Lachenmeier, Enloe & Rall - February, 2004 Publication

Upcoming Federal Reporting Requirements for Insurers:
New Changes to the Medicare Secondary Payer Statutes

The Medicare Secondary Payer statutes (“MSP”) have raised a number of questions for casualty insurers. Congress recently passed the Medicare, Medicaid, and SCHIP Extension Act of 2007 (“MMSEA”), which may expand the duties of insurers by amending the MSP. The changes will become effective beginning July 1, 2009 for liability, UM/UIM, and no-fault insurers.

Before addressing the upcoming changes to the MSP, it would be helpful to review the basics of Medicare and the MSP. Medicare is essentially a federally managed insurance program designed to provide coverage for individuals who are at least 65 years old, have received or are eligible for Social Security or Railroad Retirement benefits, or have end-stage renal failure.

The MSP was passed by Congress in 1980 to make sure that the program remained cost effective. The MSP essentially shifts the cost of treatment from Medicare to other insurers when other primary insurance is available. The MSP states, in part, that Medicare may not make payment, when “payment has been made, or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” 42 U.S.C. § 1395y (b)(2)(A) (2006). A liability or no-fault policy is considered “primary” to Medicare. 42 U.S.C. § 1395y (b)(2)(A)(ii). For the purposes of the MSPA, liability insurance includes uninsured and underinsured motorist insurance. 42 C.F.R. § 411.50 (b) (2006). In the context of no-fault insurance, Medicare only needs to pay for benefits after the applicable no-fault limits are satisfied. In contrast, liability and UM/UIM insurers typically do not pay for medical costs as they are incurred, but make payment when a settlement has been reached. To address this situation, the MSP indicates that if payment for treatment will not be made promptly by a primary payer (as would be the case in claims involving liability and UM/UIM insurance), Medicare may make a conditional payment and Medicare may seek repayment subsequently.

Medicare has the power to seek payment or reimbursement another insurer who should have been responsible for making a primary payment or repaying a conditional payment. Medicare may recover double damages for any such action. 42 U.S.C. §1395y (b)(2)(B)(iii) & (b)(3)(A).

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (“MMSEA”) adds a few new requirements for insurers under the MSPA. The MMSEA, which was Senate Bill 2499, was signed into law on December 27, 2007. The applicable changes will be codified at 42 U.S.C. § 1395y (b)(8). Most of the 2007 Act addresses Medicaid and SCHIP issues which are unrelated to the MSP. (Medicaid is a program which helps provide medical services for those with low income. SCHIP is a program which provides medical care for children whose families lack health insurance).

The first new requirement for insurers under the MSP is to identify whether a claimant is entitled to Medicare benefits. Until now, insurers should have been determining whether claimants were Medicare eligible since there was a risk that the insurer would be considered a primary payer to Medicare. The new amendments explicitly require liability (including UM/UIM) and no-fault insurers to determine whether a claimant is entitled to benefits from Medicare on any basis. At the beginning of the claims process, the insurer should ask the claimant (perhaps through a form letter or checklist) specific background questions, including his or her age, whether he or she has received or is eligible to receive Social Security or Railroad Retirement benefits, or has end-stage renal failure. The insurer should also obtain the claimant’s SSN, date of birth, and Health Insurance Claim Number (“HICN”) from the claimant if he or she is already enrolled in Medicare.

Once an insurer has determined whether a person is entitled to Medicare, the second requirement for the insurer would be to gather information that it will need to report to Medicare. The recent amendments to the MSP do not specifically identify the information to be reported. The Centers for Medicare & Medicaid Services (“CMS”), has a website describing some proposed reporting requirements at the following address: http://www.cms.hhs.gov/MandatoryInsRep/. CMS is the United States Health and Human Services agency responsible for overseeing the administration of Medicare, Medicaid, and SCHIP. CMS’s final instructions will be posted eventually on the same website prior to insurers’ obligations under the recent amendments which begin on July 1, 2009.

The information that insurers will be asked to report to Medicare may actually be rather extensive. The insurer would appear to be required to provide extensive information according to a proposed document prepared by CMS. See Attachment D to August 1, 2008 Supporting Statement of MSP Mandatory Insurer Reporting Requirements (CMS-10265) link available at http://www.cms.hhs.gov/mandatoryinsrep/. The insurer may need to provide information about the claimant, the claimant’s attorney, the identity of the policy holder, the policy limit (for no-fault policies), the nature and cause of the injury, the settlement date and amount, and whether the claim is contested or on-going. Of course, this is not very straightforward in practice. For instance, the insurer and claimant will often disagree about the nature and cause of an injury. Because a lot of information may need to be reported, it may be useful to begin compiling information as it comes in.

The third requirement under the legislation is that the insurer must report to Medicare beginning on 7/1/2009. 42 U.S.C. § 1392y (b)(8)(A)(i) indicates that the reporting obligations for casualty insurers begin “[o]n and after the first day of the first calendar quarter beginning after the date of date that is 18 months after the date of the enactment of this paragraph.” However, CMS has proposed a testing period from 7/1/2009 to 10/1/2009 after which time insurers will be begin submitting information pursuant to a schedule, but not later than 1/1/2010. CMS currently indicates that data collection will be on a one time basis for contested claims (such as liability or UM/UIM claims) after there is a single judgment, award, or other payment. Collection of data will be on an ongoing basis from no-fault insurers. Failure to comply with the new requirements will result in a civil penalty of $1,000 per day per claimant.

If Medicare has made prior payments related to an injury claim, it seems clear enough that a primary payer should ensure that Medicare receives repayment for any such “conditional payment.” One of the more significant concerns of casualty insurers regarding the MSP is the handling and consideration of future medical expenses. In the workers compensation context, if a settlement does not adequately take into consideration Medicare’s interests by attributing a portion of the settlement towards future medical expenses, Medicare may refuse to make payments for any related care. To assure that this situation does not arise, in the workers compensation context, Medicare will often can pre-approve an insurer’s settlement, including a plan to set aside an amount of a settlement to pay for future medical expenses that Medicare would otherwise pay. See Norma S. Schmidt, Note, The King Kong Contingent: Should Medicare Secondary Payer Statute Reach to Future Medical Expenses in Personal Injury Settlements? 68 U. Pitt. L. Rev. 469 (2006). In the liability context, CMS simply indicates that Medicare’s interests must be protected regarding future medical claims, and that this may be accomplished by setting money aside for the beneficiary for future medical claims (http://www.cms.hhs.gov/MSPRecovClaimPro). However, there is no real guidance or authority for creating or approving Medicare set-asides in the liability or no-fault context.

Presumably, Medicare will eventually issue some specific requirements for insurers to follow when handling a claim that may involve future medical expenses. At this point, it certainly appears that Medicare will be getting more involved in the future with insurers and claimants in order to assure its status as a secondary payer.

If you have any questions, please feel free to contact the authors: Martin M. Rall (marty@lerlaw.com) and Flavio A. Ortiz (alex@lerlaw.com) at 503-768-9600.