• New Medicare Secondary Payer Reporting Rules Affect How Insurers and Employers Settle Claims
  • May 7, 2010 | Authors: Keith A. Dropkin; Michael Jacobster
  • Law Firm: Jackson Lewis LLP - White Plains Office
  • New far-reaching reporting requirements have been added to the Medicare Secondary Payer (MSP) rules.  The breadth and complexity of this project has caused the regulatory agency (the Centers for Medicare & Medicaid Services or “CMS”) to delay implementation.  Currently, these reporting rules will generally apply as of January 1, 2011, for covered settlements, judgments, awards, or other payments on or after October 1, 2010.  However, many affected entities may need to start the registration process with CMS now.

    Overview

    Medicare is Generally the Secondary Payer

    The MSP rules prohibit Medicare from making payments for medical expenses in which payment has been made or can reasonably be expected to be made by a third-party.  If Medicare pays where a third-party is liable, Medicare has the right to recover the amount of the payment.  Depending on the situation, Medicare may seek recovery from employee benefit plans, employers contributing to the plans (including multi-employer plans), insurers, certain third-party administrators and even the Medicare beneficiary if the beneficiary recovered those expenses in a liability claim.

    The new MSP reporting rules enhance CMS’s ability to enforce Medicare’s reimbursement rights following a settlement, award or other payment to a Medicare beneficiary.

    Entities Covered By MSP Reporting Rules

    The MSP reporting requirements apply to all liability insurers, including self-insured employers and EPLI (Employment Practice Liability Insurance) coverage, no-fault insurance, and workers’ compensation benefits (collectively referred to as “Responsible Reporting Entities” or “RREs”).

    MSP Reporting Requirements

    The reporting rules require RREs to:

    • determine whether a claimant is a Medicare beneficiary,

    • register with the CMS, and

    • report any covered settlement or payment (see below).

    Covered Settlements and Payments

    The mandatory reporting rules apply to any settlement, judgment, award, or other payments paid from an RRE to a Medicare beneficiary (generally age 65 or disabled) even if the claim did not involve medical expenses covered by Medicare so long as any medical expenses are claimed and/or released.  Thus, according to current guidance by CMS representatives, even if a claim by a Medicare beneficiary does not involve any medical expenses, CMS will require reporting if the release would cover claims for medical expenses.

    The underlying claim is irrelevant.  For example, CMS representatives have stated that the MSP reporting requirements may apply to employment discrimination cases and claims under professional liability policies.  CMS representatives have stated that a general release for severance payments (i.e., severance release) to a Medicare beneficiary does not trigger the reporting rules if the payment is not for any medical expenses and the release does not cover medical expenses under a group health plan.

    Penalties

    RREs that fail to comply with the reporting requirements will be subject to a penalty of $1,000 for each day of noncompliance with respect to each claimant.  Also, the payer of the settlement could be responsible for double damages if Medicare is not paid in a timely fashion.

    The Required Actions for an RRE

    Insurers and employers who might be in the position of an RRE must take the following steps:

    Determine Whether the Claimant is a Medicare Beneficiary

    The determination of whether the claimant is a Medicare beneficiary must be done before any settlement is reached or payment made.

    • Medicare beneficiaries. The Medicare population consists mostly of those aged 65 and older.  However, it also includes any person with a disability who is receiving SSDI benefits for 24 months and any person with End State Renal Disease.

    • Status Unknown. If a claimant’s Medicare status is questionable, the RRE may query Medicare (this is optional) whereby information about the claimant (such as the SSN) is submitted for a determination on the person’s Medicare status.  An RRE must be registered to use the query function.

    Determine If a Covered Settlement or Payment is Involved

    No reporting is required unless there is a covered settlement or payment paid on or after October 1, 2010, from the RRE to a Medicare beneficiary.

    • Minimums. Temporary minimum thresholds for reporting (ranging from $5,000 in 2010 to $600 in 2013) apply for the first few years after the law’s effective date.

    • Medical expenses claimed or released. The CMS applies the reporting rules to settlements, judgments, awards or other payment where any medical expenses are claimed and/or released. 

    • Ongoing medical payments. RREs must also report the assumption of ongoing responsibility for medical payments (ORMs) made on or after January 1, 2010 (this typically only applies to no-fault and workers’ compensation claims).

    Determine Who is the RRE for the Covered Payment

    Generally, where an insurance company is involved, the insurer has the sole responsibility for reporting any covered payments unless the employer fails to inform the insurer about the payments it makes directly to a claimant.

    Registering and Reporting

    The registration process with the CMS may take weeks or more (it includes a testing process). 

    • Where. RREsmay register at www.Section111.cms.hhs.gov.

    • When. The general deadline for registering with the CMS has passed (September 30, 2009).  However, the RRE is not required to register if it has nothing to report.  The CMS cautions that those RREs who do not register initially because they have no expectation of having claims to report must register in time to allow a full quarter to test for future situations in which they have a reasonable expectation of having claims to report.

    • CMS representatives have emphasized that they are not interested in imposing penalties for late registration as long as the RREs are making good faith efforts to provide the requisite information.

    • Reporting. The mandatory quarterly reporting to CMS begins in the quarter starting on January 1, 2011, for covered settlements and payments on or after October 1, 2010.  RREs must install required software and pass a testing process before sending actual claims data to the CMS.  The initial test trials with RREs are taking place now.

    • Alternate program for low volume RREs. CMS is expected to establish a simplified reporting program for entities that have a small number of payments to report.  This program should be announced before the first mandatory reporting quarter beginning January 1, 2011.  Although the program’s threshold for the number of reportable events is not yet known, a CMS representative stated that it is safe for RREs with five reportable events or fewer in a year to wait for this new guidance.

    Protect Medicare’s Interest

    • Hold back. Before making any payments to the claimant, make sure Medicare’s interest, if any, has been protected.  If Medicare may have an interest, the more conservative approach would be to not disburse any of the settlement to the Medicare beneficiary until settling with the CMS.

    • Other approaches. Other approaches to consider include: (i) make the settlement check payable to the beneficiary, beneficiary’s attorney and Medicare, or (ii) retain that portion of the settlement estimated to equal Medicare’s share until Medicare issues a demand letter for payment.

    CMS Website on Mandatory Reporting

    The CMS provides information about mandatory reporting for liability insurers at http://www.cms.hhs.gov/MandatoryInsRep/.  The website also includes the separate mandatory reporting requirements for group health plans.