MMSEA: Another Step to Claim Resolution
William W. Drury, Jr. and
Margaret T. McCarthy
On December 29, 2007, former President George W.
Bush signed into law the Medicare, Medicaid and SCHIP Extension Act of 2007, or
the MMSEA. The MMSEA amends the Medicare Secondary Payer provisions of the
Social Security Act thereby securing Medicare’s place as a secondary payer. The
reporting requirements contained within Section 111 of the MMSEA could lead to
civil penalties and fines if not followed.
The Center for Medicare and Medicaid Services (CMS)
is an agency of the federal government that is part of the Department of Health
and Human Services. CMS is responsible for the oversight of Medicare and the
implementation of the MMSEA. CMS has a statutory lien on liability claims made
by Medicare beneficiaries. This statutory lien confers on CMS the right to be
reimbursed for medical expenses it paid on behalf of a Medicare beneficiary who
recovers those expenses in a liability claim. It may also afford CMS some
protection from the cost of future medical care. While the MMSEA does not change
any statutory provisions or regulations, it does add a reporting requirement
that, if not complied with, may result in some significant fines and penalties
to those responsible for reporting. The Medicare beneficiary may be penalized
through the termination of all benefits if Medicare is not protected as a
Does the MMSEA Apply to Your Case?
The MMSEA requires all liability insurers,
including self-insurers, no fault insurers and workers’ compensation insurers,
to determine whether the claimant/plaintiff is Medicare eligible. A Medicare
eligible plaintiff or claimant is someone who is 65 years of age or older,
someone who is under the age of 65 with certain disabilities or someone
suffering from end-stage renal disease.
Who Is Required to Report?
Responsible Reporting Entities (RRE) includes all
liability insurers, self-insurers, no fault insurers and workers’ compensation
insurers. RREs are required to keep CMS apprised throughout claim settlement and
litigation. The reporting entities are responsible to not only determine the
Medicare eligibility status for the claimant/plaintiff but to report on every
case where payment under a settlement, award, judgment or other payment is made
that involves a Medicare beneficiary. RREs are ultimately responsible for
complying with the reporting process including ensuring the accuracy of all
reported information. While RREs may not contract away their obligation under
this law, they may elect to use an agent for reporting purposes. All Responsible
Reporting Entities must electronically register with CMS before September 30,
2009 to show intent to comply with this law.
Regardless of the number of defendants in a matter,
each RRE is responsible for its own reporting. If there are multiple settlements
involving the same claimant/plaintiff, each RRE must report separately. In cases
involving multiple defendants, there may be multiple records submitted for the
same claimant/plaintiff, but they will be cumulative rather than duplicative.
What Must Be Reported?
The Responsible Reporting Entity is required to
input either a Medicare Health Insurance Claim Number (HICN) or the injured
party’s Social Security Number. While the RRE may submit either the HICN or the
SSN, it is preferable to submit both to ensure a match if the claimant/plaintiff
is in the system. In addition to the HICN and the SSN, the RRE is required to
submit the first six characters of the Medicare beneficiary’s last name, his/her
date of birth, and gender. Other relevant information may include the nature and
extent of the injury or illness, the facts about the incident giving rise to the
injury or illness, information sufficient to assess the value of reimbursement
and information sufficient to assess the value of future care planning.
The Coordination of Benefits Contractor (COB) will
use the created files to determine if an injured party can be identified as a
Medicare beneficiary based upon the information submitted and whether the
beneficiary’s entitlement for Medicare continued or commenced on or after the
date of incident as defined by CMS. To determine whether an injured party is a
Medicare beneficiary, the COB matches the RREs’ data to Medicare’s data.
RREs must report settlements, judgments, awards, or
other payments regardless of whether or not there is an admission or
determination of liability.
These reporting requirements will result in not
only added infrastructure costs (personnel and systems) for RREs, but more steps
in legal claim resolution by mandating verification of CMS’ benefits throughout
litigation until resolution. In order to avoid lengthy delays, it is best to
begin investigating a person’s Medicare beneficiary status as soon as a
questionable claim reaches your desk.
In cases involving more than one defendant, if more
than one RRE has assumed responsibility for ongoing medicals, Medicare would be
secondary to each such entity.
If the claimant/plaintiff was not a Medicare
beneficiary at the time an RRE assumed ongoing responsibility for future medical
care, the RRE must continue to monitor the claimant’s/plaintiff’s Medicare
status because it may change over time. If the claimant/plaintiff becomes a
Medicare beneficiary, any responsibility for ongoing medical care or payment of
claim must be reported to CMS. If the reporting entity’s responsibility for
future medical costs terminates before the claimant/plaintiff becomes a Medicare
beneficiary, then there is no reporting requirement.
Medicare beneficiaries who receive a liability
settlement, judgment, award, or other payment have an obligation to “pay back”
any conditional payments paid by Medicare within 60 days of receipt of such
funds. Conditional payments must be verified and resolved by all participants in
a matter in order to avoid the steep penalties.
As far as payment for future medical care is
concerned, it is important to remember that the purpose of Section 111 was to
add a reporting requirement and CMS has yet to give any guidance as to liability
Medicare Set-Asides. A Medicare Set-Aside (MSA) is money set-aside from any
settlement, judgment or award for any future medical expenses. While Section 111
does not specifically require Set-Asides, they are often the best practice for
protecting Medicare’s interest as a secondary payer. While there is no threshold
amount or specific requirement for a Set-Aside, many companies are setting them
up in cases involving future medical care for a Medicare beneficiary so as to
avoid any possible fines or penalties.
The typical funding mechanisms of an MSA are in the
form of a structured annuity or lump sum. The money often goes into a trust that
can be professionally or self-administered, but the administrator is responsible
for an annual accounting. In addition, the administrator of the account must
show the account has been properly exhausted before claiming any Medicare
benefits for services related to the injury. The best practice is to have CMS
approve this allocation for future care.
CMS is not bound by any allocation made by the
parties even where a court has approved such an allocation. However, CMS does
normally defer to an allocation made through a jury verdict or after a hearing
on the merits. This issue is relevant to whether or not CMS has a recovery claim
with respect to a particular settlement, judgment, award, or other payment and
does not affect the RRE’S obligation to report.
Fines and Penalties
This law has many attorneys, beneficiaries and
insurers scrambling to comply because the penalties for non-compliance are
steep. Insurers can face penalties of up to $1,000 per day per
claimant/plaintiff whose Medicare status is not fully reported to CMS. The
penalties Congress gave CMS also include both subrogation rights and the right
to bring an independent cause of action to recover its conditional payment from
“any or all entities that are or were required to make payment.” The government
is also entitled to seek to recover double damages if it brings an independent
cause of action.
To avoid being penalized, the ultimate goal for
RREs, attorneys, and beneficiaries is to understand when there is coverage
primary to Medicare, to notify Medicare of such coverage, and to pay Medicare
Insurers need to be mindful of the following three
concepts: 1) Responsible Reporting Entities must REPORT to CMS payments made on
behalf of Medicare-eligible claimants/plaintiffs; 2) Responsible Reporting
Entities should determine whether there are medical expenses in the PAST for
which CMS seeks reimbursement; and 3) Responsible Reporting Entities should
assess what Medicare-covered medical expenses may be incurred in the FUTURE due
to the injury or illness. One last caveat to consider is the fact that CMS has
the right to reject settlements that do not protect Medicare’s interest.
Therefore, while perhaps time consuming, it is best to voluntarily get
pre-approval of settlements from CMS directly.
While the monetary penalties for an RREs’
non-compliance are steep, attorneys and Medicare beneficiaries are also subject
to penalty. Attorneys are now exposed to increased legal malpractice as ethical
rules may be violated by failing to notify and honor CMS’ reimbursement right
even if the attorney was not aware of CMS’ interest since the attorney “should
have known” that Medicare would have a lien. Attorneys can protect themselves by
reporting all settlements to CMS, putting Medicare’s name on settlement drafts,
and getting written confirmation that Medicare’s interests have been protected.
Also important to note is that indemnity clauses on settlement agreements will
not protect you because CMS, as a governmental entity, has a super lien. A
Medicare beneficiary risks termination of all benefits if he/she fails to
protect Medicare’s place as a secondary payer. It is important to make sure all
claimants/plaintiffs are aware of this law and the risks associated with
Where Do We Go from Here?
In order to prepare for this law, all RREs should
track developments on CMS’ website at
www.cms.hhs.gov/MandatoryInsRep. After registering with CMS, an RRE should
also track the associated dates for compliance and reporting, revise protocols
for claims assessment and handling, allocate sufficient resources and expertise
for maintaining compliance, and revise all paperwork as necessary.
As daunting as this new law may seem, CMS is making
an effort to make compliance manageable. In addition to keeping up-to-date with
developments on CMS’ website, there have been numerous broadcasted town hall
meetings as well as a User Guide that has been published to help walk you
through the compliance requirements. If all else fails, protect yourself by
assessing all claimants/plaintiffs for Medicare eligibility, reporting those
individuals to CMS, identifying whether any conditional payments have been made,
obtaining an estimate of future medical expenses, clearly identifying settlement
funds allocated for future medical expenses, and drafting all settlement
documents in such a way as to indicate Medicare’s interests have been addressed.