Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section 111) imposes reporting obligations under the Medicare Secondary Payer (MSP) laws on certain entities, including liability insurance (including self-insurance), no fault insurance, and workers' compensation plans (commonly referred to as Non-Group Health Plans or NGHPs). The Centers for Medicare & Medicaid Services (CMS) refers to those entities that are required to report under Section 111 as Responsible Reporting Entities or RREs.

The Secretary of the U.S. Department of Health and Human Services is authorized to implement the mandatory reporting requirements "by program instruction or otherwise." As a result, the Section 111 reporting requirements are being implemented through sub-regulatory guidance issued by CMS, including a User Guide and supplemental Alerts. Entities that fail to comply with the Section 111 requirements may be subject to civil monetary penalties of $1,000 a day for each instance of non-reporting.

On June 4, 2010, CMS issued two important documents clarifying the obligations of NGHPs with respect to (1) risk management write-offs, and (2) who must report.

Alert Regarding Risk Management Write-Offs

This Alert , dated May 26, 2010, addresses Section 111 reporting responsibilities in situations where an RRE reduces the amount due for items and services furnished to a Medicare beneficiary (e.g., by writing off a portion of the charges) or provides something of value (e.g., cash, gift card, etc.) to a Medicare beneficiary as a risk management tool to decrease or eliminate the probability of a liability claim against it and/or to enhance good will. CMS has stated that these risk management strategies, which it refers to as "risk management write-offs," fall squarely within the definition of self-insurance for the purposes of the MSP laws.

CMS has indicated that whether Section 111 reporting is required will depend on the specific facts.

  • Where a hospital, physician and other supplier has reduced its charges or written off some portion of the charge, the entity is expected to submit a claim to Medicare reflecting the unreduced permissible charges (e.g., limiting charges) and showing the amount of the reduction provided or write-off as payment from liability insurance (namely, self-insurance). No specifics are provided in the Alert regarding how, from a billing perspective, this is to be accomplished so it is difficult to assess the specific process changes (if any) that may be required to comply. CMS has clarified that in this context, the hospital, physician or supplier will not be required to report the write-off to CMS under the Section 111 reporting process because Medicare's interests are deemed to be protected through the billing procedure.
  • Although the issue was originally referred to as the "hospital write off" issue, CMS has made clear in its Town Hall conference calls and this Alert that the risk management write-off policy applies to all RREs. Thus, if a hospital, provider, supplier or other RRE provides "property of value" to a Medicare beneficiary (e.g., a gift card) "when there is evidence, or a reasonable expectation, that the individual has sought or may request medical treatment as a consequence of an incident that gives rise to risk," such entity must report the value of the "property" as a "total payment obligation to claimant" (TPOC), unless the amount at issue is under the TPOC threshold established by CMS (in which case no reporting is required).

For additional information concerning TPOC thresholds, see Section 11.4 of the User Guide (version 3.0, Feb. 22, 2010).

Alert Regarding Who Must Report

This Alert , dated May 26, 2010, revises Appendix G of the User Guide to clarify the rules regarding who must report. Specifically, two changes were made to Appendix G.

  • New language in the paragraph entitled "Liability Self-Insurance," states that where the self insurance in question is a deductible and the insurer is responsible for Section 111 reporting with respect to the policy, the insurer is responsible for reporting both the deductible and any amount in excess of the deductible (and the self-insured entity need not report the deductible amount).
  • CMS also deleted two sentences from the Appendix G description of a "Workers' Compensation Law or Plan." The prior version stated that where such plan is directly funded by the employer, the employer has the responsibility for reporting requirements under Section 111 and where such plan is indirectly funded by the employer, the insurer has the responsibility for the reporting requirements under Section 111. Determinations as to who is required to report are fact specific and must be made with regard to the guidance in the Alert generally.

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