4. Reimbursement

4(d) Decisions on the Merits

The CMS will honor designations that are made by a court or arbitrator in a decision on the merits. According to its manual:

The only situation in which Medicare recognizes allocations of liability payments to nonmedical losses is when payment is based on a court order on the merits of the case. If the court or other adjudicator of the merits specifically designate amounts that are for payment of pain and suffering or other amounts not related to medical services, Medicare will accept the Court’s designation. Medicare does not seek recovery from portions of court awards that are designated as payment for losses other than medical services. FN 1.

There are two aspects of this rule that merit attention. First, it is incumbent on counsel to make sure the Court requires such a designation by the jury through a special verdict. This may be routine in most states, but failing to request proper instructions or findings could be expensive. Second, it is not entirely clear what the language "on the merits" means. A definition that required a determination of liability would clearly be too narrow, as the parties often have a bona fide dispute on damages even where liability is clear and admitted. If that premise is accepted, then the interesting question is whether a court determination of damages would set the ratio of medical to non-medical expenses if that were the only issue to be resolved by a court or arbitrator. This type of approach would be attractive in a case where there is a significant issue as to causation. Or perhaps the parties could settle all issues but comparative fault, and seek an allocation on that basis.

One word of caution to any primary payer. If you agree to settle a case and submit the allocation issue to the court or an arbitrator, make sure the full amount of the CMS claim is held in escrow or otherwise secured until it is confirmed that CMS will accept the allocation. CMS is likely to take a dim view of any effort to reduce its claim.

FN 1. MSP Manual Chapter § 50.4.4.