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Medicare Secondary Payer requirements have had a costly effect on claims settlements. While the Strengthening Medicare and Repaying Taxpayers, or SMART, Act helped solve many significant problems, risk managers face a new set of liability risks that have arisen over the past four years. David Farber, a partner at King & Spalding L.L.P., outlines the issues that risk managers need to address.
In the past 10 years, Medicare Secondary Payer issues have become a dominant concern. During that time, Congress has driven seismic changes in the MSP landscape, which have given MSP issues a key role in the resolution of any case involving a Medicare or Medicaid beneficiary. No risk manager can chance being unaware of the legal requirements and the effect of MSP on case closures, risk management operations and claims department budgets.
The last decade has brought significant clarity to many of the issues that plagued MSP compliance years ago. But numerous issues remain, adding to claims resolution costs, and others are emerging as major business threats. Here is a look at the changes and five major MSP business threats facing risk management departments:
Congress enacted the MSP statute in 1980 and updated it in 2003 to clarify that settling parties still were subject to MSP laws. In December, Congress enacted Section 111 of the Medicare, Medicaid and SCHIP Extension Act, which required risk managers and other entities paying a settlement, judgment or award to a beneficiary report the payments to Medicare or face a $1,000 per day per claim penalty. Once implemented by the Centers for Medicare and Medicaid Services in 2011 and 2012, a flood of data regarding potential secondary payer collections became available, helping CMS increase collection of MSP “conditional payments,” amounts paid by Medicare for health care related to an injury that is the subject of a settlement, judgment or award.
In response to Section 111, self-insured claims managers, third-party administrators and insurance industry representatives formed the Medicare Advocacy Recovery Coalition, which between 2009 and 2012 worked with Congress to enact the Strengthening Medicare and Repaying Taxpayers Act. The legislation helped eliminate several major MSP risks facing industry, including the late reporting penalty and transaction costs associated with small MSP claims. In addition, the legislation required Medicare to create an electronic “portal” to ensure prompt communication of MSP liability amounts so parties could resolve all claims at the time of settlement. The SMART Act has saved industry tens of millions of dollars by eliminating potential liabilities, expediting settlements and reducing extensive transaction costs and delays.
But a new set of risks has arisen in the four years since the SMART Act's enactment, putting millions of dollars at stake.
The five biggest disruptions to claims administration are:
Part C/Part D: In the past several years, a number of Medicare Advantage insurers (private insurers who, for a fixed per-member-per-month fee from CMS, agree to cover all Medicare beneficiary claims otherwise covered by Medicare Part A and Part B) have sued insurers, those who are self-insured and plaintiffs' attorneys to recover payments for medical costs later addressed by a settlement, judgment or award. The insurers claim they are acting on behalf of the CMS for purposes of recovery, a position they believe entitles them to seek what amounts to double damages. Though the case law is mixed, with decisions in the U.S. Court of Appeals for the 6th and 9th circuits rejecting these claims, the 3rd Circuit allowing them and the 11th Circuit considering the issue, insurers have met with success in many district courts. These claims, often brought months or years after a settlement, cause risk managers to reopen closed cases. Though these cases have involved MA plans, claims by Medicare Prescription Drug benefit insurers are soon to follow. At issue are billions of dollars of potential liability to insurers and those who are self-insured.
Unfortunately, there is no simple way for settling parties to determine whether an MA Plan is involved in a case at the time of settlement. While CMS freely gives Section 111 information to MA plans, it does not collect information from those plans to share with parties negotiating claims. It will fall to MARC, working with Congress, to resolve these issues.
Liability “set-asides”: For five years, CMS has threatened to expand its “future medicals” policy and “Medicare set-aside” process applicable to workers' compensation settlements to liability settlements as well. The implications of having to navigate the costs of future medicals in liability cases, particularly when the metrics are set by CMS as is the case in workers compensation, would significantly increase settlement costs and delay settlements in many cases.
Similar to a rule it proposed in 2014 and withdrew in 2015, CMS announced last month that it was considering expanding its voluntary Medicare set-aside arrangements amount review process to include proposed liability insurance (including self-insurance) and no-fault insurance set-asides. Every risk manager has a stake in how this issue is resolved.
Treasury debt collection: Every year hundreds of insurers and those self-insured face Treasury collection efforts for unknown MSP debts. While most amounts are not large, they can add up to hundreds of thousands of dollars. Claims departments can rarely identify the related MSP claim. Treasury says it has no information and refers inquiries to CMS, which says all information is in the hands of Treasury. While MARC has initiated a partnership with CMS and the Treasury to improve the debt collection system, Treasury debt collection remains a major MSP risk.
Ongoing responsibility for medicals: Every quarter, hundreds of thousands (and soon millions) of claims will be reported to CMS under Section 111 as “ongoing responsibility for medicals.” This requirement is wasteful for companies that have internally closed the claims but, under state laws must continue the reporting process. It also often results in CMS wrongfully denying beneficiaries' Medicare coverage unrelated to the claim in the report. There have been hundreds of cases of CMS denying beneficiaries coverage for cancer care because the beneficiary has an ongoing responsibility for medicals claim from a workers compensation injury. Beneficiaries with no other choice file complaints with state regulators against their employers or insurers.
Ongoing responsibility reporting translates to an incalculable loss of goodwill, transaction costs and time and effort for all claims managers, who continue to work with CMS to reform the reporting process and find a reasonable date upon which such reporting can end.
The portal: On Jan. 1, CMS implemented the SMART Act portal. Though the portal provides extensive information to beneficiaries and allows them to seek final conditional payment statements before settlement, it does not give insurers all the data necessary to make MSP payments at the settlement table. Though the portal has saved millions in MSP repayment transactional costs as it was phased in the past three years, more improvement is needed. MARC continues to work on this issue, but risk managers are paying unnecessary transactional costs in settling cases involving Medicare in the meantime.
David Farber is a partner at King & Spalding L.L.P. in Washington. Contact him at 202 626 2941 or firstname.lastname@example.org.
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