What Liability Insurers, No-Fault Insurers, Self Insurers And Workers’ Compensation Carriers Need To Know About The Medicare Secondary Payer Statute’s Reporting Requirements
On July 1, 2009, the Medicare Secondary Payer Act (the “MSPA”) will impose new and mandatory reporting requirements on all workers’ compensation carriers and liability, no-fault and self-insurers (“primary payers”).1 Failure to comply with the MSPA’s new reporting requirements will result in crippling fines. The Center for Medicare & Medicaid Services (“CMS”) has provided limited guidance on how to comply with the MSPA’s reporting requirements. These reporting requirements will have an immediate impact on primary payers, who must adjust their claims handling protocols to make certain that all of the information required by CMS is properly collected and reported. This article will summarize and provide preliminary suggestions on how to comply with these new requirements.2
How Has The Medicare Secondary Payer Act Been Applied In The Workers’ Compensation Context?
CMS has not yet clarified what procedures it will establish to facilitate the protection of Medicare’s future interests in general liability matters. Thus, it may be instructive to review what protocols CMS has implemented in the workers’ compensation context.
In 2001, CMS directed parties to establish Trust accounts to fund the future medical costs of workers’ compensation claimants.3 These trusts are better known as Medicare Set Aside Trusts (“MSA Trusts”).4 To establish a MSA Trust, a workers’ compensation carrier must estimate the costs funding a claimant’s future medical expenses, determine whether to fund the MSA Trust via a lump sum payment or structured annuity arrangement, and determine whether to administer the MSA Trust through a third party or via self-administration.5 The goal is to utilize the MSA Trust solely to pay for future covered medical expenses.
Through subsequent administrative memoranda, CMS established MSA Trust review thresholds for workers’ compensation cases. These thresholds provide that a formal MSA Trust should be prepared when (1) a claimant is a Medicare beneficiary at the time of settlement and the total settlement amount6 exceeds $25,000, and (2) the claimant has a reasonable expectation7 of Medicare eligibility within 30 months and the total settlement amount is greater than $250,000.00.8 While these thresholds do not specifically apply to liability, no-fault and self-insurers, CMS’ utilization of these thresholds in workers’ compensation cases suggests that these thresholds, or at least a similar approach, may be utilized when dealing with liability, no-fault and self-insurers.
While the above thresholds are not required beyond the workers’ compensation context at the moment, we expect that CMS will likely implement similar threshold procedures to assist primary payers in determining when and whether a MSA Trust would be appropriate.
What Is The Medicare Secondary Payer Act And Why Do Primary Payers Need To Know About It?
One of the common covered costs assumed by primary payers is for medical expenses. Whenever an insured has Medicare, both the primary payer and Medicare have an obligation to cover these services. The MSPA makes Medicare the secondary payer for medical services provided to Medicare beneficiaries whenever payment is available from another primary payer.9 Thus, whenever a primary payer is responsible for payment of medical services covered by Medicare, it must pay these costs first, or otherwise reimburse Medicare for conditional payments made prior to resolution of the claim.10 Of course, whether a primary payer intends to pay a claim usually requires investigation. In these cases, Medicare is authorized to make “conditional payments” for covered medical services if the primary payer is not expected to pay within 120 days.11 Failure to pay or reimburse Medicare can expose primary payers to liability to the Federal government for repayment of costs incurred by Medicare and double damages if an individual commences suit.12
Starting on July 1, 2009, primary payers must (1) “determine whether a claimant … is entitled to benefits,” even if the claim is unresolved; and (2) report an extensive amount of data to CMS about these claimants in order to permit CMS to coordinate benefits.13 Failure to comply with these mandatory reporting requirements will result in penalties of $1,000.00 per day, per claim, for non-compliance.14 In light of these potentially crippling fines, the question faced by all primary payers is what steps should be taken to comply with the MSPA’s reporting requirements and avoid any financial penalties.15 In a nutshell, the answer is to (a) identify which insureds are eligible for Medicare, and (b) gather and report all information required by CMS. The remainder of this article will address both of these points.
Step One
Determining Medicare Eligibility
The first obligation imposed upon primary plans is to identify which insureds are “claimants” who are entitled to Medicare. The MSPA defines a claimant as “an individual filing a claim directly against the applicable plan; and … an individual filing a claim against an individual or entity insured or covered by the applicable plan.”16 In other words, a “claimant” can be a first party insured filing a claim or a third party injured by the conduct of a primary payer’s insured. Please note that if there is no claim made by or against an insured, primary payers have no obligations to report any information to CMS.17
After identifying an insured or injured party to be a “claimant,” primary payers must determine if the claimant is eligible to receive Medicare benefits. Generally, there are four categories of individuals eligible for Medicare:18
Persons who have reached age 65 and are entitled to receive either Social Security, widows or Railroad Retirement benefits;
Persons of any age who have received Social Security, widows or Railroad disability benefits for 25 months;
Persons with end-stage renal disease (“ESRD”) who require dialysis treatment or a kidney transplant; and
“[W]orking aged” persons over age 65 who are not eligible for either Social Security or Railroad Retirement Benefits who purchase Medicare coverage by monthly payment as active employees for an employer of 20 or more employees.
Notably, the key question is not whether the claimant is actually receiving Medicare benefits, but merely if he or she is eligible for Medicare. If any claimant potentially falls within any of the four above categories, the primary payer’s obligation is to gather information about this claimant and report this information to Medicare.
Step Two
Reporting Claimant Data to CMS
After identifying claimants eligible for Medicare, primary plans must submit information identifying each claimant and “such other information as the Secretary shall specify in order to enable the Secretary to make an appropriate determination concerning coordination of benefits, including any applicable recovery claim.”19 Since August 2008, CMS has released four documents intended to shed light on precisely what information must be reported to CMS. These documents are: (1) the Mandatory Insurer Reporting Guidelines and a Supporting Statement; (2) an Implementation Timeline; (3) the Registration Process Instructions, and (4) an Interim Record Layout. It is imperative that primary payers review and understand these four documents and any additional documents released by CMS and made available online at <http://www.cms.hhs.gov/MandatoryInsRep/>.20
On August 1, 2008, CMS issued its Mandatory Insurer Reporting Guidelines and a Supporting Statement. These documents set forth what information CMS wants primary payers to report and the process CMS intends to use to collect this data. The following is a summary of some important points contained in these documents.21
First, all MSPA reporting will be done electronically via a secure website that CMS is currently developing. Primary payers will be expected to compile a substantial amount of data concerning each single file, including:
(1) Social Security Numbers or a Health Insurance Claim Numbers for each claimant;
(2) full contact information, dates of birth and, where applicable, dates of death, for all injured persons;
(3) full contact information on any estates, siblings or other representative claimants;
(4) legal name, type of coverage, full contact information, policyholder data, and policy limits for each type of coverage involved in the claim;
(5) full contact information for any attorneys involved in the claim;
(6) dates and the nature of any injuries, including whether the injury involved an allegedly defective product; and
(7) information detailing any resolution or settlement of a claim, with a particular focus on explaining whether the claim was contested or not, and whether the primary payer has assumed ongoing responsibility for medical costs associated with the claim.
While primary payers will be permitted to use agents, it is the primary payer, not the agent, who will be exclusively responsible for determining whether a claimant is eligible for Medicare and responsible for complying with the reporting of the above data.
CMS plans to implement the entire Mandatory Insurer Reporting Process throughout 2009. On September 5, 2008, CMS released an Implementation Timeline, in which CMS revealed that it intends to develop the systems needed to facilitate mandatory reporting from January 2009 through June 2009.22 In May and June of 2009, primary payers will be expected to register online at CMS’s mandatory reporting website.23 Thereafter, CMS will test data submission at the website from July 2009 through December 2009.24 All primary payers (liability/self/no-fault/workers’ compensation insurers) must submit their first set of reports, which CMS refers to as “production files,” from October 2009 through December 2009.25 By January 1, 2010, all primary payers will have to submit their claimant data by that time.26 Notably, this timetable reveals that CMS does not plan to have its reporting apparatus in place until months after July 1, 2009. However, primary payers should comply with the July 1, 2009 deadline.
To further explain the registration process, CMS released a set of Registration Process instructions on September 24, 2008. These instructions reiterate that all primary payers must register from May 1, 2009 through June 30, 2009.27 CMS also instructs all primary payers to assign an “Account Manager” who will serve as an administrative contact with CMS.28 The registration process will require each primary payer to provide information about itself, including contact information, lines of insurance, identification of its Account Manager and identification of any parent companies, subsidiaries or related companies.29 In addition, each primary payer will have to identify the approximate number of reported claims during the last calendar year that resulted in an actual payment to a claimant.30 This may require primary payers to compile statistical data that is not readily available. Thus, all primary payers should start this process immediately.
Lastly, on October 27, 2008, CMS issued an “Interim Record Layout.” This 60-page document lists technical and formatting requirements that primary payers must comply with in reporting to CMS. The Interim Record Layout describes the specific format that primary payers must utilize to report the data. While the information contained in the Interim Record Layout is extensive, it is nevertheless still quite preliminary, and CMS instructs all primary payers that “complete instructions and requirements will be published at a later date” and will be available online.31 In the Interim Record Layout, CMS lists a number of general requirements, some of which are summarized below. Again, primary payers are advised to review and become familiar with the Interim Record Layout and all documents released by CMS in connection with the MSPA’s reporting requirements.32
The Interim Record Layout makes clear that CMS will require primary payers to adhere to strict formatting requirements. Moreover, all submissions must be made on a quarterly basis and within an assigned, 7-day submission period during each quarter. The submission window will be assigned upon registration. Initial submissions to CMS, which will take place from October 1, 2009 through December 31, 2009, must report on all claims involving a Medicare beneficiary resolved (or partially resolved) on or after July 1, 2009. However, if a claim is only partially resolved by July 1, 2009, but the primary payer still has ongoing obligations to pay for medical services, that claim must be reported by June 30, 2010.33
Primary payers have a 45-day grace period prior to the 7-day submission time period that will be assigned upon registration. As explained by CMS, “[f]or example, if the settlement date is May 1, 2010, and the file submission period for the second calendar quarter of 2010 is June 1-7, 2010, then the [primary payer] may delay reporting that claim until the third calendar quarter file submission during September 1-7, 2010. However, if the settlement date is April 1, 2010, then the [primary payer] must include this claim on the second calendar quarter file submission during June 1-7, 2010.” 34
Lastly, all files may be submitted using Hypertext Transfer Protocol over Secure Socket Layer (HTTPS), Secure File Transfer Protocol (SFTP), or for large files, via Connect:Direct and the AT&T Global Network System (AGNS). Primary payers are advised to present these issues to their IT staff as soon as possible so that they may begin preparing for this process.
In sum, MSPA compliance will require each primary payer to stay abreast of CMS’ instructions, and will require a diligent effort to compile all of the data needed for reporting purposes. Primary payers must develop protocols to identify claimants entitled to Medicare and establish systems to enable the collection, compilation, and technical transmission of data requested by CMS. Primary payers are encouraged to implement some of the following suggested protocols:
Primary payers must review and, where necessary, revise, their initial intake protocols to ensure that they obtain all of the information they need to determine if a claimant is eligible for Medicare.
Primary payers must designate an employee to serve as an Account Manager and serve as an administrative contact with CMS.
Primary payers must work with their IT staff now to start developing software that will assist in compiling the data required by CMS. By referencing CMS’ Supporting Statement, Interim Record Layout, and this article, primary payers can determine what information is necessary and ascertain the most cost-effective ways to retrieve and compile this data. In addition, IT staff must also develop data transmission protocols and ensure that primary payers can properly store, transmit and receive large volumes of data.
Primary payers should strongly consider retaining records for at least ten years as per the recommendation of CMS.
Any and all settlement agreements must contain provisions that reflect that the parties have accounted for Medicare’s interests during their negotiations and details as to how the agreement achieves this end should be enumerated in any settlement agreement.35
Primary payers should turn to counsel, internal personnel, or both, and task them with remaining abreast of instructions and guidance from CMS.
Primary payers must implement procedures to investigate and remain informed of any conditional payments by Medicare on any of their claims. Keeping track of any such payments will be necessary for a variety of reasons, including: (a) keeping a log of what costs may need to be repaid to Medicare, (b) calculating an appropriate reserve in handling the file, and (c) identifying whether excess carriers, if any, must be afforded notice of potential claims.
Primary payers must develop training protocols to ensure that all staff charged with the task of reporting data to CMS are aware of the numerous formatting and technical requirements for submission of reports. In addition, forms and templates should be created to ensure uniformity and assist in compliance.
Primary payers should develop internal procedures for preparing reports to CMS. Primary payers may consider creating a workgroup or division dedicated exclusively to CMS reporting. Alternatively, primary payers may wish to require each Adjuster to assume this task for each of his or her claims files.
Primary payers should create internal guidelines to determine whether the creation of Medicare Set Aside Trusts are needed for a particular claim. Primary payers are encouraged to work with counsel in making these determinations.
Conclusion
Primary payers must act diligently in complying with the MSPA’s reporting requirements. The alternative is exposure to substantial fines. Primary payers are encouraged to remain abreast of updates and instructions at <http://www.cms.hhs.gov/MandatoryInsRep/> and to communicate regularly with counsel regarding MSPA compliance.
Endnotes
1 CMS uses multiple acronyms to refer to parties that are responsible for complying with the MSPA’s reporting requirements. Some of these terms are Responsible Reporting Entities (“RRE”) or non-GHP entities (all RREs except for group health plans). Rather than use these terms, this article utilizes the term “primary payers” throughout this article.
2 This article does not address the obligations imposed upon Group Health Plans (“GHP”). GHPs are also subject to the MSPA’s new reporting requirements, and must commence reporting to CMS on and after January 1, 2009.
3 See Parasher B. Patel, CMS Memorandum to All Regional Administrators, Workers Compensation Commutation of Future Benefits, July 23, 2001.
4 Medicare Set-Asides are described in section 411 of Title 42 of the Code of Federal Regulations, which provides as follows:
If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump sum payment.
42 C.F.R. §411.
5 See Popolizio, Mark, Liability Cases and Medicare Compliance, June 2008, at p. 5, available at www.nqbp.com.
6 CMS defines the term “total settlement amount to include wages, attorney’s fees, all future medical expenses and repayment of any conditional payments by Medicare. Gerald Walters, CMS Memorandum to All Regional Administrators, Workers Compensation Medicare Set-Aside Arrangement (WCMSAs) and Revision of the Low Dollar Threshold for Medicare Beneficiaries, April 25, 2006.
7 CMS defines reasonable expectation to include three scenarios: (1) when the applicant has applied for SSD, (2) when the applicant has been denied SSD but anticipates appealing this denial or re-filing, and (3) where the claimant is 30 months away from the age of Medicare eligibility or where the claimant has End State Renal Disease at any age. Thomas L. Grissom, CMS Memorandum to All Regional Administrators, Medicare Secondary Payer - Workers Compensation (WC) Frequently Asked Questions, FAQ No. 2, April 22, 2003.
8 See Popolizio, Mark, Liability Cases and Medicare Compliance, at p. 4, (June 2008), available at www.nqbp.com.
9 See Glover v. Liggett Group, Inc., 459 F.3d 1304, 1306 (11th Cir. 2006) (quoting Cochran v. U.S. Health Care Financing Admin., 291 F.3d 775, 777 (11th Cir. 2002)).
10 42 U.S.C. § 1395y(b)(2)(A).
11 See 42 U.S.C. § 1395y(b)(2)(A)(i) (authorizing conditional payments by Medicare); 42 C.F.R. § 411.21 (defining the term “promptly” to means 120 days from the date of medical service or the filing of an insurance claim, whichever commences earlier).
12 Under the MSPA, the federal government can sue any entity for failure to reimburse Medicare. See 42 U.S.C. § 1395y(b)(2)(B)(iii). The federal government also has a statutory right of subrogation as to any Medicare beneficiary. 42 U.S.C. § 1395y(b)(2)(B)(iv). In addition, the MSPA also creates a private right of action that entitles parties to collect double damages where an entity fails to provide primary payment or reimbursement of covered medical costs. See 42 U.S.C. § 1395y(b)(3)(A); Glover, 459 F.3d at 1307.
13 The MSPA’s reporting provision is codified at 42 U.S.C. § 1395y(b)(8).
14 42 U.S.C. § 1395y(b)(8)(E)(i).
15 The focus of this article is on suggesting steps to comply with the MSPA’s reporting requirements. Other important topics, such as how to calculate a Medicare set-aside, are beyond the limited scope of this article. For a discussion as to whether tortfeasors can be subject to the MSPA’s requirements, see the article entitled “The Medicare Secondary Payer Act and Its Affect on Tort Cases”, Cole, Scott & Kissane, P.A., Litigation Quarterly (March 2008) at p. 7, available at <http://192.168.10.185/cskroot/articles/Anniversary%20Issue.pdf>.
16 42 U.S.C. § 1395y(b)(8)(D).
17 Id.
18 See 42 U.S.C. §1395c (2008); 42 C.F.R. §§405.340-341; Frazer v. CNA Ins. Co., 374 F.Supp.2d 1067, 1071 n.2 (N.D. Ala. 2005); Cooper v. Blue Cross and Blue Shield, 19 F.3d 562 (11th Cir. 1994).
19 See 42 U.S.C. § 1395y(b)(8).
20 See 73 Fed. Reg. 45013, 45014 (August 1, 2008); Supporting Statement at p. 1.
21 All bullet-point references are derived from Attachment D of the Supporting Statement.
22 Implementation Timeline, at p. 2.
23 Implementation Timeline, at p. 2.
24 Implementation Timeline, at p. 2.
25 Implementation Timeline, at p. 2.
26 Implementation Timeline, at p. 2.
27 Registration Process, at p. 2.
28 Registration Process, at p. 2.
29 Registration Process, at p. 3-6.
30 Registration Process, at p. 7.
31 Interim Record Layout, at p. 2 and see also Popolizio, Mark, CMS Releases “Interim Record Layout” Information For Reporting Under Section 111 of the MMSEA, October 2008, available at www.nqbp.com.
32 Interim Record Layout, at p. 4-6.
33 Interim Record Layout, at p. 7.
34 Interim Record Layout, at p. 7.
35 This suggestion was contained in See Popolizio, Mark, Liability Cases and Medicare Compliance, June 2008, available at www.nqbp.com. Mr. Popolizio’s has published several articles on MSPA compliance.
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