The Penalties Are Here

In October 2023, the Centers for Medicare & Medicaid Services (CMS) issued its final rule on civil monetary penalties (CMPs) regarding noncompliant Medicare Section 111 reporting.

As indicated in the final rule, CMS will not seek to impose CMPs on reportable events that occur on or before Oct. 11, 2024; thus, as indicated by the final rule, any CMPs will not be imposed on historical claims or settlements per ongoing responsibility for medical (ORM) or total payment obligation to claimant (TPOC).

In contemplation of this final rule, a common question that is coming up in the insurance industry is if a responsible reporting entity (RRE, or the entity with reporting responsibility) now would need to go back and clean up historical claims if the RRE suspects that it may not have reported ORM or TPOC on certain claims occurring prior to Oct. 11, 2024. While CMS will not impose CMPs for historical unreported claims, exposure remains if the RRE does not correct its historical reporting.

Let’s dig into this concept further and understand the purpose and intent behind Section 111 reporting and why it was enacted. CMS implemented Section 111 reporting in 2010 and utilizes reporting of ORM and TPOC via Section 111 not only to coordinate a Medicare beneficiary’s benefits properly and to pay secondary where a primary payer is available, but also to recoup Medicare conditional payment liens that have occurred.

Under Section 205 of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act), which was subsequently codified in the MSP statute as 42 U.S.C. § 1395y(b) (2)(B)(iii), CMS has three years from its receipt of the reporting of the TPOC via Section 111 to recover conditional payments.

However, if the TPOC/settlement is never reported to CMS, then statute of limitations for Medicare’s recovery of conditional payments is never triggered, leaving the RRE with open exposure for conditional payments once CMS learns of the claim/settlement. CMS does have other means to learn of open workers’ compensation, general liability, or no-fault claims, such as through the beneficiary attorney self-reports to CMS, accident databases, and from medical providers who may report that the beneficiary’s injuries occurred via an insurance claim.

Once CMS opens up a recovery case for conditional payments, the RRE may receive conditional payment liens on claims that may have been settled numerous years ago with reserves closed, which is never ideal and truly a headache. Further, it can be extremely costly for the RRE as double damages are a risk.

Both traditional Medicare (Medicare Parts A & B) and Medicare Advantage Plan (Medicare Part C) conditional payments are a major potential issue in not reporting historical ORM and TPOC on older claims due to the potential for Medicare Advantage Plan (MAP) filing actions for an MSP double damages private cause of action against primary payers for failure to reimburse conditional payments. MAPs, and particularly MSP Recovery LLC as an assignee of MAPs, have been well known for suing primary payers for double damages for failure to reimburse conditional payments even without affording the primary plan the opportunity to pay first before being hit for an action for double damages under the MSP. Once a settlement has been reached, Medicare/MAP have a right to file a double damages cause of action 60 days after the settlement if they are not reimbursed. [See 42 CFR § 411.24(h)].

Further, the Medicare beneficiary may encounter coordination of benefits issues (benefits denials) for treatment on injuries that are no longer subject to be paid by the primary payer. The primary payer may receive a multitude of calls from an upset beneficiary that their injuries were not reported properly and for being denied care/ payment by Medicare.

All of the above is reason enough to consider why an RRE should strongly consider ensuring ORM and TPOC are properly reported on historical claims even though CMPs may not be imposed if an RRE does not do so. Cleaning up historical data is highly recommended.

From a workers’ compensation claims perspective, the final rule’s exemption from CMPs for historical unreported claims may seem like temporary relief. However, as those involved in the claims process, the authors find it apparent that failing to address historical data can lead to challenges and headaches down the road.

In handling workers’ compensation claims, efficiency and accuracy are paramount. Failure to report historical claims correctly exposes RREs to potential financial risks and disrupts the flow of claims processing. Arguably, it’s akin to leaving a ticking time bomb within the claims system, waiting for complications to arise.

Best practices dictate that RREs should take a proactive approach to rectifying historical data inaccuracies. Cleaning up historical claims aligns with compliance obligations and safeguards against future disputes, denials, and costly legal actions.

It is about safeguarding the integrity of the claims process and ensuring that injured workers receive the benefits they rightfully deserve in a timely manner. Moreover, from a broader best practice perspective, investing in robust internal procedures, staff training, and technology solutions geared toward MSP compliance is crucial. By fostering a culture of compliance and accountability within the organization, RREs can navigate MSP regulations more effectively and mitigate compliance risks proactively.

While the final rule may provide a temporary reprieve from CMPs, it serves as a reminder for RREs to uphold their responsibilities diligently. Advocating for thorough reporting practices and adherence to MSP regulations is imperative for those intimately involved in the workers’ compensation claims process. The true measure of success lies in navigating the complexities of claims management while upholding the rights and wellbeing of injured workers.