – procurement costs)
3. If the Center for Medicare Services has to file suit due to a dispute over payment, recovery amount is the lower of the following:
- Medicare payment
- Settlement – procurement costs
To protect their clients, the best RI personal injury lawyers must always be wary of Medicare and their “super lien.” Experienced lawyers understand that the failure to navigate Medicare’s rules and regulations in a timely fashion can, at best, delay your claim, and at worst, place you at risk for owing additional money out of a potential personal injury settlement.