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Local case triggers Medicare change

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Tuesday, Feb. 12, 2013, 9:48 a.m.

A settlement seemingly has brought closure to a three-year odyssey that began when Lorraine Babich was injured in an automobile accident.

But Medicare's bureaucracy prevented the Fayette City woman from collecting the settlement or paying her bills.

As a result, Babich – through the efforts of Monessen attorney Bernie Shire and U.S. Rep. Tim Murphy – has effected a change in federal law that will aid seniors across the nation.

Babich was involved in an auto accident in March 2008 in front of Kmart in Rostraver Township.

Injuries suffered in the mishap required surgery on her spine.

She developed complications as a result of the surgery and had an ongoing period of medical treatment and hospitalization as well as nursing and personal care home treatment.

In 2011, Babich was declared incapacitated and her brother-in-law, Louis R. Gerber Sr., and his son, Louis R. Gerber Jr., were appointed co-guardians. Her husband, Paul Babich, died in 2009.

Babich had extensive expenses as a result of all of the treatments.

The medical providers submitted Babich's medical benefits to Medicare, unaware that she had medical insurance.

Under the federal Social Security Act – under which Medicare falls – Medicare is a secondary payer. That means Medicare may pay out to medical providers and are entitled to be reimbursed by the primary payer – the individual's medical insurance carrier.

The law provides that if any settlement or judgment verdict is received by the individual for whomever benefits were paid, Medicare is reimbursed for the medical expenses it paid.

In 2011, a settlement was reached in Babich's case and Shire notified Medicare, but never heard anything back.

“We had a settlement but we couldn't transact it because we had to pay Medicare first,” Shire said. “She had bills to pay, but we were unable to do so because we were unsure how much Medicare was going to get out of the deal.”

Shire reported the issue concerning lack of accountability for Medicare at a meeting of the Westmoreland Academy of Trial Lawyers. The president of the academy appointed Shire to pursue whether something could be done under the law.

“We were all hamstrung in the settlement of our cases,” Shire said. “This was not an individual thing. It was happening to all of the attorneys.”

Shire contacted then-U.S. Rep. Mark Critz, who referred the issue to U.S. Rep. Tim Murphy because of his role on the committee that overseas Medicare.

Murphy introduced the Strengthening Medicare and Repaying Taxpayers Act on March 14, 2011.

The SMART Act requires Medicare provide affected parties with accurate information about the total cost of medical bills when the parties announce a settlement is near. Without coming to a settlement, Medicare cannot recoup the money and beneficiaries are often left footing the bill. The SMART Act breaks down the bureaucratic hurdles that prevent Medicare and private insurers from closing out medical billing cases in a timely manner.

Under the SMART Act, Social Security must respond within 65 days from the time that Medicare receives notice of the settlement, although the federal government can extend that by 30 days.

“Congressman Murphy was very diligent in keeping us informed about what was going on,” Shire said.

The SMART Act was signed into law by President Obama last month.

Murphy said he was pleased to see the SMART Act become law.

“It gives seniors some peace of mind on a couple levels,” Murphy said. “They want (to be sure) Medicare will be there for their future. It was one of those unfortunate bureaucratic glitches that hurts seniors who may have been injured and prevents them from getting their bills paid,” Murphy said. “Without this bill, a senior may wait years for settlement. Without this bill, Medicare may spend large amounts money with delays.”

Murphy estimated the SMART Act will save Medicare in excess of $1 billion owed the program.

“Sometimes seniors were being told to repay Medicare when they did not know if they owned anything,” Murphy said. “We wish we could have gotten this done earlier for (Babich), but for other families like her, this will help them.”

Murphy said when he introduced the bill, many of his peers in Congress did not know it was a problem.

“They found out it was happening to constituents in their districts, too.”

Chris Buckley is a staff writer for Trib Total Media. He can be reached at 724-684-2642 or

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