Medicare Conditional Payments: New and Improved or Business as Usual?

On Nov. 19, 2013, the interim final rule from the Centers for Medicare and Medicaid Services (CMS) related to the SMART Act’s new expedited conditional payment process went into effect. The interim final rule, now codified at 42 C.F.R. 411.39, implements Section 201 of the SMART Act. Section 201 enables parties to obtain Medicare’s “final” conditional payment amount prior to a settlement, judgment, award, or other payment. Those new regulations implement the expedited process through expanded use—and eventual increased functionality—of CMS’ existing Medicare Secondary Payer Recovery Portal (MSPRP).

Section 201 also requires Medicare to promulgate regulations establishing a right of appeal and an appeals process for any determination for which the secretary is attempting to recover payment from an applicable plan (defined by the Medicare Secondary Payer Act as liability insurance, self-insurance, no-fault insurance, or workers’ compensation).

Excitement around the implementation of these new regulations has been building since the SMART Act was signed into law in January 2013. Rule 42 C.F.R. 411.39 sets forth the “new and improved” process to obtain Medicare’s final conditional payment reimbursement demand prior to a settlement, judgment, award, or other payment. The regulations also detail a new process for disputing the amount of Medicare’s asserted lien.

Pictures of the Past

The new regulations, theoretically, will tremendously improve on the past method parties used to obtain information on Medicare payments. Before the passage of the SMART Act, parties were unable to obtain Medicare’s final demand in advance of settlement. Therefore, parties to a settlement with a Medicare beneficiary were unable to ascertain the full amount of the Medicare lien until after the claim was settled, when a party would submit the final settlement detail to Medicare in exchange for Medicare’s final demand letter.

The problems with that process are obvious. The primary payers to the settlement were unsure of their ultimate liability for reimbursement to Medicare of Medicare’s conditional payments, despite the fact that settlement might have already been tendered. Issues of bad faith arose when a carrier refused to make payment until it received Medicare’s final demand. Litigation often resulted in those cases, which may have been unnecessary had the primary carrier been able to obtain the information in advance of a settlement.

Likewise, Medicare beneficiaries, who also would be liable for repayment in certain circumstances, often could not obtain certainty as to the exact amount of their reimbursement obligations in advance of a settlement. In some cases, the uncertainty resulted in a chilling effect on settlement. Cases that could have resolved peacefully and expeditiously were run off the rails by the parties’ inability to obtain Medicare’s final demand prior to settlement.

It’s also important to note the associated delays inherent in the process. Even if both sides were working together to uncover what payments Medicare made on the claim, it would often take months to receive the payment summary form and associated conditional payment letter. Many times, the amount contained in Medicare’s first asserted initial demand was incorrect and included charges not associated with the specific claim. Several more months might pass as the parties corresponded back and forth with Medicare via fax or regular mail to correct the discrepancies in the Medicare “lien” and to obtain some visibility into what the parties’ ultimate reimbursement obligation would look like. Such delays were frustrating, particularly in situations where the parties desired to settle quickly and were just trying to “do the right thing” by protecting Medicare’s interests.

Improved or Not?

So it appears at first blush that the new regulations improve the process dramatically. Now, according to 42 C.F.R. 411.39(c), parties may obtain the final conditional payment demand in advance of settlement. In addition, 42 C.F.R. 411.39 (b) provides for enhanced functionality of the MSPRP Web portal.

The new and improved process, as detailed in the regulations, sets forth the following procedure for obtaining Medicare’s final conditional payment amount prior to settlement:

• Medicare must be put on initial notice. The beneficiary, beneficiary’s attorney, or applicable plan (primary payer) must provide notice to Medicare of the impending settlement at least 185 days in advance of the settlement.
• Medicare then has 65 days to post its initial claims compilation. Within 65 days of receipt of the initial notice, Medicare must post its payments made on the claim. (Medicare can extend the 65 days by an additional 30 days in certain circumstances.)
• After the posting of the initial claims compilation, the beneficiary, the beneficiary’s attorney, or the applicable plan may notify Medicare once—and only once—that the settlement is going to occur within 120 days.
• The “Claims Refresh”—where the parties request updated payment information via the Web portal—becomes available. Medicare will provide the refresh within five days (on or before Dec. 31, 2015).
• And finally, beginning Jan. 1, 2016, Medicare will provide an “uninitiated claims refresh via updated functionality of the Web portal.”

The regulations also provide a new way to dispute Medicare’s conditional payment reimbursement demand. The beneficiaries or their attorneys or representatives may “once and only once,” dispute Medicare’s demand. All disputes are to be resolved within 11 business days of receipt of the dispute. If the dispute is fully resolved and the beneficiary has obtained confirmation of a completed claims refresh, the beneficiary then can request a conditional payment summary. If the conditional payment summary occurs within three days of settlement, the summary becomes the final demand.

If the dispute is not resolved with Medicare and the beneficiary is within three days of settlement, she may not request a final conditional payment amount.

Within 30 days of settlement, the beneficiary must provide Medicare with information about the settlement, including the date and total amount of the settlement. Failure to provide that information within 90 days of settlement renders the final conditional payment amount void.

Notice that the provisions regarding the request for the final demand apply only to the Medicare beneficiary. So how do primary plans obtain the final demand in advance of settlement?

The regulations provide the applicable plan also may request the final demand in the manner outlined above as long as the plan is properly registered to gain access to the Web portal and has obtained from the beneficiary and provided to Medicare the proper release documentation, which is either a proof of representation or consent to release. The applicable plan also may obtain read-only access with a consent to release.

What It All Means

As of Jan. 15, 2014, despite the fact that by law the new regulations (changing the conditional payment process) are effective, nothing has changed at Medicare. In other words, for all practical purposes, Medicare has not aligned its procedures to conform with the new regulations. Parties are still laboring under the process in existence pre-SMART Act (with the exception of the implementation and various improvements to the MSPRP Web portal). When will that change? Perhaps by the time we are discussing this topic in April at CLM’s annual conference in Boca Raton, Fla.—or perhaps not.

In the meantime, once Medicare permits the parties to follow the new procedure, what are the practical implications? For one, the upgrades to the Web portal allowing all authorized users full visibility to conditional payment information is not expected to be completed until Jan. 1, 2016. In other words, until then, anyone other than the beneficiary will need the actual conditional payment letter to see the diagnosis codes, provider names, dates of service, and so on—basically all of the information necessary to dispute the Medicare demand.

Also, do the regulations actually impose more restrictions on workers’ compensation and no-fault plans? The regulations seem to say that all primary payers will need either a proof of representation or consent to release to gain access to the Web portal. Currently, workers’ compensation and no-fault primary payers may directly gain access to the portal, provided they have the correct case identification number—no release is required. So is this a step backward for workers’ compensation and no-fault carriers?

It’s also important to note that the parties must still notify Medicare manually—phone, fax, or snail mail—of the existence of the claim. The new regulations require parties to have notified Medicare of the existence of the claim at least 185 days prior to settlement to obtain conditional payment amounts in advance of settlement.

Finally, will the parties really be able to dispute Medicare’s conditional payments using only this new process “once and only once”? What if the parties successfully complete their dispute of Medicare’s conditional payments, yet fail to settle their case within the allotted time frame? Are the parties prohibited from disputing any erroneous payments in the future that Medicare may make on the claim? That is yet to be seen, but the implications are troubling.