Medicare Seeks Recovery from Settling Parties and Their Insurers
February 1st, 2010 by Michael JonesThe U.S. Department of Justice recently filed an action seeking to recover conditional Medicare payments paid on behalf of certain individuals who also received compensation as part of a $300 million PCB settlement entered into almost six years earlier. The complaint seeks to recover damages from the plaintiffs’ attorneys, the defendant PCB manufacturers and two of their insurers for the conditional payments Medicare made on behalf of approximately 900 individuals. (Medicare will pay certain expenses on a conditional basis where the party primarily responsible has not paid, and then it can recover such conditional payments from the primary payer.) In addition to recovery of the conditional payments, the complaint also seeks double damages. Consequently, if all these claims are successful against them, the insurers could have to pay certain claims or portions of claims three times over.
In 2003 Monsanto, Pharmacia and Solutia settled several related suits in Alabama involving approximately 20,000 plaintiffs alleging injuries caused by the manufacture, release and disposal of PCBs. The $300 million Abernathy portion of the settlement involved several consolidated lawsuits filed on behalf of approximately 3,500 Anniston, Alabama residents who claimed that PCBs released in the Anniston area lowered their property values and caused them personal injury.
The Abernathy settlement involved the creation of a $300 million fund to process the settlement payments. The PCB manufacturers, along with two of the insurers of one of the PCB manufacturers, namely Travelers and AIG, paid monies into the Abernathy Settlement fund. Medicare alleges that no provision was made for reimbursement of the conditional Medicare payments made on behalf of the approximately 900 plaintiffs that received these Medicare benefits.
The complaint is venued in United States District Court for the Northern District of Alabama. United States v. James J Stricker, et.al CV-09-PT-2423E. Filed pursuant to the Medicare Secondary Payer Statute and the regulations promulgated under the statute, the complaint alleges that 42 CFR §411.25 obligated the defendants to notify Medicare of any settlement, award, judgment or other payment that was made when the case was settled. The complaint alleges that the defendants’ failure to notify Medicare entitles Medicare to a double recovery for any payments that are owed pursuant to 42 U.S.C. § 1395y(b) (2) (B) (ii) and 42 C.F.R. § 411.24 (c) (2).
There has been significant effort and focus recently in industry to address the Medicare Reporting requirements that became effective as of January 1, 2010. These efforts have been concentrated on avoiding the imposition of certain statutory fines for failing to properly report settlements. However, the Stricker case cautions that such fines are only one potential financial detriment that can result from failing to report liability settlements. Medicare has now made it abundantly clear that it will seek double damages for recovery of any conditional payments where Medicare was not properly notified of a liability settlement. Medicare’s potential double damages recovery for non-reported claims also predates the new Medicare Reporting requirements. Indeed, the Stricker case is not based on the newly effective Medicare Reporting requirements. Given the six year statute of limitations, there is potential for double damages liability for such settlements going back as much as six years.
A PDF of the complaint is available here: United States v. James J Stricker, et.al CV-09-PT-2423E.