October 20, 2014

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October 20, 2014

October 17, 2014

Congress Amends the Medicare Secondary Payer Act

On December 31, 2012, Congress sent the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act (“the Act”) of 2012 to President Barack Obama for signature. The Act had strong bipartisan support, passing in the House with a vote of 401-3 and in the Senate with a unanimous consent vote. The Act consists of what originally were two separate bills, the Medicare IVIG Access Act (H.R. 1845) and the Strengthening Medicare and Repaying Taxpayers Act of 2011 (the SMART Act) (H.R. 1063). The two bills were combined for passage. 

The former Medicare IVIG Access Act is found in Title I of the combined Act. It provides for establishment and implementation of a three-year demonstration project providing Medicare coverage for in-home administration of intravenous immune globulin (IVIG) for the treatment of primary immune deficiency diseases. The former SMART Act is found in Title II of the combined Act. It amends Title XVIII of the Social Security Act with respect to the application of the Medicare Secondary Payer rules (42 U.S.C. § 1395y (b)). 

Title II of the Act consists of the following five substantive sections, which are intended to strengthen and protect Medicare beneficiaries and the Medicare Trust Fund by improving and increasing the efficiency of the Medicare Secondary Payer recovery process: 

Sec. 201. [Determination of Reimbursement Amount Through CMS Website to Improve Program Efficiency] 

Under present practice, Medicare does not issue a final demand for reimbursement of the conditional payments it has made on behalf of a Medicare beneficiary until after there is a settlement, judgment, award, or other payment resolving the Medicare beneficiary’s liability claim against the party allegedly responsible for his or her injuries that prompted Medicare’s payments. The uncertainty over the final amount of Medicare’s claim for reimbursement can hamper settlement of claims involving Medicare beneficiaries. Section 201 of the Act redresses this problem by establishing a new process for determining the amount of Medicare’s conditional payment reimbursement claim before resolution of beneficiaries’ liability claims. 

Accessing Conditional Payment Information Through a Website 

Section 201 of the Act requires Medicare to maintain a password-protected website of conditional payments made by Medicare that are attributable to a specific injury or incident that forms the basis of a potential settlement, judgment, award, or other payment. Medicare is required to update the conditional payment information on the website in as timely a manner as possible but not later than 15 days after the date Medicare made the payment. The information shall include provider or supplier name(s), diagnosis codes (if any), date of service, and conditional payment amounts. 

The conditional payment information on the website shall be made available to a Medicare beneficiary/claimant and to an applicable plan (i.e., liability insurer, self-insured, no fault insurer, or workers’ compensation law or plan) if the plan has obtained the consent of the Medicare beneficiary/claimant. 

Providing Notice to Medicare of Expected Date of Settlement, Judgment 

Section 201 of the Act also provides that at any time beginning 120 days before the reasonably expected date of a settlement, judgment, award, or other payment, a Medicare beneficiary/claimant or applicable plan may notify Medicare that a payment is reasonably expected and the expected date of the payment. Medicare then will have a response period of 65 days (which Medicare can extend another 30 days if it determines that additional time is required to address payments) in which to post conditional payments on the website. 

Using Website Download as Final Conditional Payment Amount 

A Medicare beneficiary/claimant and/or applicable plan also may download a statement of conditional payments made by Medicare relating to a potential settlement, judgment, award, or other payment. A downloaded statement (referred to in the Act as a “statement of reimbursement amount”) will constitute the final conditional payment amount recoverable by Medicare if the following conditions are met:

  1. The statement was downloaded during the “protected period,” which is the period after Medicare’s response period (the 65-day or 95-day period) up to the notified date of the expected resolution of the dispute or lawsuit;
  2. The settlement, judgment, award, or other payment occurs within the protected period; 
  3. The statement was downloaded within three business days of the settlement, judgment, award, or other payment; and 
  4. The statement was the last statement downloaded from the website.

Resolving Discrepancies in Downloaded Statement of Conditional Payments. 

If the Medicare beneficiary/claimant believes there is a discrepancy with a downloaded statement of conditional payments, he or she must provide documentation to Medicare explaining the discrepancy and a proposal to resolve the discrepancy. Medicare in turn will have 11 business days after receipt of the documentation to determine whether there is a reasonable basis to include or remove payments on the statement. If Medicare does not make a determination within the 11 business-day period, then the Medicare beneficiary/claimant’s proposal to resolve the discrepancy shall be deemed accepted. 

Mandating Medicare Promulgate Final Regulations within Nine Months 

The Act charges Medicare with promulgating final regulations to carry out the website-related provisions of Section 201 within nine months after the date of its enactment. It is likely that Medicare will use a modified version of the Medicare Secondary Payer Recovery Portal (the “MSPRP”) that became active online in the summer of 2012. Among other things, the MSPRP currently allows parties to request updated conditional payment amounts. It does not, however, provide full claim details (supplier name, diagnosis codes, date of service, etc.). Currently, to receive full claims details, a party must request Medicare mail a hard copy conditional payment letter with an accompanying payment summary form. 

Establishing Right of Appeal and Appeal Process for Applicable Plans 

Section 201 of the Act further requires Medicare to promulgate regulations establishing a right of appeal and an appeals process under which an applicable plan (or an attorney, agent, or third party administrator on behalf of the applicable plan) may appeal determinations by Medicare of its entitlement to conditional payment reimbursement. An applicable plan must provide notice to the Medicare beneficiary/claimant of its intent to appeal. 

Sec. 202. [Fiscal Efficiency and Revenue Neutrality] 

Currently, regardless of how small a settlement, judgment, award, or other payment is, the terms of the Medicare Secondary Payer Act still entitle Medicare to reimbursement of conditional payments it has made on behalf of a Medicare beneficiary. It would, however, be wasteful for the government to pursue small claims that would cost more to pursue than what possibly could be recovered. To ensure that situation does not happen, Section 202 of the Act establishes a threshold for exemption from conditional payment reimbursement. 

Establishing a Reimbursement and Reporting Threshold 

Beginning in 2014, Medicare will be required to annually calculate and publish on an annual basis a single threshold amount under which the cost of seeking repayment of a conditional payment would be expected to be more than the expected recovery. If a settlement, judgment, award, or other payment by a liability insurer or self-insured for an alleged physical trauma-based incident (excluding alleged ingestion, implantation, or exposure cases) constituting a total payment obligation to a Medicare beneficiary/claimant is below the single threshold amount for the year involved, no reimbursement of conditional payments by Medicare or mandatory reporting to Medicare are required. 

Earlier last year, while the SMART Act was pending, Medicare published a minimum recovery amount of $300. So in a sense, the provisions of Section 202 codify current practice, and it is expected that the initial threshold calculated in 2014 will be around the current $300 amount. 

Sec. 203. [Reporting Requirement] 

Changing Noncompliance Penalty from Mandatory to Discretionary 

As originally enacted, the mandatory reporting requirements under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 U.S.C. § 1395y(b)(8)) included a mandatory civil money penalty of $1,000 for each day of noncompliance with respect to each claimant. Section 203 of the Act changes the penalty to a discretionary civil money penalty of up to $1,000 for each day of noncompliance with respect to each claimant. 

Creating Reporting Safe Harbors 

Section 203 of the Act also provides that within 60 days of enactment, Medicare is to publish notice in the Federal Register soliciting proposals for the specification of practices for which a reporting noncompliance penalty will and will not be imposed, including not imposing sanctions for good faith efforts to identify a Medicare beneficiary for reporting purposes. After considering submitted proposals, Medicare shall publish in the Federal Register, including a 60-day period for comment, proposed specified practices for which noncompliance penalties will and will not be imposed. After considering any public comments received, Medicare shall issue final rules specifying such practices. 

Sec. 204. [Use of Social Security Numbers and Other Identifying Information in Reporting]

Presently, the system for identifying Medicare beneficiaries and complying with reporting requirements requires Social Security numbers or Health Care Identification numbers. Some claimants have resisted supplying this personal information. It also is a burden for applicable plans to protect these numbers once they have been collected. So Section 204 of the Act directs Medicare to develop an alternative method for identifying individuals. 

Relaxing Use of Social Security and Health Care Identification Numbers 

Specifically, Section 204 requires Medicare to modify existing reporting requirements within 18 months of enactment to permit, but not require, applicable plans to access or report a Medicare beneficiary/claimant’s Social Security number and/or Health Care Identification number. Medicare may extend the deadline for one or more one-year periods if the Secretary of Health and Human Services certifies to the committees of jurisdiction in the House and Senate that the prior deadline for modification, without extension, threatens patient privacy or the integrity of the Medicare Secondary Payer system. 

Sec. 205. [Statute of Limitations] 

Imposing a S/L on Conditional Payment Recovery Actions 

As discussed in U.S. v. Stricker, No. CV-09-BE-2423-E, 2010 WL 6599489 (N.D. Ala. Sept. 30, 2010), there has been a question as to what is the applicable statute of limitations for conditional payment recovery actions brought by the government. Section 206 of the Act answers the question by creating a three-year statute of limitations under the Medicare Secondary Payer Act for recovery actions by the government against applicable plans and any entity that has received payment from an applicable plan or from the proceeds of an applicable plan’s payment to any entity. The three-year limitation period runs from Medicare’s receipt of Section 111 notice of settlement, judgment, award or other payment. The three-year statute of limitations applies to all actions brought and penalties sought on or after six months from the enactment of the Act.

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About this Author

Partner

Stephen G. Schweller is a Partner in the Litigation Department. Steve, a Chartered Property Casualty Underwriter (CPCU), focuses his practice on insurance-related issues and disputes. He has represented insurance carriers in significant coverage litigation in state and federal trial and appellate courts around the country as well as in mediations and arbitrations. Steve has handled cases for carriers, agents, and third-party administrators, including bad faith cases, adversary proceedings in bankruptcy, collections matters, and declaratory judgment actions concerning...

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