The Medicare Secondary Payer Act (MSP) was enacted with the intent that Medicare pay medical expenses as a secondary payer and withhold payment where “payment has been made or can reasonably be expected to be made” under a workers’ compensation, general liability, or no-fault insurance plan (the primary payer).
However, Medicare often pays conditionally where payment is not reasonably expected to be made “promptly” or within 120 days of receipt of the claim by the primary payer. If Medicare makes payment in this situation, the payment is a “conditional payment” that must be reimbursed to the Medicare Trust Fund. A primary payer’s reimbursement obligation to Medicare may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, and, lastly, a waiver or release (whether or not there is a determination or admission of liability) of payment for items included in a claim against the primary payer or by other means.
In a workers’ compensation, general liability, or no-fault settlement involving a Medicare beneficiary, primary payers must take a multi-faceted approach to comply with the MSP and satisfy three pillars of MSP compliance—past, present, and future—for protecting Medicare’s interest. “Past” involves satisfying Medicare’s conditional payment liens, “present” involves reporting the claim/settlement to Medicare via MMSEA Section 111 reporting, and “future” involves the potential need to set aside funds via Medicare Set-Aside (MSA).
Arguably, reimbursement of Medicare’s conditional payments is the riskiest pillar of MSP compliance, as Medicare has the right to file an action for double damages in federal court seeking recovery of unreimbursed conditional payments. Further, Medicare may pursue recovery from any party to the settlement, including the primary plan (the workers’ compensation, general liability, or no-fault plan/carrier), even if the primary plan has already paid settlement funds to the Medicare beneficiary. This could cause the primary plan to potentially have to pay the amount of settlement twice. Department of Treasury actions are also common when Medicare has not been reimbursed. The Treasury may take an offset and/or garnish either the beneficiary’s Social Security benefits or a primary plan’s federal tax refund.
Traditional Medicare Conditional Payment Recovery Processes
Currently, there are two contractors that conduct conditional-payment recoveries: the Benefits Coordination & Recovery Center (BCRC), and the Commercial Repayment Center (CRC).
In workers’ compensation and no-fault claims, the CRC issues conditional payment notices (CPNs) when a recovery amount is owed. The Responsible Reporting Entity (RRE) must respond to the CPN within 30 days. If the RRE does not respond within the allowed timeframe, a demand will issue, and a debt will be established to the government by the RRE. This is a departure from CMS’ practices prior to 2015 where it sought conditional payment recovery only after a settlement, judgment, or award. The updated process increases conditional-payment exposure for primary plans during the life of a claim.
The CPN is triggered only by the RRE’s responsibility to pay medicals, as the CRC requires no settlement or resolution of the case. The CRC will look to recover for the period from the date of injury to the present unless an ongoing responsibility for medicals (ORM) termination date is entered. To reduce exposure, RREs must be vigilant in populating ORM termination dates. This ensures that the Medicare Trust Fund does not overcollect. Demand letters accrue interest from the letter date unless payment is made within 60 days.
In general liability claims, the BCRC continues to issue conditional-payment letters (CPLs) and final demands when the claim is self-reported to the BCRC or when there is a report of settlement via MMSEA Section 111 reporting. CPLs are different from CPNs in that CPLs will not require a due date for response, and a demand will not issue until a settlement occurs. Understanding the differences and recovery practices between both contractors—BCRC and CRC—and which entity to look to when resolving conditional payments, is critical to ensure that claims for recovery by Medicare are resolved.
Medicare Advantage/Medicare Prescription Drug Plans
Millions of Americans are enrolled in private Medicare health plans, which includes Medicare Advantage Plans (Medicare Part C) and Medicare Prescription Drug Plans (Medicare Part D). Recent Medicare Advantage Plan enrollment has been close to 50% of the Medicare population. Private Medicare health plans must be reimbursed for conditional payments just like traditional Medicare, and the recently enacted Provide Accurate Information Directly (PAID) Act aims to facilitate this reimbursement.
The PAID Act required CMS, as of Dec. 11, 2021, to provide primary plans/RREs with the name, address, and plan number of all Medicare Part C and Medicare Part D plans that a Medicare beneficiary was enrolled in during the previous three years. The goal of PAID Act was to provide increased transparency to primary plans, enhance/improve upon enrollment information provided to primary payers in the Medicare Section 111 reporting query process, and facilitate the ability for primary plans to resolve conditional payments with these private Medicare health plans pre-settlement.
It is critical for primary payers to have a process in place to address conditional payment notices received. Depending on the primary payer’s existing claims management program, processes for addressing CPNs can vary quite a bit. Primary payers should confirm that their claims administrator/insurer is equipped to address CPNs, as well as provide direction to the appropriate members of management when an employee receives a copy of a notification related to a claim. Ensuring that all Medicare-related notifications are addressed promptly and correctly is an important part of every primary workers’ compensation, general liability, and no-fault insurance plan risk management practice.