A Guide through the Medicare Morass: Medicare Fundamentals and Best Practices for Liability Insurers and Their Attorneys

Abstract

SINCE its enactment, the mandatory Medicare reporting obligations of companies and insurers under U.S. federal law, i.e., Section 111 of the Medicare and Medicaid SCHIP Extension Act ("MMSEA") of 2007, have been discussed extensively. (1) From an insurer's perspective, the laws are opaque and onerous. This article provides an overview of best practices under the Medicare laws to ensure that the obligations of both insurers and their attorneys are met. The article also addresses how different insurance arrangements change the Medicare reporting requirements and, in some instances, avoid them altogether. I. The Medicare Program Medicare is the federal government insurance program available to U.S. citizens and permanent residents who are 65 or older, have certain medical conditions or have received Social Security disability benefits for 24 months. (2) To understand Section 111 and how it has changed the nature of personal injury litigation and claims handling, some background information is helpful. The Medicare program was signed into law in 1965 but, in response to funding concerns, was amended in 1980 by the Medicare Secondary Payer Act ("MSP Act"). The MSP Act provided that Medicare may not pay for treatment or services provided to a Medicare beneficiary if another entity is legally or contractually obligated to provide such coverage. (3) The entity obligated for payment is known as the "primary plan" or "primary payer." Medicare is, thus, a "secondary payer." In the context of liability insurance, Medicare makes so-called "conditional payments" on behalf of the beneficiary for medical treatment or services pending final settlement of a liability claim with the expectation of reimbursement from the liability insurer (also called the primary payer). However, the MSP Act lacked sufficient enforcement mechanisms to ascertain when reimbursement was possible from a primary payer and thus was unable to effectively ensure reimbursement. Accordingly, on December 29, 2007, the Medicare program was again amended in an effort to reduce government spending by enabling the agency responsible for administering Medicare (the Centers for Medicare and Medicaid Services or "CMS") to better determine when another entity is responsible for the medical expenses of a Medicare beneficiary and ensure reimbursement for those Medicare-covered items and services that another entity is required to cover. This amendment has been dubbed "Section 111 and requires any entity who makes a payment to a person eligible for Medicare arising out of a personal injury claim to report that payment to CMS. It is important to keep in mind that reporting is triggered by Medicare eligibility, not receipt of Medicare benefits. Reporting is done quarterly by submitting an electronic file on the Coordinator of Benefits Secure Website. (4) The Coordinator of Benefits Contractor ("COBC") is a branch of CMS that is responsible for coordinating whether Medicare is entitled to reimbursement for any medical expenses and, if so, the total amount of reimbursement owed. Due to inefficiencies arising out of Section 111's implementation, on January 10, 2013, the Medicare laws were once again amended by the Strengthening Medicare and Repaying Taxpayers Act ("SMART Act"). Parties are now able to request the amount that Medicare has paid as conditional payments 120 days prior to the expected date of a settlement, and CMS is required to respond with the lien amount within 65 days (or 95 days if CMS determines additional time is needed). (5) The purpose of the provision is to enable parties to engage in mediation and settlement discussions with some idea as to the amount of the Medicare lien. Prior to this amendment, CMS was not obligated to respond within a specified time frame to a request for the amount of conditional payments, and settlements were delayed as a result. Additionally, CMS must establish each year a threshold amount that is exempt from Section 111 reporting equal to the amount that CMS incurs in attempting to collect conditional payments. …