TORT AND INSURANCE LAW
CHRISTINE HUMMEL, J.
This article explores the Medicare Secondary Payer Act and provides practical tips for compliance with the statute’s main requirements.
The Medicare Secondary Payer Act (MSPA),1 in its broadest reading, requires that (1) the defendant or its insurance provider must report qualified settlements to the Centers for Medicare and Medicaid Services (CMS);2 (2) Medicare conditional payments must be reimbursed at settlement;3 and (3) Medicare must remain in a secondary payer position when a primary payer or primary plan issues a payment for a medical condition (also called a primary payment).4
This article offers practical tips for identifying when the MSPA applies to a case and ensuring compliance with all relevant sections of the statute as the case progresses toward settlement. The tips generally apply equally to plaintiff and defense attorneys, unless otherwise noted. The article also highlights recent changes to MSPA enforcement by CMS, notably changes to the Common Working File (effective October 1, 2017) and an anticipated expansion of the formal Medicare set-aside (MSA) review process (expected in 2018).
The MSPA requires that Medicare remain secondary to any source of primary payment5 for medical expenses. The reporting requirements embedded within the MSPA ensure that Medicare remains secondary by identifying when an insurance company or self-insured entity has assumed responsibility for a specific body part, injury, or disease process. Should Medicare make a medical payment for an injury or disease process that it later receives notice is the primary responsibility of an insurance company or self-insured entity, Medicare can seek reimbursement for this payment via the conditional payment recovery system. Therefore, it is critical for practitioners to understand the MSPA reporting requirements and report accurately.
The Compliance Threshold
The Strengthening Medicare and Repaying Taxpayers Act (SMART Act) of 20126 requires the Department of Health and Human Services to determine an annual threshold amount for MSPA recovery actions. If the case settles below the threshold, CMS will waive all interest in the settlement. For 2018, the MSPA threshold is $750;7 thus, if the case settles for an amount equal to or below $750, CMS will not assert a conditional payment against the settlement proceeds, and no future medical allocation will be required to ensure that Medicare remains secondary to settlement proceeds. Further, the defendant/insurance provider in the case would not be required to submit a Section 111 report (discussed below), which notifies Medicare of payments to a Medicare beneficiary.
Section 111 Reporting
Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 mandated reporting requirements for settlements, judgments, awards, or other payments from liability insurance, no-fault insurance, or workers’ compensation to Medicare beneficiaries. Insurance providers or self-insured entities must report to CMS any settlement or other award of monetary damages that includes a payment for a claim of past, present, or future medical damages payable to a Medicare beneficiary.8 The settlement report must be timely; failure to timely report may result in a financial penalty assessed against the responsible reporting entity.9
It is important to accurately report to CMS the date of injury or loss, date of settlement or TPOC date,10 plaintiff ’s identifying information, and applicable ICD-9 or ICD-10 codes. ICD codes are medical billing codes used to classify procedures, treatments, diagnoses, and other health-related conditions. Medicare uses these codes to identify the body parts or illnesses that are the subject of the underlying settlement payment to the Medicare beneficiary.
While the reporting requirement is a defense-only requirement, plaintiffs should not ignore it. Plaintiffs should ask defendants which specific ICD-9 or -10 codes they will report as part of the Section 111 report to ensure that the codes reported are accurate and do not overstate or understate the body parts or injuries involved in the case. Failure to accurately report the ICD codes can have serious repercussions, which are discussed below in the Future Medical Allocations section.
Medicare conditional payments are Medicare payments made from the date of injury to the date of settlement. Medicare will make a payment for a medical bill when it appears that the party or entity responsible for the injury is refusing to make timely payment.11 However, this payment is “conditioned” on the requirement that Medicare must be reimbursed if the primary payer or primary plan eventually makes a payment for the injury in question.12 For purposes of compliance with “ ” the conditional payment statute and Code of Federal Regulations, the settlement payment meets the definition of a primary payment from a primary plan or payer.13
“Insurance providers or self-insured entities must report to CMS any settlement or other award of monetary damages that includes a payment for a claim of past, present, or future medical damages payable to a Medicare beneficiary.”
Medicare’s actions are date-of-injury specific. Medicare does not define or determine the date of injury; the agency must rely on the data provided to it by the parties to the case. For example, in a medical malpractice case, is the date of injury the date the malpractice occurred or the date the patient discovered the malpractice? Depending on the nature of the claimed malpractice, the date of occurrence and the date of discovery could be weeks, months, or even years apart. It is easy to see how reporting to Medicare the date of discovery versus the date of occurrence will result in a very different conditional payment amount, particularly because Medicare compares Section 111 data to data in the conditional payment database.14 Therefore, if a plaintiff requests a conditional payment search and reports the date of discovery as the date of injury, but the defendant’s Section 111 report states the date of occurrence as the date of injury, the two dates of injury will not match. The failure of the reported dates of injury to match may result in CMS opening a second conditional payment file for the same settlement, which may result in administrative delays.
Parties must also take care to report to Medicare an accurate date of settlement. CMS defines “date of settlement” as the date the settlement becomes legally binding and obligates the defendant to make a payment.15 This means the date of an arbitration agreement, mediation agreement, or high-low agreement. The date the parties agreed to settle “in principle” is not the proper date of settlement for conditional payment purposes unless this agreement is legally binding and compels the defendant to issue a settlement check. If the parties are required to finalize the terms and conditions of settlement in another document or writing, the date this subsequently drafted document is signed should be provided to CMS as the date of settlement. Reporting any other date as the date of settlement prematurely cuts of the date range CMS uses to calculate a conditional payment amount. Purposefully and knowingly reporting a false date of settlement could be Medicare fraud and may result in the assessment of fines or penalties against all parties to the settlement.16
CMS contracts with private companies to manage payments. Correspondence that CMS issues through its contractor outlining a conditional payment before the date of settlement is not final. The par ties can dispute this “tentative”17 conditional payment amount at any time before settlement. A tentative conditional payment amount should not be paid. Further, payment of a Medicare conditional payment amount before a final demand request does not close Medicare’s lien file, and payments made to a tentative lien may be misapplied by Medicare.
To obtain the final demand amount from Medicare, a notice of settlement must be provided to the conditional payment contractor. Once a notice of settlement has been provided, a final demand letter will be generated. The final demand amount must be paid within 60 days of the date on the “final demand notice.” Failure to pay within 60 days will result in interest accruing on the final demand amount. The parties have the right to appeal, or request a redetermination review, of any final demand amount; however, if it takes more than 60 days for the appeal to be reviewed, interest will begin accruing even though the appeal is still pending. Interest accruals...