Avoiding Medicare’s Tangle

With a new notice of proposed rulemaking (NPRM) on the way regarding Medicare secondary payer requirements and civil monetary penalties—and high stakes for property and casualty insurers and self-insureds that could be subjected to these penalties—it is critical for the industry to understand the latest developments in Section 111 Reporting, and to provide a coordinated response to the Centers for Medicare and Medicaid Services (CMS).

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) imposed mandatory reporting requirements (Section 111 Reporting) on liability insurance (including self-insurance), no-fault insurance, and workers compensation insurance—collectively referred to as non-group health plan (NGHP) insurance—that is responsible to pay settlements, judgments, awards, or other payment obligations to Medicare beneficiaries. The provisions for liability insurance, no-fault insurance, and workers compensation can be found at 42 U.S.C. 1395y(b)(8). An organization that must report under Section 111 is referred to as a responsible reporting entity (RRE).

Are You Prepared?

The Office of Management and Budget (OMB) recently posted on its website about a forthcoming NPRM on civil monetary penalties and Medicare secondary payer (MSP) requirements that are intended to set out criteria for when civil monetary penalties would be imposed on RREs for noncompliance with MSP reporting requirements. The NPRM issuance deadline is September 2019.

The industry has been waiting for this NPRM because, under the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act), CMS was required to establish criteria and practices under which the act would impose civil monetary penalties. Through the SMART Act, specifically Section 42 USC 1395y(b)(8), the imposition of civil monetary penalties of $1,000 per day, per claim, for noncompliant RREs was modified to provide that such penalties would be “up to $1,000 each day of noncompliance with respect to each claimant.”

In other words, the SMART Act allowed for civil monetary penalties to be discretionary rather than mandatory and capped penalties at $1,000 per day, per claim. To set parameters around CMS’ discretion for imposing a range of penalties, CMS must develop safe harbors and standards for RREs to determine when civil monetary penalties should be issued and the monetary amount of such civil monetary penalties. Back in 2013, CMS issued an advanced notice of proposed rulemaking (ANPRM) regarding these safe harbors, but for the past five years has taken no further regulatory action until now.

CMS may begin to audit RREs through their recovery audit contractors or other methods, and for this reason NGHP entities would be wise to revisit the efficiency and accuracy of their current Medicare (Section 111) reporting platform and process. While it may take a couple of years for regulations to pass and audits to begin, IT initiatives of this scale can be slow moving and there is no guarantee that penalties will not be retroactive. So, cleaning up late and/or under-reporting of claims from over eight years of historical claims data is important despite it being a tedious process.

The industry can be certain that once the NPRM is complete and comments are collected from the industry, CMS will eventually issue a final rulemaking, which will then allow for civil monetary penalties against noncompliant RREs.

It is anticipated that the NPRM will provide for safe harbors for RREs that can evidence good-faith efforts to report or report properly. However, in scenarios where RREs have failed to either register as an RRE or submit reportable claims, or scenarios in which there is improper termination of ongoing responsibility for medical, it is anticipated that the RRE will likely be subject to civil monetary penalties. There is no indication at this time whether the civil monetary penalties will be issued retroactively versus prospectively.

Common Issues With Section 111 Reporting

To report, RREs must first be able to determine whether an injured party is a Medicare beneficiary, then gather the information required for Section 111 reporting. CMS allows RREs to submit a query to CMS’ Benefits Coordination and Recovery Center (BCRC) to determine the Medicare status of an injured party. To submit the query, however, the RRE must include the injured party’s Social Security number or Medicare beneficiary identifier, name, date of birth, and gender.

It is not unusual for a plaintiff to refuse to provide her Social Security number to the RRE. Again, without an Social Security number, the RRE is unable to submit a query, and, accordingly, is unable to verify whether the injured party is a Medicare beneficiary. Despite the mandate on RREs to report claims and settlements with Medicare beneficiaries via Section 111 reporting, there is no law requiring plaintiffs to provide their Social Security numbers to a liability insurer so the insurer can determine whether a report is even required.

In recognition of this issue, CMS has provided a form that an injured party may sign attesting that she is refusing to provide this information. While the form may be considered a safe harbor from civil monetary penalties for noncompliance with Section 111 reporting, it does not solve all MSP obligations. Without knowledge of an injured party’s Medicare status, the RRE is unable to resolve any conditional payments (payments made by Medicare pre-settlement to which Medicare is owed reimbursement) or potential obligations with respect to protection of Medicare’s future interests.

In addition, many judgments or settlements are entered into, as ordered by a judge/court of law, at a point when knowledge of the injured party’s Medicare status has not yet been acknowledged. Accordingly, Section 111 and MSP obligations may be an afterthought and considered after the litigation is completed. Accordingly, civil monetary penalties should not be issued under this scenario where the RRE was not able to obtain an injured party’s Social Security number prior to judgment being entered, and CMS should consider this as part of the final rulemaking.

Further, there is a range of culpability with respect to reporting, from willful intentional refusal to do so to ignorance of the law. This may be related to the sophistication of the RRE. Many RREs are sophisticated in the MSP law and its requirements, like insurance companies whose business it is to pay liability claims. Others are unsophisticated, like the mom-and-pop shop with a self-insured retention for the first $100,000 of claims. We know that there are many self-insureds that are not aware of the MSP law, much less that it applies to them. While ignorance of the law is not a defense, specific scenarios must be considered when evaluating the amount of civil monetary penalties.

Further, Medicare’s stance on what claims are considered reportable is too broad and should be more tailored in the final rulemaking. CMS takes the position that no matter the type of claim, if it involves a Medicare beneficiary and there is a general release that includes future medical treatment, then the claim is reportable. This would bring non-medical type claims, such as homeowners’ claims, under the purview of Section 111, requiring reporting and potential civil monetary penalties if not reported. CMS should not issue a civil monetary penalty against an RRE if the claim did not involve payment for medical treatment.

Coordinated Response

The NPRM is going to require a great deal of consideration by the industry and by CMS to determine reasonable standards for penalty scenarios. There are a large number of variables for an RRE to successfully report: cooperation by the injured party, a successful query result with CMS, and the RRE successfully populating 164 data fields regarding the claim in its claim input file to CMS. Essentially, the burden upon the RRE is great, and CMS should consider all of these factors before sanctioning an RRE with a civil monetary penalty.

With the NPRM on Section 111 civil monetary penalties coming soon, now is the time for stakeholders to join and provide a common-sense response to the NPRM when it is released. If stakeholders can present common solutions, then that should prove more persuasive to CMS when it issues its final rule. This NPRM has the potential to make a significant impact, with possible penalties of up to $1,000 per day, per claim, so the property and casualty industry and self-insureds should rally to get involved on this rulemaking’s outcome.

One such group, the Medicare Advocacy Recovery Coalition (MARC), is a national coalition that advocates for the improvement of MSP programs, and it is well positioned to provide help. MARC routinely collaborates with all stakeholder groups related to MSP to pursue reasonable and effective implementation of the MSP program. MARC was behind the SMART Act discussed previously, which changed the penalty provision from $1,000 per penalty to “up to” $1,000. More information about MARC can be found at www.marccoalition.com.