New Illinois State Law Increases Complexity in Achieving Medicare Secondary Payer Compliance
Roy Franco
August 28, 2013

Effective January 1, 2014, settling defendants must work through yet another hurdle in attempting to achieve Medicare Secondary Payer compliance.  The new law, signed by Governor Quinn over objections of Industry groups such as the Illinois Insurance Association, is designed to expedite payment of settlement funds to the plaintiff attorney – within 30 days of delivery of the executed settlement document and other documents to protect Medicare recovery rights.  Regrettably, the law does not take into account the potential liability of the defendant or its insurer.  More likely it is a pronounced statement by State Government that such liability does not even exist for defendant – yet it exempts the State of Illinois, its agencies, and any class actions.

The law is triggered when a settlement occurs.  A release must be tendered within 14 days by defendant of written confirmation of settlement, which includes communication of all written means.  Defendants (attorneys and adjusters) must exercise caution in all writings (e-mail, letters, notes, faxes, etc.) so as to not trigger a settlement unless all terms are clearly laid out as conditions precedent.  If not, a tendered release which attempts to hold back funds until Medicare’s conditional payments are satisfied can be ignored with a simple letter from the plaintiff attorney.   The law requires the defendant to pay the settlement amount to the plaintiff attorney within 30 days, if the plaintiff attorney includes a letter that he or she agrees to hold the money in their trust account until the conditional payments are resolved.

Defendant is still required to electronically report to Medicare pursuant to 42 U.S.C. §1395y(b)(8).  If defendant is unclear as to how plaintiff has resolved the conditional payment, the data submitted by defendant may differ and result in gaps between what was reported by the defendant and the information submitted by the plaintiff attorney. Medicare uses the data reported by defendant to collect conditional payments.  If there are differences in the date of settlement or injury codes, this triggers additional conditional payment demands by Medicare which defendant is liable for under 42 U.S.C. §1395y(b)(2)(B)(ii).   The only proven method is when both the plaintiff and defendant work cooperatively to resolve Medicare claims.

To protect themselves the defendants must be proactive in identification of conditional payments owed Medicare and plan to pay it off at time of settlement.  This requires an agreement beforehand with the plaintiff attorney that must serve as a conditional precedent to any settlement.   Such conditions will prevent an attorney from simply holding the money in his or her trust account, as the law does allow the defendant to hold back the funds at the offer of the plaintiff attorney or agreement of the parties.

This law is a bold attempt to fix delays in settlement, but regrettably places an additional burden on defendants attempting to comply with difficult Medicare Secondary Payer laws, regulations and policy.  It does not encourage settlement and it is quite possible that it may be pre-empted by potential regulations under development by Medicare.

Click Here To Read About the New Law (Section 5 of the Code of Civil Procedure)