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An upcoming change to the Medicare Secondary Payer Act could protect some employers from facing hefty fines if they fail to comply with the law — a protection that could particularly benefit mid-market companies with tight budgets.
Revisions to the act are taking place as the Centers for Medicare and Medicaid Services works to implement the Strengthening Medicare and Repaying Taxpayers Act, which was signed into law by President Barack Obama in January.
CMS holds insurers and self-insured employers responsible for paying for a Medicare beneficiary's medical treatment related to workers compensation or liability cases. The SMART Act includes several provisions meant to simplify the reimbursement process, typically related to claim settlements and judgments.
One key update to Medicare law, experts say, is language that allows CMS to be lenient in charging penalties for failure to report settlements that are eligible for Medicare reimbursement. Before the SMART Act was signed into law, CMS was required to charge a penalty of $1,000 per claim per day that a settlement was not reported to Medicare. Under the act, CMS now has the ability to charge a penalty “up to” $1,000 per claim per day.
That slight wording change could create big savings for smaller employers if they accidentally fail to report a Medicare-related claim settlement to CMS, particularly if that failure was not noticed for months or years after the claim is closed, said Michael Merlino, vice president of Medicare compliance for Sedgwick Claims Management Services Inc. in Atlanta.
That can happen in cases when a claimant gave an incorrect Social Security number to the insurer or employer — which prevents insurers or employers from checking the claimant's Medicare eligibility status — or if a company that normally follows CMS procedures inadvertently skips the reporting process for one claim, Mr. Merlino said.
“If a really large company got hit with a ... $500,000 penalty, they could probably absorb that,” Mr. Merlino said of claims that go unreported for long periods. “But if you're talking about a mid-market or smaller company, that's a lot of money.”
The SMART Act also requires CMS to create regulations that would define “good faith” efforts that employers, insurers and third-party administrators can take to identify whether a claimant owes money to Medicare.
Those “safe harbor” provisions likely will become the best practices for Medicare Secondary Payer compliance and could help protect employers and insurers from fines if they follow Medicare procedures, said Michelle Allan, an attorney in the Medicare compliance group at law firm Burns White L.L.C. in Pittsburgh.
“I think as long as any payer or responsible reporting entity can demonstrate that they're making an effort to comply with reporting, Medicare may show them some leniency if there is perhaps an isolated event of noncompliance,” Ms. Allan said.
Another provision of the SMART Act, set to take effect July 10, sets a three-year statute of limitations for CMS to seek reimbursement from claim settlements and judgments.
That limit can help give peace of mind to employers and insurers about how long they are responsible for Medicare-related claims after settlement, said Greg McKenna, counsel and head of governmental affairs for Itasca, Ill.-based Gallagher Bassett Services Inc.
The statute of limitations “gives employers a sense of the time frame ... that they are in the game for these kind of collections being pursued by (CMS) for collection of conditional payments,” Mr. McKenna said.
Additional SMART Act provisions are expected to help ease the Medicare Secondary Payer compliance process, experts say. However, they say that it could be a long time before employers start to see the benefits, because CMS has yet to draft rules and regulations for some of the SMART Act amendments.
Sedgwick's Mr. Merlino said the regulation process was delayed as CMS focused most of its attention on implementing the Patient Protection and Affordable Care Act.
“I think there was rightly great celebration in ... January when the legislation was passed and signed into law,” said Daniel Anders, compliance director for Medicare compliance firm MedAllocators Inc. in Lawrenceville, Ga. “But now it's a matter of really getting Medicare to do what the statute indicates.”
One of those changes is a system that will allow settlement parties to determine how much a Medicare beneficiary owes to CMS prior to settlement.
Currently, parties that want to enter into a workers comp or liability settlement with a Medicare beneficiary must request an interim reimbursement demand letter from CMS. The amount gives an estimate of how much a claimant is expected to reimburse to Medicare, but CMS does not provide a final demand for reimbursement until an official settlement has been reached.
That can create a problem when a final demand from CMS is greater than the amount that the claimant and the insurer initially expected to pay to Medicare, experts say.
Under the SMART Act, CMS will create an Internet-based portal that will tell settlement parties the final amount due for Medicare reimbursement. After that, parties will have 120 days to settle with no further demands from CMS in relation to that claim.
That provision is expected to help decrease uncertainty in the settlement process.
“If we can get that final amount before settlement, it is going to make the vast majority of cases easier to settle,” Sedgwick's Mr. Merlino said.
Although provisions still are being implemented, the SMART Act is expected to make the Medicare Secondary Payer compliance process easier for insurers and employers, MedAllocators' Mr. Anders said.
“Does it address all the issues that we have with MSP compliance? No,” Mr. Anders said. “But it's a significant leap forward.”
Employers should work with insurers, TPAs or other service providers specializing in Medicare Secondary Payer issues to ensure they understand how the act will begin to affect how claims are handled, said Robert Sokol, director of Medicare Secondary Payer compliance for Belleville, Ill.-based Allsup Inc.
“In general, I think it's important for all parties — employers, carriers, beneficiaries alike — to recognize their role in the process,” he said.