Insurance groups and Medicare Secondary Payer advocates have asked the Centers for Medicare and Medicaid Services to start over on planned reforms to the secondary payer system, and say litigation may result if CMS doesn't amend its regulations.

The Medicare Secondary Payer Act requires insurers and self-insured employers to notify CMS of any workers compensation or liability claim settlement involving a Medicare-eligible individual. CMS can require that such payments reimburse the agency for medical care that it paid on a claimant's behalf.

The insurance industry's recent criticism relates to how the Strengthening Medicare and Repaying Taxpayers Act, a bill enacted in January that aims to ease the Medicare Secondary Payer compliance process, is being implemented.

CMS published its interim final rule in late September on implementing the SMART Act, and Nov. 19 was the deadline for observers to submit comments. Because the regulation is an interim final rule, CMS planned to implement the final rule as soon as the comment period ended. However, stakeholders had hoped that CMS would have devised a proposed rule, which would have allowed comments to be submitted about proposed changes and more time before creating a final rule.

“It's somewhat unusual to go to an interim rule for comment and have the effective date and the comment date be the same. It's not the usual process,” said Melissa Shelk, vice president of federal affairs for the Washington-based American Insurance Association.

Litigation could result unless the rule is changed, she said.

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In comments submitted to CMS in November, the AIA, the Property Casualty Insurers Association of America, the Risk & Insurance Management Society Inc., the Medicare Advocacy Recovery Coalition, and UWC-Strategic Services on Unemployment and Workers' Compensation asked the agency to rescind its interim final rule for SMART Act implementation.

All five groups propose that CMS issue a new rule incorporating changes outlined in their comments and allow feedback before setting a final rule.

“Our concern is that rather than enhancing the ability to determine final conditional payment amounts in advance of a settlement that this (will) make it more difficult to settle cases,” said Keith Bateman, vice president of workers compensation for the Des Plaines, Ill.-based PCI.

Roy Franco, principal of Medicare compliance firm Franco Signor L.L.C. and former chairman of MARC, said he believes CMS issued an interim final rule rather than a notice of proposed rulemaking in an attempt to meet an October deadline for SMART Act implementation. His firm also asked CMS to rescind its interim final rule.

“It's sort of like (putting) the cart before the horse at this point,” Mr. Franco said. “You have CMS interpreting a congressional statute and then posting (an interim) rule that ... people have to follow,” he said. “We may have to have a change.”

Common concerns in the industry comments include delays in establishing a website to allow insurers and self-insured employers to find out the final amount of money due to CMS before settling a claim and an extended timeline for how long CMS has to respond to requests for reimbursement information (see box).

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Experts say those concerns defeat the purpose of the SMART Act, which was written to speed up and simplify the process to reimburse CMS for workers comp and liability settlements.

“Following the (interim rule) is going to prolong the claims process, which means the victims of loss will likely see a delay in receiving the benefits they need while we wait for CMS,” Richard Rabs, vice president of insurance and risk for Veolia Environnement North America and chairman of the RIMS External Affairs Committee, said in a statement to Business Insurance.

Douglas Holmes, president of the Washington-based UWC, said CMS' interim final rule was disappointing for the organization's insured and self-insured members.

“So many of the things that were addressed from a policy standpoint in the SMART Act are being frustrated by the very rules that are being set forth to implement the act,” Mr. Holmes said.

Mr. Franco said it's possible that CMS could amend its rule to include feedback from industry groups, though he said there's a “low probability” that CMS would rescind the rule entirely.

He recommends that industry observers continue to submit comments about the interim rule to their congressmen, even though the official CMS comment period has concluded.

If CMS implements a final rule for the SMART Act without including industry feedback, experts say they may seek a legislative solution to perceived problems in the regulations or challenge the rule through a lawsuit.

“We'll circle back with our membership and probably talk to the other groups that have commented as well about what next steps make sense,” Mr. Holmes said.