Overview of the Medicare Secondary Payer Act (MSPA)
Until 1980, Medicare was the primary payer for all medical services covered by Medicare except those covered by Worker's Compensation. The MSPA was created in 1980 to attempt to shift costs from Medicare to other private payers. 42 U.S.C. § 1395y (1980). Pursuant to the MSPA, Medicare is the "secondary payer" to insurance plans and programs for individuals covered through (among other things) auto and other liability insurance or no-fault liability insurance. Id.
How does the MSPA apply to third-party claims?
In December 2007, additional legislation, the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) was signed into law. Id., see also Mandatory Insurer Reporting, available at https://www.cms.gov/Medicate/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/overview.html- last checked November 19, 2018 and found under Home > Medicare > Mandatory Insurer Reporting For Non-Group Health Plans. This legislation created reporting requirements for insurance companies and other payers to provide information to the Center for Medicare and Medicaid services (CMS), which is the federal agency that administers the Medicare program. Id. at (b)(8). The purpose of these reporting requirements was to help CMS identify any situation in which Medicare is or will become the secondary payer.
Who has to report?
Reporting obligations apply to payers identified as "Responsible Reporting Entities" (RRE). Id. Essentially, if you fund and pay, in whole or in part, a settlement, judgment award or make any other payment to a Medicare beneficiary or Medicare eligible claimant—you are an RRE. This means that you must determine the Medicare status and eligibility of the claimant in every claim.
What does it mean to be "Medicare Eligible"?
The MSPA is applicable to your case if the claimant is a current Medicare beneficiary or a potential Medicare beneficiary. Id. If the claimant is a current Medicare beneficiary (meaning they currently receive health benefits through Medicare), he or she will have a Health Insurance Claim Number (HICN) and should be able to share that information with you. A claimant is considered a "potential" Medicare beneficiary when they have a "reasonable expectation" of becoming a Medicare beneficiary within 30 months. Id. Unsurprisingly, significant confusion exists as to what is meant by a "reasonable expectation" that the claimant will be a Medicare recipient within 30 months. CMS issued guidance on this issue as it relates to workers' compensation, but no similar guidance has been issued for liability claims. See, e.g., Workers' Compensation Medicare Set Aside Arrangements, available at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview.html- last checked November 19, 2018 and found under Home > Medicare > Workers' Compensation Medicare Set Aside Arrangements. However, the workers' compensation guidance is a useful reference tool when considering Medicare eligibility in a liability claim.
What do you need to report?
RREs are required to report payments which exceed $750 (for settlement agreements signed on or after January 1, 2017). 42 U.S.C. § 1395y(b)(8) (1980), see also NGHP Quick Reference Guide v. 1.2, Chapter 6: Responsible Reporting Entities, Table 6-7, available at https://www.cms.gov/Medicare- last checked November 19, 2018 and found at Home > Medicare > Mandatory Insurer Reporting for Non Group Health Plans > NGHP User Guides > NGHP User Guide. When mandatory reporting is triggered by settlement, judgment, award or other payment, the RRE must send an electronic query to Medicare. Id. This query includes, in part, the claimant's social security number, date of birth, gender and name. Id. Once the initial payment is made for a Medicare beneficiary, subsequent reports are required on a quarterly basis during the week specified by the CMS office. Id.
Do you need a Medicare Set-Aside?
Currently, there is no statute or regulation that explicitly requires a Medicare Set Aside account or trust, like those required in workers' compensation settlements. However, since 2007 it has become increasingly clear that Medicare expects its interests to be taken into consideration in the settlement negotiation process. On February 3, 2017, CMS issued a request to its administrative contractors requiring systems updates that would allow CMS to better track third party liability claims and deny medical expense claims for treatment that it deems related to a third party liability claim. CMS Manual System, Pub. 100-20, Transmittal 1787 available at https://cms.gov/Regulations-and-Guildance/Guidance/Transmittals- last checked November 19, 2018 and found at Home > Regulations and Guidance > Transmittals > 2017 Transmittal Items > R1787OTN. This request created anticipation that guidance from CMS on creating Medicare set-asides for liability claims would be imminently forthcoming.
CMS set a target date of October 1, 2017 to have Medicare's systems prepared to begin processing Liability Medicare Set Asides (LMSAs) and No-Fault Medicare Set Asides (NFMSAs). Id. After no additional regulations were promulgated, CMS issued guidance on October 27, 2017 indicating that it would continue to consider expanding its MSA review process to include LMSAs and NFMSAs. No further guidance has been provided to date. CMS Manual System, Pub. 100-20, Transmittal 1954 available at CMS Manual System, Pub. 100-20, Transmittal 1787 available at https://cms.gov/Regulations-and-Guildance/Guidance/Transmittals- last checked November 19, 2018 and found at Home > Regulations and Guidance > Transmittals > 2017 Transmittal Items > R1787OTN. , 2018 and found at Home > Regulations and Guidance > Transmittals > 2017 Transmittal Items > R1954OTN.
Practically speaking, the challenges associated with establishing a formal review process for liability claims are obvious. A multitude of considerations, including applicable policy limits, liability defenses, causation issues, and many other aspects of liability case can all lead to the settlement of a liability claim for less than its "full value". A process which does not properly take these issues into account would not be workable for these claims. These obstacles are almost certainly a major factor in the continued uncertainty surrounding LMSAs. In any event, as it stands now, the requirement for handlers of third-party liability claims remains as it has always been. Thus, when settling a claim with a beneficiary, or potential beneficiary, you must "consider and protect" Medicare's interest as a secondary payer. 42 U.S.C. § 1395y (1980).
What happens if you don't consider Medicare's interests?
CMS has a right of action to recover payments it made for medical treatment from any entity that received a "primary payment". 42 U.S.C. §1395y (b)(2)(B)(ii). More importantly, in third-party liability claims, CMS can recover directly from the third party payer/defendant-- regardless of any agreement between the parties or even a court order regarding who is responsible for satisfying Medicare's claim. Id. The MSPA has no safe harbor provision for a third-party/defendant who previously paid a Medicare beneficiary. Id. Thus, it is vitally important to ensure that you have accurate information about: (1) the claimant's Medicare beneficiary status; (2) whether Medicare issued any conditional payments for medical services for injuries allegedly related to the third-party claim; and, (3) whether any conditional payment liens have been satisfied when settling a claim or lawsuit. 42 U.S.C. §1395y (b)(2)(B)(ii).
Best practices to ensure Medicare's interests are "reasonably considered"
As previously discussed herein, Medicare has a priority right of recovery for medical bills it previously paid and/or medical bills it might pay in the future on behalf of a claimant. Accordingly, parties to third-party claims must consider and protect both Medicare's past and future interests in order to avoid running afoul of CMS and the MSPA. Being on the wrong side of CMS also includes exposure for reimbursing Medicare for primary payments (regardless of whether reimbursement for payments was intended to be included with the settlement with the claimant), interest, and a post-settlement lawsuit by Medicare (in which case Medicare can seek recovery for twice the amount of primary payments made). 42 U.S.C. §1395y (b)(2)(B)(ii).
Knowing there is no clear guidance from CMS on what it means to consider and protect Medicare's interests and given the possible exposure for failing to get it right, the question becomes: what is the best way to resolve a claim with sometimes limited information on the claimant's Medicare status and/or any applicable Medicare liens? As you attempt to make your way through what can sometimes feel like a Medicare maze---here are some practical tips:
- Send correspondence to the claimant or their attorney (if applicable) explaining the obligation to identify and protect Medicare's interest during settlement negotiations;
- Determine the claimant's Medicare status and eligibility in all cases; have the claimant or his attorney confirm that he is or is not a Medicare beneficiary in writing; also make sure they confirm whether the claimant has a reasonable expectation of becoming a Medicare beneficiary in the next 30 months;
- Make sure the claimant is aware of the mandatory reporting requirements and that you (as an RRE) will report the full amount of the settlement to Medicare;
- Require language in the release specifically explaining that Medicare's interests were properly considered, including consideration of future medical needs;
- If possible, list the ICD-10 diagnoses codes associated with all injuries claimed by the plaintiff (regardless of any causation issues) in the release (to ensure clarity as to the specific injuries and past/future treatment at issue); these codes can usually be found within the medical bills;
- Include indemnity language in the release which requires the claimant to indemnify the released parties and cover the costs associated with any future suits by Medicare in the event they fail to address any Medicare liens;
- In cases where the claimant is not a Medicare beneficiary or a potential beneficiary, include language in the release which specifically reflects his or her status;
- If possible, make sure plaintiff's counsel's approval of the release language with regard to Medicare's interests is demonstrated by counsel's signature;
- Recommend, in writing, the use of a Medicare Set Aside or Annuity where future medical treatment will be required;
- If an MSA or annuity is used, make sure those documents are exhibits to the settlement release; and,
- Prior to issuing the settlement check to plaintiff or his attorney, require proof that any Medicare liens have been satisfied; in the alternative, Medicare can be included as a payee on the settlement check.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
