WHAT YOU NEED TO KNOW: IMPORTANT CHANGES IN MEDICARE REPORTING AND HOW TO STAY COMPLIANT

WHAT YOU NEED TO KNOW: IMPORTANT CHANGES IN MEDICARE REPORTING AND HOW TO STAY COMPLIANT

On December 29, 2007, President Bush signed into law the “Medicare, Medicaid and SCHIP Extension Act of 2007” (the “MMSEA”), which is an expansion of the Medicare Secondary Payer (the “MSP”) Statute. This amendment increased the reporting obligation of parties entering into settlements with a Medicare beneficiary. Section 111 of the MMSEA requires responsible reporting entities (RREs)—such as liability insurers, (including self insurers), no fault insurers, and workers compensation insurers who pay settlements, awards, judgments, or other payments to Medicare beneficiaries—to determine whether a claimant is Medicare eligible and report every case where payment is made to a Medicare beneficiary to the Centers for Medicare and Medicaid Services (CMS).

This legislation reinforces the concept that Medicare is the payer of last resort. The penalty for non-compliance is $1,000 per day per beneficiary for each day the insurer is not compliant. CMS also has subrogation rights and the right to bring an independent cause of action to recover its conditional payment from “any or all entities that are or were required . . . to make payment.” The penalty requires RREs to exercise diligence in dealing with claimants who are Medicare beneficiaries. The new rules will apply to settlements occurring on or after October 1, 2010.

The New Requirements

Although the MSP previously required settling parties to notify Medicare of liability settlements with beneficiaries, the new amendment has increased reporting obligations under Section 111 of the MMSEA. The new amendment does not change or remove any existing MSP rules regarding recovery. Specifically, Section 111 of the MSP requires RREs to report any payment obligation to a Medicare beneficiary when the obligation results from a claim potentially involving past or future medical expenses.

When a party settles with a Medicare beneficiary claimant, it is considered the primary payer regardless of any admission or denial of liability. Medicare requires the claimant to use the funds received to pay for treatment of accident-related injuries, and/or to reimburse Medicare for accident-related claims paid by Medicare on a conditional basis. The MSP further requires settling parties to notify Medicare of any personal injury settlements with Medicare beneficiaries.
For more information about the reporting requirements please see the Section 111 User Guide at http://www.faegre.com/webfiles/Medicare%20Secondary%20Payer%20Mandatory%20Reporting%20User%20Guide.pdf.

How to Avoid the $1,000 a Day Penalty

Beginning on October 1, 2010, RREs should follow the below two-part test to remain compliant with Section 111’s reporting:

1. RREs must determine whether a claimant (including an individual whose claim is unresolved) is entitled to Medicare benefits.
2. If the claimant is entitled to benefits, the RRE must electronically submit data about the claimant, the injury, and other, more specific information concerning the settlement to the Secretary of Health and Human Services through the Coordination of Benefits Secure Website. 

Step One:   Determining Whether the Injured Party Is a Medicare Beneficiary

Implementing a procedure in the claims review process will help RREs determine whether an injured party is a Medicare beneficiary. To find out if a claimant is a Medicare beneficiary, the RRE may submit a query to CMS Coordination of Benefits Coordinator. To do this, the RRE must submit the claimant’s Medicare health insurance claim number or Social Security number, name, date of birth, and gender.

This inquiry will include determining whether the claimant is: (1) currently receiving Medicare benefits; (2) currently receiving Social Security Disability or has applied for or is currently appealing his/her denial of Social Security Disability; or (3) has a reasonable expectation of receiving Medicare benefits within the next thirty (30) months.

Step Two:   Reporting

For claims involving settlements, awards, judgments, or other payments to claimants entitled to Medicare benefits, Section 111 requires RREs to report the identity of the claimant, along with “such other information as the Secretary shall specify to enable the Secretary to make an appropriate determination concerning coordination of benefits, including any applicable recovery claim.” 42 U.S.C. § 1395y(b)(8).

Other relevant information may include the nature and extent of injury or illness, the facts of the incident giving rise to the injury or illness, information sufficient to assess the value of reimbursement, and information sufficient to assess the value of future medical expenses. RREs must report applicable settlements, judgments, awards, or other payments regardless of whether there is admission or determination of liability. To help ensure compliance with new MSP requirements, RREs should also determine whether there have been past payments for medical expenses for which Medicare should be reimbursed and assess whether any future Medicare-covered medical expenses may be incurred.

The reporting process is electronic and must be completed on a quarterly basis via the Section 111 coordination of benefits secure website at www.section111.cms.hhs.gov. The RRE must either submit a report once per quarter according to a schedule or indicate that it has nothing to report.

RREs must report information pertaining to claims resolved through a total payment obligation settlement, judgment, award or other payment on or after October 1, 2010, that meet certain thresholds described in the CMS User Guide, which can be found at http://www.faegre.com/webfiles/Medicare%20Secondary%20Payer%20Mandatory%20Reporting%20User%20Guide.pdf.

Conclusion

RREs should implement procedures to ensure proper reporting of all payment obligations to Medicare beneficiaries as soon as possible. At the beginning of any litigation or claim, RREs should also determine whether the claimant is a Medicare beneficiary or if he/she anticipates receiving Medicare benefits in the future.

By following these protocols, RREs can manage risk and promote compliance with the MSP. Working with an attorney to draft settlement documents can further mitigate risk by requiring claimants compliance with the MSP and demonstrating Medicare's interests have been protected.