Volume XXIV, No. 9, June 25, 2012     

From the Law Offices of Garan Lucow Miller, P.C.

From the Co-Editors

James L. Borin & Simeon R. Orlowski







On April 24, 2012, the Centers for Medicare and Medicaid Services (CMS) issued an “advance notice of proposed rule making” regarding the Medicare Secondary Payer program as it applies to future medical expenses recovered in cases involving liability insurance and automobile insurance. This advance notice was published in the Federal Register on Friday, June 15, 2012.

This is not yet a proposed rule. CMS is requesting early comments from interested parties on several aspects of a proposed rule. This is the very first formal action that CMS has taken in developing a policy for “Medicare set-asides” in liability and auto insurance cases. We published an article on this topic back in 2009. (See Volume XXI, No. 16, April 15, 2009)



CMS is considering seven different options. Some would apply to individuals who are current Medicare beneficiaries and those who will become Medicare beneficiaries in the next 30 months, while others are expected to apply solely to current beneficiaries.

The options can be paraphrased as follows.

• Option 1 – The self pay option. The beneficiary uses the settlement funds to pay for his medical expenses that are related to the accident until the settlement funds are exhausted, and provides documentation of those uses. This is essentially the same as a self-managed Medicare set-aside, without the need for any advance approval.

• Option 2 – For claims that do not involve a chronic illness or condition or “major trauma”, and which meet other criteria, settlements under a specified dollar amount will not be required to address future medical expenses. CMS has not stated at this point what its dollar amount will be. Presumably that is a question on which it is soliciting comments.

• Option 3 – A physician certifies that no further medical care related to the subject accident will be needed. In that event, CMS will not require any other action.

• Option 4 – Approval of a set-aside plan by CMS.

• Option 5 – Participation in one of the three “recovery options” that are currently in effect (each with certain limitations). As a reminder, these are based on the recovery amount:

A. Settlements under $300 – CMS will not pursue recovery.

B. Settlements under $5,000 – CMS will accept 25% of the amount as its recovery.

C. Settlements under $25,000 – the beneficiary may “self calculate” the recovery amount. The amount will need to be approved by CMS.

• Option 6 – Upfront payment to CMS. Rather than maintaining funds in a set-aside account, the beneficiary would send the calculated payment directly to CMS. The amount would have to be subject to CMS approval.

• Option 7 – Compromise or waiver by CMS, as currently in effect.

CMS has set August 14, 2012 as the deadline for commenting.

Note that CMS has not suggested any plan to formalize a proportional or allocated reimbursement plan. It continues to take the position that its conditional payments must be reimbursed in full, and it undoubtedly will carry that stance forward as it pertains to future medical expenses. The option of requesting a compromise is always available to the Medicare beneficiary.

The case of Hadden v United States, in which the Sixth Circuit rejected (in November 2011) the argument that the repayment amount should be reduced when the plaintiff does not collect the full value of his claim, now has a Petition for Certiorari pending with the U.S. Supreme Court (filed March 30, 2012). Several organizations, including the Defense Research Institute, have filed amicus briefs, all supporting the petitioner’s position.






Register now for our Troy Breakfast Seminar which will take place at the Troy Marriott on Thursday August 30, 2012. This Seminar will address the Michigan Supreme Court and Court of Appeals decisions on significant no-fault cases.

To register please email Eileen Carty at