By Guest Author Rasa Fumagalli, J.D., MSCC, CMSP-F – Director of MSP Compliance Services
The wait for proposed rulemaking related to Medicare Secondary Payer (MSP) compliance obligations regarding future medical services in liability settlements continues. Although the Department of Health and Human Services issued their initial notification of proposed rulemaking in the fall of 2018, the target date has been moved several times and is currently set for October of 2021. However, focusing solely on the notice of proposed rules will cause a practitioner to overlook the impact of important MSP compliance changes taking place with Section 111 Mandatory Insurer Reporting obligations on settlements.
Current MSP Landscape
By way of background, the MSP Act prohibits Medicare from making payment when “payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (Including a self-insured plan) or under no-fault insurance.” (42 U.S.C §1395 Y(b)(2)(a)). The exception to this occurs when payment is not reasonably expected to be made “promptly” or within 120 days of receipt of the claim by the primary payer. If Medicare makes payment in this situation, the payment is conditioned upon the reimbursement of the payment to the appropriate Medicare Trust Fund. A primary payer’s reimbursement obligation to Medicare 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 included in a claim against the primary payer or by other means.” (42 C.F.R §411.22).
MSP compliance has three distinct components to it that should be addressed in connection with a settlement or a judgment. The first component involves conditional payments that were made by Medicare under traditional Medicare Parts A or B plans for injury related treatment prior to settlement. Conditional payment information is provided by the Benefits Coordination & Recovery Center (BCRC). Once a final conditional payment demand is made, it should either be disputed or paid. A failure to reimburse the Medicare Trust Fund may result in Medicare filing suit directly for double damages against any or all entities that were responsible for reimbursement of the conditional payments.42 U.S.C §1395 y(b)(2)(B)(iii); 42 U.S.C.§1395y(b)3.
As part of the first component, it is also important to be aware of liens that may be asserted by Medicare Advantage Organization plans that provide benefits under Medicare Parts C and/or D. Although these plans are administered by private insurance carriers who enter into a contract with Medicare, their recovery rights are based on the Medicare Secondary Payer Act. Plaintiffs and their representatives should reach out to the Medicare Advantage plans themselves to investigate and resolve their liens since this information is not provided by the BCRC.
The second component involves consideration of Medicare’s potential interest in the future medicals that are released in connection with the settlement. Since Medicare is prohibited from making payment when payment has been made under a liability insurance plan, no-fault insurance plan, or workers’ compensation insurance plan, any settlement that includes a component of future medical damages runs a risk of Medicare denying post settlement injury related treatment. One of the triggers for this risk comes from the Medicare beneficiary’s responses to the MSP admission/ outpatient encounter questionnaire that must be completed prior to a provider submitting a bill to Medicare. According to CMS’ Manual System Medicare Secondary Payer transmittal of September 15, 2020, the purpose of the questionnaire is to assist “in the proper coordination of benefits to ensure adherence to Medicare Secondary Payer (MSP) provisions as outlined in section 1862(b) of the Social Security Act.” The questions seek information about whether the treatment is for an injury or illness for which another party may be liable. If it is, the provider must obtain information regarding the accident date and the other carriers. The transmittal memo further notes that “liability insurance is the primary payer only for services related to the liability settlement, judgment, or award.” The risk of post-settlement injury related treatment denial may be mitigated in a variety of ways depending upon the specific facts of the case and the risk tolerance of the Plaintiff. Since the risk will fall on the Plaintiff, it is prudent for plaintiff counsel to document the MSP compliance discussions in your file.
The third component of MSP compliance is the Section 111 Mandatory Insurer Reporting obligation which serves as an enforcement mechanism for the MSP. It ensures that Medicare remains a secondary payer when a Medicare beneficiary receives a settlement, judgment, award, or other payment from liability insurance, no-fault insurance, or workers’ compensation. Section 111 reporting is completed by a responsible reporting entity (RRE) for the liability insurer, no-fault insurer and workers’ compensation plans and insurers. The RRE must report to Medicare if the plan has an Ongoing Responsibility for Medical (ORM – workers compensation/ Med Pay and Personal Injury Protection (PIP) coverage) in the case and/or the Total Payment Obligation to the Claimant (TPOC – or “settlement”). The current reporting TPOC threshold for settlements involving a Medicare beneficiary is $750.00 in both liability cases involving physical trauma and workers’ compensation cases. RREs must also query the system on a regular basis to identify claimants that become eligible for Medicare benefits while the claim remains open.
Under the Section 111 reporting requirements, the RRE must provide the injury victim’s first name, last name, date of birth, gender, and Medicare Beneficiary Identifier (MBI), Social Security Number, or the last five digits. The RREs must also report ICD diagnosis codes for the alleged illnesses/injuries that are claimed and/or released in the TPOC settlement, judgment, award, or other payment. CMS “encourages RREs to supply as many valid ICD-9/ICD-10 Diagnosis Codes as possible as that will lead to more accurate coordination of benefits, including claims payments and recoveries, when applicable.” (NGHP User Guide, Chapter IV, Version 6.4, June 2021). If the RRE fails to comply with the Section 111 reporting obligations, they may face a penalty of up to $1,000 per day per claim. To date, the penalty provision has never been enforced.
Shifting MSP Landscape
There are two changes in the foreseeable future that are likely to impact the settlement process for Medicare beneficiaries. The first involves the issuance of final rules that clarify when civil monetary penalties (CMP) should be imposed for Section 111 reporting violations. The proposed rules were issued by CMS in February of 2020 followed by stakeholder comments. CMS’ proposed rules contemplate CMP of up to a $1,000 for each day of noncompliance for each claim with a maximum penalty of up to $365,000 per claim per year under the following circumstances: when the RRE failed to report within one year of the coverage effective date, date of settlement or establishment of payment obligation or when the RRE provided Section 111 information that conflicts with information provided in response to MSP conditional payment recovery efforts. Smaller CMPs would be assessed on a tiered approach when the reported data was of poor quality. Since the need to formulate regulations regarding the CMPs is outlined in the SMART Act that was passed in 2012, the industry expects the final rules to be issued by the end of the year. This is prompting liability carriers and their RREs to conduct a review of their reporting processes. This enhanced scrutiny is trickling down to settlement terms that contain a slew of overly broad ICD diagnosis codes that will have a negative impact on the Plaintiff once the case settles.
The second change involves the Provide Accurate Information Directly (PAID) Act that was signed into law in December of 2020 and must be implemented by December 11, 2021. The PAID Act requires Medicare to provide liability insurers, no-fault insurers and workers’ compensation plans and insurers with information regarding the Medicare Part C and Part D plans that provided coverage to the Medicare beneficiary injury victim. The RRE’s Section 111 queries will provide the Medicare Part C and D plans contract number, name, plan benefit package number, and plan address. It will also provide the effective dates for the previous three years. CMS issued a Technical Alert and hosted a webinar in June of 2021 to provide details regarding the technical changes that must take place to implement the PAID Act. Once the insurance carriers have access to the specific Medicare Part C and D plan coverage, settlement terms will likely impose additional burdens on the Plaintiff.
Settlement delays may be avoided by the Plaintiff taking charge of the MSP compliance obligations in a case. Synergy’s MSP compliance audit report arms you with documentation from an outside MSP compliance expert that addresses the status of conditional payment reimbursements, the strategy for post-settlement injury related treatment, appropriate ICD 10 diagnosis codes that should be used by the Section 111 RRE, and MSP compliance settlement terms. By presenting the audit report to the defense, you are in the MSP compliance driver seat. Contact Synergy to learn more about our services.
Jason D. Lazarus is the managing partner and founder of the Special Needs Law Firm; a Florida law firm that provides legal services related to public benefit preservation, liens and Medicare Secondary Payer compliance. He is also a founding Principal and Chief Executive Officer of Synergy Settlement Services, which offers healthcare lien resolution, Medicare secondary payer compliance services, pooled trust services, settlement asset management services and structured settlements.