Published in Volume 21, No 2 of Workers' Compensation Quarterly, Workers' Compensation Section of the State Bar of California

Congress voted, in December 2007, to enact the Medicare, Medicaid, and SCHIP Extension Act of 2007 . One part of this bill adds teeth to CMS’ ability to enforce the Medicare Secondary Payer (MSP) Statute, and broadens CMS’ reach beyond workers’ compensation to other plans such as liability insurance (including self-insurance) and no fault insurance. It not only requires additional information to be reported but also adds stiff penalties for non-compliance. Close attention is recommended because it’s not over yet; there are more rules to come which will further clarify these new requirements.

Purpose:
The purpose of the legislation was expressed by its sponsor, Senator Chuck Grassley (R-IA), on the floor of the senate on December 18, 2007 this way:

“As in previous legislation that Congress has passed, this legislation will continue to improve accountability in the Medicare Program. There are situations when Medicare is not the primary payer for a beneficiary’s health care, but it is currently difficult to identify these situations. This legislation will improve the Secretary’s ability to identify beneficiaries for whom Medicare is the secondary payer by requiring group health plans and liability insurers to submit data to the Secretary.”

Senator Grassley’s remarks highlight the fact that Medicare is still having difficulty identifying when Medicare “is not the primary payer for a beneficiary’s health care”.

Requirements
The law requires that, beginning July 1, 2009, an “applicable plan” must:
• Determine whether a claimant (including an individual whose claim is unresolved) is entitled to Medicare benefits, and

• Submit the “required information” for those claimants that are entitled to Medicare to the Secretary of Health and Human Services (Secretary) in the form, manner and frequency prescribed by the Secretary, after the claim is resolved.

Further provisions of the bill state that:
• An Applicable Plan is defined as liability insurance (including self-insurance), no fault insurance and workers’ compensation laws or plans.

• The Required Information will include the identity of the claimant and other information as the Secretary shall specify it needs to determine coordination of benefits and recovery of claims.

• A Civil Penalty of $1,000 for each day of non-compliance is imposed with respect to each claimant. This is in addition to any other penalties prescribed by law.

• Congress appropriated $35,000,000 to the Centers for Medicare and Medicaid Services (CMS) for implementation of this new law over fiscal years 2008, 2009, 2010.

What Does This Mean?
At first glance, the new law seems simple. Beginning on 7/1/2009 insurers must report information on settled claims for those claimants that are Medicare beneficiaries. Congress is enforcing this reporting requirement on the insurance companies with very stiff fines which indicates that they are serious about compliance. CMS is also receiving significant funds from Congress so it seems that the data will be scrutinized by CMS.

However, the uncertainties at this time are causing a lot of speculation as to the impact of this new legislation. First, the Secretary will issue further rules or regulations to address the two open issues expressly stated in the bill:
• What is the “required information” that must be reported?
• What is the “form, manner and frequency” of reporting requirement?

Second, many other questions remain to be answered, such as:
• What will CMS do with this huge amount of new information?
• What will be the impact on how liability and no-fault cases are negotiated and settled?
• Does this means that Medicare Set-Asides (MSA) will be required for liability cases?
• At what point will plans be in violation and subject to penalties?


What Should We Do Now?
It is too early to know precisely how this new legislation will affect those in the claims settlement industry. However, it seems imperative that insurers and other parties (e.g. attorneys, structured settlement brokers, MSA allocators, professional administrators, etc) take the following actions between now and the July 1, 2009 effective date of this bill:
• All parties should make sure that they are currently protecting Medicare’s interests in all claim settlements as currently required by the MSP statute. Determining the Medicare status for all claimants, addressing the issue of conditional payment reimbursement to Medicare and funding MSA’s are all currently an integral part of compliance with the MSP statute for workers’ compensation settlements.
• Insurers should begin planning for the impending data gathering and reporting requirements.
• All parties involved should understand this new legislation, as currently written.
• All parties should keep a close eye on the future developments regarding this new amendment to the MSP statutes; especially the impending rules to be issued by the Secretary.