How the SMART Act’s enactment helps address the 800-lb gorilla in Medicare-related claims.
Congratulations! You have performed a legal miracle and either obtained high value for your client in a personal injury case or settled a high exposure personal injury matter for modest dollars on behalf of a defendant. All is right in Legaltopia for the moment.
But then the 800-pound gorilla known as the Medicare Secondary Payer Act rears its ugly head, thus preventing the parties from finalizing the settlement documents. Despite best efforts, neither the defense nor the plaintiff can obtain the information from the Center for Medicare and Medicaid Studies (CMS) in order to satisfy the parties’ repayment obligations. The trial is looming, experts need to be deposed, and deadlines are approaching. What to do?
Help is on the way. On Jan. 10, 2013, President Obama signed into law the Strengthening Medicare and Repaying Taxpayers (SMART) Act. The SMART Act eases the process for Medicare claimants and responsible reporting entities, such as liability insurance companies and self-insureds, to obtain conditional payment information. Also included amongst its terms are amendments relating to mandatory reporting obligations by responsible reporting entities. Finally, the SMART Act codifies the three-year statute of limitations for Medicare to seek recovery.
The threshold concept is simple. Whoever causes the Medicare beneficiary’s injury (or their insurer) should pay the Medicare beneficiary’s medical expenses, reimburse Medicare when a payment has already been made, and protect Medicare in the event of future medical bills. The “primary payers” in a liability case include providers of liability insurance, self-insurance, and no-¬fault insurance.
While this makes sense, primary payers historically have not rushed to reimburse Medicare for the billions of dollars that it paid to recipients. There was simply no enforcement and penalty mechanism to encourage voluntary compliance. In search of additional revenue to fund the rapidly depleting Medicare Trust Fund, President Bush signed into law the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) on Dec. 29, 2007. As a result, CMS had the means to enforce its rights through a dramatic series of remedies and penalties.
With passage of Section 111 of the MMSEA, CMS began requiring primary payers (insurers and self-insureds) to provide claims information directly. This allowed Medicare to recover payments that should have been paid by primary payers (commonly referred to as “conditional payments” or past medical expenses) and ensure that any additional future medical costs are paid by primary payers or by claimants themselves through the claimant’s settlement proceeds, instead of by Medicare. In addition, it became the obligation of the responsible reporting entity to ensure that any judgment, award, or settlement protects Medicare’s interests in regard to both past and future Medicare payments.
Responsible Reporting Entities
Entities responsible for complying with Section 111 are referred to as responsible reporting entities (RREs). RREs are required to register with CMS and provide quarterly reports to CMS of all claims involving Medicare beneficiaries when there are allegations of the right to recover damages for past or future medical expenses. They also report cases that have been resolved through a single payment by settlement, judgment, or award.
Insurance carriers are responsible for compliance with Section 111 for insureds covered by an insurance policy with first-dollar coverage (no self-insured retention), unless the settlement is within a deductible and the insured pays the claim themselves. Insureds who are handling their own claims within a self-insured retention or who do not tender to their insurer are considered self-insured pursuant to Section 111. These companies are required to register as an RRE and report claims just like an insurer. If the claim exceeds a self-insured retention and moves into the insurer’s layer, the insurer then becomes the RRE.
The Labyrinth
Once a claim is identified as one in which a claimant is alleging personal injury, it is incumbent on the RRE to determine if the claimant is alleging the right to recover past or future medical bills.
If the answer to this question is in the affirmative, the next step is to determine if the claimant is, or ever has been, a Medicare beneficiary. If claimants are over 65 years of age, they are entitled to receive benefits, which make them a beneficiary even if no benefits are ever received. In addition, a person who has received Social Security benefits for 24 months or more may qualify, as does a claimant with end-stage renal disease and a person with Lou Gehrig’s disease. Other severely disabled people can qualify, too. It does not matter whether the claimant actually received the benefits; all that matters is that the claimant is Medicare eligible.
Fortunately, one does not have to guess as to whether a claimant is a Medicare beneficiary. To assist in making this determination, RREs can make a query to CMS’ Coordination of Benefits Contractor. The necessary information in order to make a query includes: the claimant’s current name (and all other names used by claimant); sex; date of birth; and Social Security number. After confirming that the claimant is a Medicare beneficiary through query or admission by the claimant or claimant’s counsel, the RRE must report the claim to CMS. This reporting is done through the electronic transmission of dozens of “data points” that concern the nature of the alleged injuries and damages. This self-reporting by the RRE enables CMS to determine what medical bills have been paid by Medicare that should, ultimately, be paid by the RRE.
In regard to conditional payments (the past medical bills), once the case is near settlement, a request for a final demand is made on CMS. At that point, CMS will generate a report that states how much in the way of Medicare payments CMS is seeking to recover. Absent appeal or voluntary reduction, when the case is settled (or there is a judgment or award), a check must be sent to CMS to satisfy Medicare’s interests no later than 60 days of receipt of the final demand.
In order for a plaintiff to be in a position to settle a case, a plaintiff will have to request conditional payment information from Medicare at least 60 days before a settlement conference, and it typically has taken Medicare eight weeks or longer to provide the information. It is also common that Medicare allocates as much as it can to a litigated claim, including payments for medical treatment unrelated to an injury or accident, and those issues have taken weeks or months to sort out.
The practical reality is that, without a plaintiff knowing what his share of a settlement is going to be, settlements have been difficult to obtain.
Penalties
If an RRE does not report a claim in a timely fashion, the penalty could be $1,000 per claim, per day. In addition, there are dramatic penalties that apply if CMS does not receive reimbursement of its conditional payments or Medicare’s interests are not protected in a settlement or in distribution of funds from an award or judgment.
If the monies are not paid, Medicare can seek payment from the RRE, claimant, claimant’s counsel, and even from defense counsel if the money flowed through defense counsel’s office. In other words, the RRE could end up paying some or even all of the settlement twice. If Medicare’s demand for payment is not satisfied, Medicare has a direct right of action against the primary payer or “any entity, including a beneficiary, provider, supplier, physician, attorney, state agency, or private insurer,” and Medicare is entitled to double damages.
Help Is on the Way
The SMART Act is intended to speed up Medicare’s recovery process. Through amendments to the Social Security Act and certain reporting requirements, delays related to the process should be limited. The primary effects of the SMART Act are as follows:
1. Timely Receipt of Medicare Conditional Payment Information
One of the primary complaints of claimants and RREs is the difficulty in obtaining conditional payment information from CMS. The SMART Act is intended to eliminate this issue through the establishment of an electronic process with specified deadlines within which information must be provided. Pursuant to the SMART Act, CMS must implement the following within nine months:
2. Changes to Mandatory Reporting Requirements
The SMART Act amends the Medicare Act in regard to mandatory reporting as follows:
Analysis of the SMART Act
All in all, we give three cheers for the SMART Act. It was enacted to resolve claims involving Medicare beneficiaries in an efficient and quick manner. The parties will be able to obtain timely Medicare conditional payment information in a manner that can be relied upon so that the parties can settle cases more efficiently. Now that CMS has obligations to act once notified of a date when settlement may be achieved (that date commonly will be a settlement conference date or the date of a mediation), the dates set for settlement conferences and mediations should take these deadlines into consideration. Hopefully, the reality of the SMART Act will be as good as its promise, and the gorilla can be tamed
Medicare conditional payment fundamentals and ensuring compliance
Tom Blackwell is vice president and program director for Ringler Medicare Solutions. He has been a CLM Fellow since 2013 and can be reached at tblackwell@ringlerassociates.com
John V. O’Meara is a senior partner with Bremer, Whyte Brown & O’Meara LLP. He has been a CLM Member since 2012 and can be reached at jomeara@bremerwhyte.com
Caryn Siebert is vice president, carrier practice, with Gallagher Bassett, and previously was CLM’s litigation management professional of the year. caryn_siebert@gbtpa.com
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