Medicare Secondary Payer Act Blog

The Centers for Medicare & Medicaid Services (CMS) consolidated all of the functions and workloads related to Medicare Secondary Payer (MSP) post-payment recoveries into one MSP recovery contract – the new national MSP Recovery Contractor (MSPRC). The MSPRC’s website provides tools and resources to assist in the MSP recovery process.

The MSPRC recently presented a PowerPoint presentation regarding changes to its recovery process. View it here. The presentation features the following information:

• the new Rights and Responsibilities letter for Medicare beneficiaries;
• the Conditional Payment Letter (CPL) process and timeline;
• the new Conditional Payment Notice (CPN) process and timeline;
• what to provide MSPRC when there is a settlement, judgment, award or other payment;
• the recovery Demand Letter process and timeline; and
• new additions and changes to the MSPRC Recovery Process.

CMS’s Reporting Dos and Don’ts

To avoid common reporting mistakes, please regularly check CMS’s Reporting Dos and Don”ts page. CMS updates this page with reporting issues and errors it has identified.

Revised CMS Alert Regarding the Collection of Identifying Information

The following document may be helpful if you receive questions about the collection of Social Security Numbers or Medicare Health Insurance Claim Numbers:

CMS ALERT Regarding the Collection of Medicare Health Insurance Claim Numbers (HICNS), Social Security Numbers (SSNs) and Employer Identification Numbers (EINs) (Tax Identification Numbers)

May 2010 Medicare Secondary Payer Act Cases

Discovery To Proceed in Case Challenging MSP Reimbursement Procedures (Arizona Federal)

The federal judge granted plaintiffs’ motion to compel discovery in the pending potential class action against the U.S. Department of Health and Human Services (HHS). Plaintiffs challenge the collection practices used to recover Medicare reimbursement claims under the Medicare Secondary Payer (MSP) program.

HHS refused to make initial disclosures under Fed.R.Civ.P. 26(a)(1)(B)(I) maintaining that discovery was inappropriate, except for filing the administrative record. The court issued an order directing the parties to brief the scope of the discovery question. Plaintiffs filed a motion to compel discovery beyond the administrative record, and HHS filed a motion to limit judicial review to the administrative record. In support of its motion, HHS relied on 42 U.S.C. § 405(g), which applies to a case where a beneficiary seeks juridical review of an agency’s denial of a claim for benefits. The court held that this statute is not applicable to this case, which is a due process claim. The court will review HHS’s decision to adopt the policies and procedures challenged by plaintiffs, not decisions resolving individual MSP claims. The court will determine the following issues in this case:

1. whether HHS can require prepayment of an MSP recovery claim before the correct amount is determined through the administrative appeal procedures; and
2. whether HHS can make plaintiffs’ attorneys financially responsible if they do not hold or immediately turn over to HHS their clients’ litigation proceeds.

Date of Decision: April 12, 2010

Haro v. Sebelius, 2010 U.S. Dist. LEXIS 38620, CV 09-134-TUC-DCB (D. Ariz. April 12, 2010) (Bury, J.).

On March 9, 2010, Representative Patrick Murphy (D-PA) introduced H.R. 4796, the Medicare Secondary Payer Enhancement Act of 2010, into the U.S. House of Representatives. The bill proposes several changes to the Medicare Secondary Payer (MSP) Act.

Minimum Threshold

Any settlement, judgment, award, or any other payment with a total obligation of less than $5,000.00 would be exempt from the MSP Act.

Voluntary Calculation and Payment of Conditional Payment

At least 90 days prior to a reasonably expected settlement, judgment, award or any other payment, a claimant and applicable plan would be able to: (1) voluntarily submit to the Centers for Medicare and Medicaid Services (CMS) a conditional payment calculation; and (2) reimburse CMS for this amount. CMS would have 75 days from receipt of the reimbursement payment to contest the amount and to provide a final demand for the balance of the remaining amount owed.

Request for Final Demand for Reimbursement

Beginning 120 days prior to the reasonably expected settlement, judgment, award, or other payment, a claimant and applicable plan would be able to request a final demand payment for reimbursement from CMS. Within 60 days, CMS would be required to provide the final demand amount. After receiving CMS’s final demand, the claimant or applicable plan would have 60 days to reimburse CMS the final demand amount. If CMS does not provide a final demand within 60 days of receiving a request, the claimant, applicable plan, or an entity that receives payment from an applicable plan would not be liable for and would not be obligated to reimburse CMS for any item or service related to the request for final demand for reimbursement.

Appeal Process

The bill requires CMS to set up an appeal process. Claimants and Non-Group Health Plans would be able to appeal MSP determinations.

Section 111 Reporting Requirements

The proposed changes require CMS to implement a reporting process so that responsible reporting entities do not have to access or report social security numbers or health identification claim numbers. The statute of limitations for MSP recovery actions would be three years from receipt of the Section 111 report. The penalty provisions would be amended to provide the government with discretion to impose monetary penalties rather than requiring the government to impose such penalties. Finally, CMS would have to develop safe harbors for meeting the mandatory reporting requirements.

The Department of Health and Human Services Centers for Medicare & Medicaid (CMS) changed the initial production date for submitting non-group health plan (NGHP) input files from April 1, 2010 to January 1, 2011. All NGHP RREs should now be registered with CMS’ Coordination of Benefits Contractor (COBC), and either in, or preparing for, file testing status. NGHP file data exchange testing will continue through December 31, 2010. CMS encourages NGHP RREs that have completed file data exchange testing to proceed to production file data exchange status. Sometime this week, CMS will post a new version of the “Section 111 NGHP User Guide” along with an alert describing the steps NGHP RREs can take to assure their ongoing compliance with the Section 111 reporting requirements.

The real impact of this change is that the penalties for not reporting will not go into effect until January 1, 2011. However, Medicare is not waiving its rights to recover the conditional medical payments it makes on behalf of Medicare beneficiaries. NGHP RREs are still responsible for reimbursing Medicare for its conditional payments. Additionally, NGHP RREs will still be potentially liable for double damages if the government brings an action to recover reimbursement of its conditional payments.

Plaintiff filed numerous lawsuits in federal courts across the country, claiming the Medicare Secondary Payer (MSP) Act, 42 U.S.C. § 1395y(b), was a qui tam statute entitling him to sue, as a private attorney general, healthcare entities for failing to reimburse Medicare for expenses incurred. The district courts rejected this novel legal claim and held Plaintiff lacked standing to assert it.
Plaintiff subsequently filed qui tam actions under the MSP Act in the United States District Court for the Eastern District of Tennessee, which were also dismissed for lack of standing. The United States Court of Appeals for the Sixth Circuit affirmed the district court’s decision and determined that sanctions against Plaintiff and his counsel were appropriate in light of Plaintiff”””””””’’s “utterly frivolous” claims. The Court of Appeals stated that Plaintiff cited no legal authority for his contention that MSP is a qui tam statute and concluded that the claims were filed for an improper purpose, namely, to profit at the expense of Defendants. Following the appeal, Defendants moved for sanctions. The court found that Plaintiff and his law firm acted in bad faith and should be jointly and severally liable for attorney’s fees based on the court’s inherent authority. The court granted sanctions against Plaintiff totaling $276,589.00.
Date of Decision: February 2, 2010
Stalley v. Mt. States Health Alliance, 2010 U.S. Dist. LEXIS 8643 (E.D. Tenn. Feb. 2, 2010) (Collier, J.)

In recent health care reform negotiations, some senators suggested providing Medicare benefits to people ages 55 and over.  An expansion of the group of people eligible for Medicare benefits (people ages 55-65), would have a serious impact on the application of the Medicare Secondary Payer Act.  Although defeated this time, it is possible that the proposed reform will be revisited in the future.  Clearly any expansion of the eligibility for Medicare will be financed, in part, by the Medicare Secondary Payer Act.  This potential reform and others that might be proposed emphasize the importance of monitoring  health care reform legislation to determine its impact upon the Medicare Secondary Payer Act.

Mandatory Reporting Requirements Begin January 1, 2010

Beginning on January 1, 2010, responsible reporting entities (RREs) (any entity that pays or funds any settlement, judgment, or award to a Medicare beneficiary) must report detailed information regarding payments to Medicare beneficiaries for claims involving past or future medical expenses.  Medicare will use the information to recover benefits it previously paid on behalf of the plaintiff.  Within 60 days after any payment to a Medicare beneficiary, parties to the claim are required to reimburse the federal government for any claims it paid.  A failure to comply with the mandatory reporting requirements could result in fines up to $1,000 per day and “double damages” if the Centers for Medicare & Medicaid Services (CMS) initiates a legal action to recover its benefits.

Proposed Reporting Rules

The Centers for Medicare & Medicaid Services (CMS) recently issued proposed rules that put the burden of the mandatory reporting requirements on the insurer, not the insured, in most situations.  Under these rules, the insurer would be responsible for reporting any settlement that exceeds the insured’s deductible.  The insured would be responsible for reporting: (1) any settlement it pays directly and is reimbursed by the insurer, and (2) any settlement that is equal to or less than its deductible.

Mandatory Reporting and Potential Qui Tam Actions

A recent amendment to the False Claims Act makes it a violation to avoid an obligation to pay money to the federal government.  This means that a failure to reimburse Medicare is a violation of the False Claims Act.  The penalty for violating the False Claims Act include civil penalties ranging from $5,000 to $10,000 per violation, plus treble damages and attorney fees.  The False Claims Act contains a qui tam provision that allows private citizens to file a lawsuit in the name of the U.S. Government.  There is serious possibility that qui tam actions will be brought against attorneys, defendants, and insurers who fail to reimburse Medicare.

In Haro v. Seblius, the United States District Court for the District of Arizona denied the federal government’s motion to dismiss a class action filed against the Department of Health and Human Resources challenging its administration of the Medicare Secondary Payer (MSP) program. Plaintiffs, a nationwide class of Medicare recipients, specifically challenge the collection practices used to recover Medicare reimbursement claims when a beneficiary receives liability insurance proceeds related to health care services paid for “conditionally” by defendant. Plaintiffs assert that defendant violates a Medicare beneficiary’s due process rights by demanding immediate reimbursement, within 60 days, in advance of resolution of any appeal or request for waiver of the reimbursement claim sought by Medicare. Plaintiffs also assert that defendant’s collection procedures exceed the Secretary’s authority under the Medicare statute.

Defendant moved to dismiss the class action on several grounds, including failing to state a valid Due Process claim and failing to exhaust administrative remedies under the Medicare Act. The court found that plaintiffs had standing to bring an action against defendant under both the Medicare Act and the Due Process Clause. The court stated that plaintiffs’ allegation that defendant is demanding payment of a disputed MSP reimbursement claim without an opportunity to be heard at a meaningful time and in an meaningful manner is a “classic due process claim.”

Date of Decision: November 30, 2009

Haro v. Sebelius, 2009 U.S. Dist. LEXIS 111053, CV 09-134-TUC-DCB (D. Ariz. November 30, 2009) (Bury, J.)