Subrogation is an essential part of handling a personal injury claim by an attorney. Every attorney has an obligation to explain subrogation to their clients, and to address subrogation issues in their client’s case. This article is intended as an overview of subrogation and further discussion with your attorney is suggested.
Subrogation is an equitable doctrine holding that when a third party pays a creditor or obligee the third party succeeds to the creditor's rights against the debtor or obligor. In terms of an automobile accident claim, subrogation is a doctrine holding that when an insurance company pays an insured's claim of loss due to another's negligence, the insurer succeeds to the insured's rights (as the right to sue for damages) against the tortfeasor. Subrogation can take place either by operation of law or by contractual agreement. The purpose of subrogation is to compel the ultimate payment of a debt by the party who, in equity and good conscience, should pay it.
When you are injured as a result of someone else’s negligence, and you will likely obtain medical treatment for injuries sustained, such as in an automobile accident. In Florida there is currently a requirement that all drivers carry personal injury protection insurance coverage or PIP, also known as no-fault. In theory your no-fault insurance is supposed to pay for your medical care following an automobile accident. However PIP is normally limited to $10,000.00 and will pay only 80% of your medical bills. To make matters worse your own insurance company may cut off your PIP benefits and simply stop paying your medical bills after you are examined by one of their doctors in what they call an independent medical exam or IME. No fault benefits are not subject to subrogation, and as such payments made to medical providers through PIP do not have to be reimbursed.
The problem arises when other sources of payment must be utilized to cover your medical bills following a car accident. These sources may include health insurance, medicare, medicaid, and medpay. These are known as collateral sources, and any payments made by them are subject to subrogation, which means that they may have a lien against any settlement you may receive from the at fault party, and must be reimbursed for payments made to your medical providers.
In many cases, the collateral sources are willing to accept a reduced amount and your lawyer may be able to negotiate these reductions on your behalf.
It is the lawyers obligation to determine if there were payments to any medical providers by collateral sources, to obtain written lien amounts from those collateral sources, and to pay back those collateral sources through the subrogation process.
The subrogation process becomes even more complex when medicare or medicaid have made payments, which triggers federal laws and complicated rules, particularly with regard to medicare. Subrogation for medicare falls under the MSPRC or Medicare Seconday Payer Recovery process. In order to understand the complexity of MSPRC and the time frame that should be expected, please review the following; Medicare’s has a Right of Recovery from Liability Insurance, No-Fault Insurance, Workers’ Compensation. The applicable statute is 42 U.S.C. 1395y(b). See particularly, 42 U.S.C. 1395y(b)(2)(A)&(B). See also 42 CFR Part 411 for the applicable regulations. Medicare is secondary to all types of liability insurance, no-fault insurance, or workers’ compensation. Note: For liability insurance, this includes self-insurance which is defined by statute as follows: "An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part." Medicare may make conditional payments while a claim is pending but is entitled to repayment. "A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this title with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means." The MSPRC begins retrieving all claims paid by Medicare with dates of service on or after the Date of Incident. Once the MSPRC receives this information, the claims are reviewed to determine which items and/or services are related to the Liability Insurance, No-Fault insurance, or Workers’ Compensation case. MSPRC is not able to provide the Conditional Payment information until the medical claims information is available and has been reviewed. This process takes approximately 8 weeks. During this time either Proof of Representation or Consent to Release documentation, as appropriate, needs to be sent to the MSPRC as soon as possible. If no valid Proof of Representation or Consent to Release document has been received by the MSPRC, the Conditional Payment Letter (CPL) will ONLY be sent to the beneficiary and any no-fault insurer or workers’ compensation carrier reflected in the MSPRC’s records.