Medicare was initially the "primary payer" for medical services to beneficiaries, meaning that it paid first for medical costs, even where other sources existed. However, high costs led Congress, beginning in 1980, to enact "Medicare Secondary Payer" (MSP) laws. The MSP legislation sought to reduce Medicare costs by requiring beneficiaries to first exhaust other sources of payment before resorting to Medicare. If you are injured in a personal injury lawsuit, i.e. a car accident, slip, trip and fall, construction site fall, you must report the accident to the Center for Medicare and Medicaid Services.
Medicare Payment for Treatment of Injuries
When payment from another source is probable (automobile insurance, liability insurance, no-fault insurance), yet not likely to occur within 120 days of the service, the law allows "Conditional Medicare Payment" for medical costs. Although Medicare providers are often required to question patients regarding possible alternative sources of payment, as a practical matter, the agencies that run Medicare have little way of knowing about such alternatives. As a result, "conditional payment" is often made.
Medicare Reimbursement: Rights and Duties
The MSP system includes provisions for reimbursement and "subrogation." In other words, Medicare succeeds to the rights of the injured party to sue the injuring party, or others, for recovery. The beneficiary has a statutory duty to reimburse Medicare for its "conditional payments" within 60 days of receipt of a "third-party payment". So if you have a personal injury lawsuit and it settles, Medicare must be reimbursed out of those settlement proceeds.
Waiver or Reduction of "lien" amount
Depending on the circumstances, Medicare may waive its right to reimbursement, though it is more likely to reduce the amount. Under applicable regulations, Medicare will reduce its recovery to allow for the cost of procuring the settlement or judgment, including attorneys' fees.
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