7The March 25, 2010, "open letter to the Western New York bar" ("Trusiak: State courts not an out on MSP," by Robert Trusiak) regarding Medicare reimbursement by the U.S. Attorney (USANYW) argues that plaintiffs' counsel must follow the administrative procedures established by Congress "or else." The Western New York plaintiff bar's response is "OK."

This is an evolving area of the law set in motion by Arkansas Dept. of Health and Human Services v. Ahlborn, 126 S.Ct 1752, 2006, which recognized a distinction between the causes of action of pain and suffering and causes of action for the recovery of medical expenses. The impact of the analysis by this U.S. Supreme Court decision has had ramifications beyond the specific topic therein.

As to Medicare, there are several basic legal tenets upon which there seems to be no disagreement.

1. Certainly, it is recognized that where there is a federal statute that provides an administrative procedure for resolution of disputes, that process must be exhausted prior to initiation of an action in federal court.

2. It should be recognized by all practitioners that the Medicare-enabling legislation accords the government with a right of "subrogation" in order that they may recoup the medical expenditures (42 U.S. Code).

3. The federal government's statute of limitations on such recovery claims is three years from the date of payment for the medical benefit (42 USC 1395y[b][2][B][vi]). There has been some confusion on this issue, though the statute is unequivocal.

4. The federal statute requires notification of CMS (the Centers for Medicare & Medicaid Services) of a personal-injury resolution involving a Medicare recipient. All practitioners should be doing this as a matter of course.

There was a time when the USANYW did negotiate a Medicare recovery claim directly with a local defense attorney, and even was party to a settlement agreement between the federal government, the defense and the plaintiff. In this evolving area of the law, the USANYW's interests are now stated as exclusively plenary. Trusiak wrote: "The United State Attorney's Office for the Western District of New York defers CMS on MSP waiver and compromise as such decisions are solely within the province of the administrative agency."

The present standard is that the government's claim of reimbursement is limited to the amount it paid minus the costs of litigation, including attorney fees. In as much as the USANYW specifically states that it totally defers to CMS regarding whether there is a Medicare reimbursement obligation or not, there would seem to be no reason to argue legal positions in this forum. Addressing the issue of payment by the insurer upon a settlement and the impact of CPLR 500 3-a (judgment upon failure to pay within 21 days), there should be no problem with the insurer timely issuing the settlement draft. The proviso would be that the plaintiff's attorney stipulate and agree to hold the plaintiff's portion in escrow until CMS has issued their "conditional demand" and it is satisfied or the issues are resolved administratively. If there is a stipulation to hold all monies including attorney fees in abeyance until Medicare has defined its claims, then that is the stipulation, and the entry of judgment would be inappropriate. However, so long as Medicare's interests in (the) plaintiff's personal recovery be preserved, whether the funds are held in escrow by (the) plaintiff's attorney or the insurance company would not seem to be an issue of concern to the USANYW.

While it is agreed that an administrative protocol is required to dispute the "conditional demand" of CMS, that mandate does not dictate that a plaintiff's counsel is required to pursue Medicare's subrogation claim as a part of the personal-injury claim. The Code of Professional Responsibility, Rule 1.8(g), makes it an ethical violation for an attorney to represent competing claimants on a single lump-sum recovery, take a fee on that total and then allocate the funds between the two. That rule is the law controling attorney conduct in the State of New York. That the USANYW might not be concerned about potential ethical violations by plaintiff's practitioners so long as the federal government recoups its expenditures is understood. However, arguments by a U.S. attorney do not absolve a plaintiff's attorney of his ethical obligations and could themselves constitute an ethical violation (Professional Rule of Conduct, Rule 3.4[e]).

For the plaintiff's practitioner, the simple course is to follow the prescribed administrative procedures. Whether the practitioner decides to pay any and all demands by CMS or seeks to distinguish the personal-injury claim from the medical-reimbursement claim and contest such demands is between the practitioner, his client, the Grievance Committee, CMS and administrative processes.

Finally, it is recognized that there is no statutory obligation to notify either CMS or USANYW of a suit or of the claims or lack thereof contained therein. However, given the three-year statute of limitations on subrogation claims under the statute, it would seem a courtesy, as well as good faith, to advise CMS of the suit, especially if there are bona fide ethical concerns that compel the practitioner to restrict the scope of the suit to "pain and suffering." Whether the claims for pain and suffering and those for medical expense can be severed will not be determined by the USANYW. That will be determined by "the administrative process" and/or the federal courts. There are cases "in the pipeline" that should help clarify these apparent distinctions.

J. Michael Hayes is a Buffalo trial attorney who can be reached at jmh@jmichaelhayes.com.

Editor's Note: We invite comment on this letter and the letter it references, from our March 25 issue. Further submissions on this topic, to be published at the discretion of the Buffalo Law Journal, should be restricted to 500 words or less, or may be shortened to fit our word limit.