You have battled the insurance company and won, but alas you are not done. Before any money can leave your client’s trust account, you have to negotiate the liens. A “lien” is an insurance carrier, a medical provider, or a former attorney’s legal right to repayment. A lien holder’s right to be repaid attaches to the client’s recovery from a settlement or verdict.
Liens can present a daunting trap for the inexperienced. There are all sorts of liens out there. Some liens are statutory like the Medi-Cal lien (Welfare & Institutions Code sections 14124.72-14124.791), the workers’ compensation lien (Labor Code section 3856), the county medical benefits lien (Government Code section 23004.1), and the hospital lien (Civil Code sections 3045.1-3045.6) Other liens are contractual, like private insurance liens, attorney liens, or doctors-on-liens.
Negotiating liens is often a time consuming subject; in the case of statutory liens like Medi-Cal or Medicare, an attorney’s failure to resolve these liens can result in disciplinary actions. California State Bar provides a detailed discussion on the ethical parameters regarding an attorney’s ethical obligations when dealing with liens. See California Standing Committee on Professional Responsibility and Conduct’s Formal Opinion 2008-175.
The focus of this article is limited to dealing with Medi-Cal and Medicare liens. Understanding the legislative history and the purpose behind the programs is a critical bit to successful negotiation of these liens.
MEDICAL, MEDICAID and MEDICARE
A. Medicaid or Medi-Cal: Which is It?
Not every client can afford to pay for health insurance. If you cannot afford your next meal, likely chances are you can’t afford to pay for health insurance. But even the poor deserves healthcare. This is the idea behind the Medicaid program.
The Medicaid program is a joint federal and state funded program that provides medical care for individuals who cannot afford to pay their own medical costs. The Medicaid program was launched in 1965 during the presidency of Lyndon B. Johnson and under Title XIX of the Social Security Act (“SSA”). (42 USC §1396 et. seq.)
According to the U.S. Business insider, as of 2017, Medicaid provided free health insurance to 74 million low income and disabled people. While states are not required to participate in the Medicaid program, all states do participate in this program. Medi-Cal is part of California’s federal Medicaid program. (Welf. & Inst. Code, §§14000–14198, emphasis added.)
B. Medicare v. Medi-Cal: What’s the difference?
Medicare is a federally funded insurance program that provides healthcare for persons 65 years or older, certain disabled persons under 65, and persons with end-stage renal disease (Permanente kidney failure requiring dialysis or a transplant.) (42 USC §1395)
Until 1965, the Medicare program did not exist in the United States. President Johnson signed the program into law to provide health care for the elderly. The program has expanded over the years and its limits are constantly challenged depending on the country’s political climate.
The history of Medicare and its different parts (A-D) is long and complex. One fundamental difference between Medi-Cal and Medicare is their application of benefits. Unlike Medi-Cal, Medicare is a secondary layer of health insurance. For example, Medicare may not pay for medical expenses when payment “has been made or can reasonably be expected to be made under a workers’ compensation plan, an automobile or liability insurance policy or self-insured plan, or under no-fault insurance.” (42 USC §1395y(b)(2); 42 USC §1862(b)(2)(A)(ii); see the Medicare and Medicaid’s comparison chart.)
NEGOTIATING MEDICARE AND MEDI-CAL LIENS:
A. How to Negotiate Medi-Cal liens
When it comes to negotiating Medi-Cal liens, first you must open a Medi-Cal lien claim. You can open a claim online or by mail. Once a claim has been opened, within 120 days you will receive an acknowledgement letter from Department of Health Care Services (“DHCS”). The acknowledgment letter will contain a claim number that you will need to include in all your future correspondence with DHCS.
At the end of the case, or once your client has completed her treatment, whichever happens first, notify Medi-Cal through the Medi-Cal online Portal or by mail. (see chart included for online and mail information.) Before sending a final lien amount, Medi-Cal may take up to 180 days from the last date of your client’s treatment to request a copy of all medical bills. Explain to your client that the process can be slow.
Once you have received a final lien amount, you may negotiate with Medi-Cal to reduce its final lien amount. Pursuant to California Welfare and Institution Code 14124.76(a), Medi-Cal’s recovery is limited “to that portion of a settlement, judgment, or award that represents payment for medical expenses, or medical care, provided on behalf of the beneficiary.” (Welf. & Inst. Code, §14124.76(a), emphasis added.)
DHCS will require a copy of the parties’ settlement agreement, attorney fees and litigation costs before accepting a substantial reduction of its lien amount. Thus, it is best to provide DHCS with the above items in advance.
B. When Medi-Cal’s Lien Exceeds Your Client’s Recovery
Before 2006, all states (including California) could recover the entire value of their liens even if that would leave the injured person with little to no recovery. The case of Heidi Ahlborn changed all that.
Heidi Ahlborn was a 19-year-old college student and an aspiring teacher. (Arkansas Dept. of Health and Human Servs. v. Ahlborn, (2006) 547 U.S. 268) Heidi was involved in a serious, catastrophic crash that left her “brain damaged, unable to complete her college education, and incapable of pursing her chosen career.” (Id.) While the case was in litigation, Heidi applied for and was granted medical assistance through Arkansas’ Medicaid health program. (Id., at p. 270)
The case settled for policy limits of $550,000. (Id., at p. 274.) “The settlement was not allocated between the various categories of damages. The state of Arkansas claimed that it was entitled to the entire sum of $215,645 it had expended, while the beneficiary [Heidi Ahlborn] contended that [Arkansas] was entitled only to that portion of the settlement that was attributable to medical expenses.” (Bolanos v. Superior Court, (2008) 169 Cal.App.4th 744, 752; emphasis added.)
To facilitate resolution, the parties had stipulated to the following terms: “(1) the Ahlborn’s entire claim was reasonably valued at $3,040,708; (2) the $550,000 settlement amounted to approximately one-sixth of that amount; and (3) if the Ahlborn’s construction of the applicable federal law was correct, Arkansas Medicaid program was entitled to recover $35,581, i.e., only approximately one-sixth of the $215,645 benefits provided.” (Ahlborn, supra, 547 U.S. at p. 274; Bolanos, supra, 169 Cal.App.4th at p. 752.)
Deciding the case, the United States Supreme Court held “Federal Medicaid law does not authorize ADHS [Medicaid] to assert a lien on Ahlborn’s settlement in an amount exceeding $35,581.47, and the federal anti-lien provision affirmatively prohibits it from doing so. Arkansas’ third-party liability provisions are unenforceable insofar as they compel a different conclusion.” (Ahlborn, supra, 547 U.S. at 292) The U.S. Supreme Court explained “because the tortfeasors accepted liability for only one-sixth of Ahlborn’s overall damages … the relevant “liability” extends no further than that amount.” (Id., at 270)
Section §1396k(b) of Medicaid law does not mean “that State must be paid in full from any settlement. Rather, because the State’s assigned rights extend only to recovery of medical payments, what §1396k(b) requires is that the State be paid first out of any damages for medical care before the recipient can recover any of her own medical costs.” (Ahlborn, supra, 547 U.S. at p. 292, emphasis added.)
California Welfare & Institutions Code section 14124.76(a) incorporates the holding of Ahlborn into California’s governing Medi-Cal laws. Section 14124.76(a) limits
“Recovery of the director’s lien from an injured beneficiary’s action or claim is limited to that portion of a settlement, judgment, or award that represents payment for medical expenses, or medical care, provided on behalf of the beneficiary…Absent the director’s advance agreement as to what portion of a settlement, judgment, or award represents payment for medical expenses, [ ] the matter shall be submitted to a court for decision. In determining what portion [ ] represents payment for medical expenses,[ ]and as to what the appropriate reimbursement amount to the director should be, the court shall be guided by the United States Supreme Court decision in Arkansas Department of Health and Human Services v. Ahlborn (2006) 547 U.S. 268 and other relevant statutory and case law.” (Welf. & Inst. Code, § 14124.76(a); see also 42 U.S.C. §§ 1396a(a)(18) and 1396p; emphasis added.)
The decision in Ahlborn radically reshaped the liens Medi-Cal could assert against recoveries in personal injury cases. The Ahlborn formula and its progeny provide ample leverage and legal authority to obtain substantial lien reduction in cases involving Medi-Cal.
C. How to Negotiate Medicare Liens
Before resolving a Medicare lien, you will first need to open a claim with Medicare’s Benefit Coordination and Recovery Contractor (“MSPRC”).
Unlike Medi-Cal’s online program, Medicare’s Secondary Prayer Recovery Portal (“MSPRP”) requires a login and ID. The MSPRP verification process may take up to three weeks or longer. Thus, if your firm does not have an online profile, set one up today at https://www.cob.cms.hhs.gov/MSPRP/
To open a Medicare claim, the Benefits Coordination & Recovery Center (BCRC) requires an attorney to submit a singed “proof of representation and consent to release” form. A copy of these forms can be found on MSPRP’s portal. Medicare will not send you a reminder to submit the above forms. So to avoid delay, make sure you include these documents when setting up a Medicare claim. Otherwise, you will be waiting for Medicare to send you an acknowledgement letter and none will ever arrive.
Within 60-90 days of opening a claim, you will receive a notice of lien letter from Medicare Secondary Payor Recovery Center (“MSPRC”) outlining the process that you will need to follow. Contact Medicare if you have not received any correspondence within 90 days of opening your case. (see chart for contact information)
As soon as the case is settled, or the client has completed treatment, whichever occurs first, notify MSPRC and request an itemized conditional payment lien from MSPRC. Once you have received the itemized payment carefully review each item. If you look carefully, often, you will find charges unrelated to your client’s claimed injuries.
Cross out the unrelated claims with a pen. Using a pen is better than highlights because highlights don’t always transmit through fax or scans. Within 60-90 days, you should receive a response from Medicare regarding your disputed redactions and the final Medicare lien amount.
Once you have the final lien amount, you may pay, appeal, and request a waiver of the lien. Since Medicare is a federally funded program, its applicable deductions are governed by Federal Regulations. Pursuant to 42 CFR 411.37(d) , “If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.” (Id.) procurement costs include attorney fees and litigation costs.
Sadly, Medicare lien laws have not yet been challenged the same way that Ahlborn challenged and changed Medicaid laws. Thus, Medicare is less flexible in accepting substantial lien negotiations and more likely to pursue the full value of its asserted liens even if that my result in little to no recovery for the injured person. In cases involving Medicare liens, be sure to know and include the exact lien amount before accepting any offer of settlement.
Negotiating Medicaid, Medi-Cal or Medicare liens can be time consuming and sometimes a headache. But if you set your client’s expectations early, start the process timely, and follow through with the deadlines described above, the process will be less daunting. If you have any questions or would like to consult your case further, do not hesitate to e-mail your questions or give my office a call.