Medicare Officials Criticized for Inability To Recover Amounts Lost in MSP Maze
Coordination of Benefits
Employee Benefits Series THOMPSON July 2011 | VOL. 19, No.3
In testimony before the House Subommittee on Oversight and Investigations on June 22, officials for the Centers for Medicare and Medicaid Services (CMS) defended how the Medicare Secondary Payer (MSP) program works, but GOP congressmen looked at billions of dollars of waste and gave CMS poor grades on tracking improper double payments.
Medicare officials said plans are not being properly identified as the primary payer and beneficiaries are not informing Medicare that they have other coverage. But they said CMS is improving technologies to exchange data about beneficiary claims, alternative payers and recovery pursuit, and they said more reporting from thirdparty payers to Medicare will become mandatory in 2012.
Republican lawmakers said the program’s lack of transparency and problems communicating are creating unnecessary roadblocks to settlements and agreements. Cases become more drawn out while parties wait for CMS’ estimate of its recovery claim, costing businesses more in litigation costs, they said.
Background
Since 1980, under MSP law, Medicare is a secondary payer to group health insurance, auto and other liability insurance, no-fault insurance and workers’ compensation (WC) plans. CMS has the right to recover overpayments (after mistakenly paying primary) from the actual primary payer. The thing holding it back has been not being aware of all MSP situations.
Health plans are legally obliged to notify and repay Medicare when they determine that Medicare should not have paid first. Likewise, beneficiaries are required to cooperate with Medicare recoupment efforts.
To help CMS identify MSP situations, Congress added mandatory reporting for group health plans and non-group health plans (NGHPs) in 2007 as Section 111
of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA). Mandatory reporting was supposed to get started in 2009, but it was pushed back to January 2011 for WC and no-fault coverage and to January 2012 for most liability insurance.
In a June 22 statement to the U.S. House Energy and Commerce subcommittee on oversight and investigations, Deborah Taylor, CMS chief financial officer, testified that the government’s MSP recovery program saves Medicare close to $5 billion a year. Medicare is a “payer of last resort” when another insurer has the primary responsibility to pay for care of a Medicare beneficiary, she said.
The MSP recovery program received 413,000 new cases and issued more than 74,000 recovery demands in fiscal year (FY) 2010, a significant increase from the 222,000 NGHP cases and 43,000 recovery demands in FY 2007, Taylor said. In 2009, Medicare moved to electronic reporting to enable insurers and plans to submit data that would help it coordinate benefits or seek recoveries.
Pay and Chase
In most MSP situations, Medicare pays first: (1) because it is not aware of the actual primary payer; or (2) in order to ensure that the beneficiary has timely access to needed care. Once CMS learns about a primary payer, it may stop paying the bills, or it can make “conditional payments” while the other payer investigates. But it likely will try to recover conditional payments if it concludes that the other payer should have been primary, according to a June 22 report by the Government Accountability Office (GAO).
Set-aside Payments
To prevent Medicare from making future payments for MSP situations involving NGHPs, a Medicare setaside arrangement may be created when an individual is expected to have future medical expenses related to an MSP situation, the GAO said.
This is a voluntary arrangement where part of a settlement is set aside to pay for future related health expenses that Medicare would otherwise pay for. In cases where a set-aside is created, Medicare will not make payments for medical expenses related to the MSP situation until the Medicare set-aside fund is exhausted.
There are five stages in the MSP process: (1) negotiation between the beneficiary and the liable party; (2) resolution of liability between the beneficiary and the liable party; (3) payment made to the beneficiary; (4) mandatory reporting; and (5) Medicare’s recovery. Medicare’s strategy depends on at which step in the process it is notified of the beneficiary’s injuries.
Ideal Scenarios From GAO Report
Auto Liability. A Medicare beneficiary is injured in a car accident. Early in the negotiation phase, the beneficiary’s attorney tells Medicare she’s working on a settlement, and asks Medicare to report to her all conditional payments Medicare makes for the beneficiary, so she can use that information in negotiations with the auto insurer. Later, the auto insurer makes a lump sum payment and simultaneously reports the details to CMS. The beneficiary receives the payment and (either with or without the prompting of a CMS “demand letter”) turns over the amount that CMS is owed.
No-fault Insurance. A Medicare beneficiary injures her ankle at a neighbor’s house. She submits her bills directly to her neighbor’s insurer. That insurer accepts responsibility as primary payer. After the resolution, the neighbor’s insurer reports the details to Medicare, which checks to see if it has paid any bills related to the ankle injury. Medicare has made no such payment, so no recovery is necessary.
Workers’ Compensation. A Medicare beneficiary slips at work and gets injured. Early in the negotiation phase, the WC plan notifies CMS of the beneficiary’s injury. It reports that it is assuming primary payer responsibility and anticipates that the resolution will include a setaside arrangement to pay for future medical expenses related to the accident. The beneficiary’s attorney, the plan and CMS will review and approve the set-aside. The beneficiary’s attorney and the WC plan hammer out a deal to cover the beneficiary’s current and future medical expenses. The beneficiary receives a lump sum for past payments and a set-aside for future care. The WC plan reports the details of the settlement to CMS. CMS moves to recover from the lump sum payment, and will pay no health bills related to the accident until the setaside fund is exhausted.
Complaints at Hearing
Businesses and injured individuals cannot close on a settlement until CMS provides a complete list of all medical costs, and CMS is not providing that information in a consistent or timely manner, subcommittee chairman Cliff Stearns (R-Fla.) said in his opening remarks.
“CMS’s delays cause lawsuits to drag on, hinders timely payments to injured individuals, and causes uncertainty and increased costs for both large and small businesses,” Stearns said. He lambasted the agency for “tens of billions of dollars in improper payments [lost] every year” and for dragging its feet when administering the MSP program.
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