Medicare Madness: Wrongful Death Claims and Survivorship Claims and Release Language

    We are seeing an uptick in CMS lien recovery issues across the board. A hot topic has been Medicare asserting liens against wrongful death recoveries. The law is clear that CMS has no lien rights against a California wrongful death recovery.  If you only represent WD heirs in a lawsuit, then no claim for past medical special damages to which a CMS lien could attach are implicated.
    However, often there is a survivorship claim on behalf of the estate to consider. If, for instance, you commence a claim on behalf of a plaintiff who thereafter passes away before the matter resolves. If the passing is related to the tort matter, you now have a WD claim on behalf of the heirs and a survivorship claim on behalf of the estate. It is not unusual for a WD heir to also be the representative of the estate. You must then resolve the issues of who you represent and potential conflicts of interest.  
    Very often the only recoverable damages in the survivorship action are the past medical special damages, i.e., the claimed CMS lien. Since CMS will only reduce its lien for actual procurement costs, it is hard to justify making the claim since the full recovery goes to CMS and the attorney.  The estate nets nothing. 
    If care is taken to never make any claim for past medical special damages subject to the CMS lien, nor even represent the estate, that may not be enough to avoid CMS making a claim against the WD recovery.  In many instances, the liability carrier is going to insist that the settlement documents release all potential claims against their insured, including those of the estate. In cases on policy limit tenders, this is the only way the liability carrier can assure their insured is not subject to further claims. If the settlement is unapportioned, and if the estate’s claims are extinguished, CMS will take this to mean the estate’s claim has been paid and CMS will pursue recovery of its lien interest.  

Here are some practical ways to deal with the issue:

• Represent only the WD heirs and not the estate. Have other counsel represent the estate.
• If you represent both the estate and WD heirs, use separate fee agreements and make sure to get conflict waivers.
• If you do not need the past medical special damages as part of your damage claims – do not include them in any discovery responses, demands, etc.  Specifically make clear you are not seeking recovery of the past medical special damages subject to any CMS lien.
• Demand that the liability carrier report only WD damages claims being made by the WD heirs in their SMART Act reporting to CMS at the beginning of the claim and more importantly, when the case resolves. 
• Use separate settlement releases for WD and estates claims. 

    Language in the WD release matters, even if the release makes clear that it is only for WD.  A broadly worded indemnity/hold harmless provision in which the heirs agree to be responsible for, “any and all” liens may be taken to create third-party beneficiary rights in favor of CMS against the WD heirs.  Yes, we have seen this happen.
Dealing with the wording of the WD release can be tricky because liability carriers generally insist on indemnity/hold harmless language. We suggest adding something along the lines of the following:
“Nothing in the release shall inure to the benefit of any non-party to this release, named or not named, including any governmental or insuring entity. No third-party beneficiary status/standing is established or implied for any individual or entity. "
    Also keep in mind that private Medicare Advantage Plans continue to claim the same Secondary Payer Act lien rights as CMS.  The limitations on CMS’s lien rights should be applied equally to MAP liens.
    Challenging Secondary Payer Act liens can be time-consuming. There are four levels of appeal before you can ripen an issue for filling in Federal District Court. We have found that with diligent planning, many CMS issues can be avoided or resolved efficiently. Of course, staying abreast of the ever-changing CMS regulations and procedures can itself be a never-ending task. 
    Here at The Lien Project, we can help you set up firmwide processes and procedures to guard against CMS problems and handle Secondary Payer Act compliance efficiently.  Or, we can take on the responsibility directly and you can spend your time on better tasks - like working more cases!   If you have a CMS problem, we stand ready to jump in and fight like trial lawyers!
    We are here to help.

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