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New Medicare Secondary Payer appeals process may prove costly

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A new Medicare Secondary Payer appeals process for workers compensation and liability claims will allow payers to challenge reimbursement demands they believe are incorrect, but appeal costs could be greater than any potential savings.

“I think this is going to be used in extremely rare circumstances because it would have to be the right case,” said Michael Merlino, senior vice president of Medicare compliance and structured settlements at Sedgwick Claims Management Services Inc. in Atlanta.

The Centers for Medicare and Medicaid Services enacted a formal appeal process on April 28 for workers comp payers and others to contest reimbursements required under federal Medicare Secondary Payer rules. The process was created under the Strengthening Medicare and Repaying Taxpayers Act, a 2013 law intended to ease compliance requirements.

The Medicare Secondary Payer Act requires insurers and self-insured employers to notify CMS of any workers comp or liability claim settlement involving a Medicare-eligible individual. CMS can issue liens requiring that settlements be used to reimburse the agency for medical care it paid on a claimant's behalf.

Under the new rules, insurers or self-insured employers deemed to be a primary payer for a Medicare beneficiary's medical care can appeal the amount of reimbursement due or the existence of a debt to Medicare, according to a CMS statement posted online in April.

Implementing the appeals process was an important step to help ease the burden of Medicare Secondary Payer rules for claims payers, said Michele Adams, co-chairwoman of the Washington-based Medicare Advocacy Recovery Coalition and vice president of risk management services at Walt Disney World Resort in Orlando, Florida.

“First, we hope that CMS, knowing there is a right of appeal, will be more deliberate and careful in its calculations and demands,” Ms. Adams said in a statement to Business Insurance. “Second, as a fundamental right of due process, having an appeal right is imperative.”

Before the appeals process enacted last month, payers had no formal right to appeal the amount or existence of CMS reimbursement demands, though beneficiaries can challenge such demands if CMS seeks reimbursement directly from them.

Claims payers typically have more resources and may be more successful in challenging CMS reimbursement demands than beneficiaries, said Russell Whittle, vice president of Medicare Secondary Payer compliance with claims management firm ExamWorks Clinical Solutions in Lawrenceville, Georgia.

“They have billing and coding expertise that would give them, I think, an advantage in questioning a recovery amount, maybe more than a beneficiary would otherwise have,” Mr. Whittle said.

Payers cannot use the appeals process to contest whether they are the correct party from which to seek reimbursement. “Requests for appeal on the basis that the applicable plan is not the correct debtor will therefore be dismissed,” CMS said in a statement.

However, sources say it likely will be possible to challenge whether a payer is the correct reimbursement party after receiving a Medicare lien but before entering the formal appeals process.

Michelle Allan, a partner with the Medicare compliance group at Burns White L.L.C. in Pittsburgh, said the law firm has successfully challenged Medicare liens by raising disputes with contractors that collect reimbursements on behalf of CMS.

While Ms. Allan believes the formal appeals process will provide more clarity about which parties are responsible to repay Medicare liens and how to dispute those debts, she also expects the rules will allow CMS to be stricter in considering lien challenges.

“We asked for a formal process and they're giving a formal process, and along with the formal process comes formality,” Ms. Allan said.

Payers will need to weigh whether an appeal would save money overall, said Greg McKenna, co-chairman of the MARC Coalition and vice president and counsel for governmental affairs with Itasca, Illinois-based third-party administrator Gallagher Bassett Services Inc.

“You are talking about an investment of attorney time and time on the file to bring it to closure,” he said. “So you're going to have to go into a bit of a cost/benefit analysis to see if it makes sense.”

Sedgwick's Mr. Merlino agreed that claims payers will need to determine whether a Medicare lien is large enough to justify defense costs related to appealing the debt.

Conditions under which someone would appeal include when “you know you're right, there's a lot of money in controversy and CMS is being stubborn and not agreeing to reduce this very large conditional payment down to something that makes sense,” Mr. Merlino said. “If a lot of money is not in jeopardy, the analysis is going to come out and say, "We might as well just pay it.' “

ExamWorks' Mr. Whittle said CMS can charge interest for outstanding Medicare debts upheld on appeal. He suggests companies pay Medicare reimbursements that are undisputed and challenge apparently incorrect lien amounts.

“I think the smart suggestion here is if there is a part of that debt that's not at issue, that it be paid to stop that interest clock,” he said. CMS “will allow you to do that.”

Burns White's Ms. Allan encourages payers to be “vigilant” in following CMS appeal timelines and use strategic terminology in any communications.

“Don't use the word "appeal' if it's only a dispute prior to an initial determination letter (from CMS), because you may have waived your right to an appeal at a later time,” she said. “It's going to be much more technical going forward.”