Companies and their attorneys risk monetary penalties and DOJ enforcement if they fail to ensure that toxic tort and personal injury plaintiffs reimburse Medicare.

By Christine Rolph, Taiga Takahashi, and Holly Bainbridge

The US Department of Justice (DOJ) has filed numerous enforcement actions against defendant companies and law firms based on an alleged failure to reimburse the government for its share of personal injury and toxic tort settlements, pursuant to the Medicare Secondary Payer Act (MSP Act), as amended by Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007.[1] Medicare now seeks to enhance its enforcement of penalties for non-compliance, proposing a rule that implements the MSP Act’s reporting requirements. Under the MSP Act, inaccurate reporting of settlements, judgments, or other payments made to Medicare beneficiaries may result in a civil monetary penalty up to US$1,000 per day per Medicare beneficiary.

The new rule, if finalized, would provide guidance on how and when penalties should be assessed, as well as facilitate increased government monitoring of compliance. The clear message to all parties in toxic tort and personal injury litigation is to investigate whether any plaintiffs are Medicare recipients and, if so, to ensure full compliance with the reporting and reimbursement requirements in the MSP Act.

Under the MSP Act, if Medicare paid for an individual’s medical expenses, Medicare may be entitled to repayment if another party — the “primary payer” — has an obligation to cover those costs. Repayment responsibility extends to any party paying for medical expenses that were already paid by Medicare, including payments in litigation settlements or final judgment proceeds.[2] Under the MSP Act, plaintiffs, defendants, and their counsel are each responsible for ensuring repayment.[3] If Medicare is not reimbursed within 60 days of receipt of the primary payment, the DOJ may bring an action against any party to recover not just reimbursement of Medicare’s conditional payments, but double that amount.[4] Repeated failures to comply may result in a DOJ enforcement action brought, for example, under the False Claims Act.

The DOJ has a history of enforcing the MSP Act. One of the first and most notable cases was a lawsuit against 18 defendants, including producers of polychlorinated biphenyls (PCBs), seeking to recover Medicare payments made to persons allegedly injured by PCBs.[5] Before settlement monies were transferred to the plaintiffs, the United States filed suit pursuant to the MSP Act against the PCB producers, their insurers, and the plaintiffs’ lawyers to recoup Medicare payments made to 907 plaintiffs. The government also sought interest and double damages.[6] More recently, the United States obtained US$2 million in settling a False Claims Act lawsuit against two insurance companies for failure to repay Medicare.

The DOJ also has been active in enforcing the MSP Act against law firms representing parties in personal injury cases. For example, in March 2019, the DOJ reached a US$250,000 settlement with a Maryland law firm to resolve allegations that the firm failed to comply with the MSP Act when its client received a large settlement and the firm failed to ensure Medicare was repaid. In November 2019, the DOJ settled a similar action against a different Maryland law firm relating to cases in which the firm referred clients or entered into joint representation agreements with co-counsel. The DOJ warned that attorneys may be held accountable for repayment, “regardless of whether they were the ones primarily handling the litigation for the plaintiff.” In 2020, the DOJ sued a Texas law firm for failure to reimburse conditional payments made to clients.[7]

In addition to facing DOJ enforcement, parties who fail to report settlements, judgments, awards, or other payments related to Medicare-covered injuries or illnesses, or inaccurately report, may be issued a civil monetary penalty of up to US$1,000 per day per Medicare beneficiary.[8] Recently, the Centers for Medicare & Medicaid Services (CMS) proposed a rule providing guidelines for how and when to assess civil monetary penalties.[9] CMS stated in comments to its proposed rule that it intends to “enhance monitoring of recovery process disputes and appeals that contradict reported data, as well as monitoring of the reported data and performance over time to identify reporting that exceeds error tolerances.” The comment period on the proposed rule has ended. No final rule has yet been published.

The critical takeaway is that if Medicare has paid for the health expenditures of a plaintiff in a lawsuit, Medicare may be entitled to reimbursement. In the event of reporting or reimbursement failures, the non-complying party could face a DOJ enforcement action or other significant monetary penalties. All parties to the lawsuit are responsible for ensuring that Medicare is notified of the matter and receives any reimbursement payments in a timely manner.


[1] Pub. L. No. 110–173; see 42 U.S.C. § 1395y(b)(7)–(8).

[2] See 42 C.F.R. §§ 411.21, 411.22(b).

[3] 42 C.F.R. § 411.24(g).

[4] See 42 U.S.C. § 1395y(b)(2)(B)(ii)–(iii).

[5] 524 F. App’x 500 (11th Cir. 2013).

[6] This case was ultimately dismissed because the government waited over six years after the settlement to file its lawsuit, which was beyond the statute of limitations. 524 F. App’x at 502.

[7] Case No. 4:20-cv-00991 (S.D. Tex. Mar. 18, 2020).

[8] 42 U.S.C. § 1395y(b)(8)(E)(i).

[9] 85 Fed. Reg. 8793-02 (Feb. 18, 2020).