The procedure by which Medicare reimbursements for medical care provided to a claimant alleging the negligence of another has changed drastically. Gone are the simple days when a claimant was primarily responsible for satisfying a Medicare lien. Any insurer and self-insured entity must become familiar with the changes and put adequate systems into place; if they do not they will likely face onerous fines. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) was Congress's solution to years of Medicare being poorly reimbursed when beneficiaries are compensated through liability insurance, no fault insurance or worker's compensation.

The purpose of the legislation is to further the Centers for Medicare & Medicaid Services' (CMS) ability to collect by holding insurers liable for failing to report Medicare beneficiaries to whom they render payment. Under the Medicare Secondary Payer (MSP) Statute, enacted in the early 1980s, "primary" plans, specifically liability insurance (including self-insurance) and no-fault insurance plans, are subversive to Medicare, the "secondary" payer (known as MSP claims).  In short, Medicare should not make payments on behalf of a beneficiary if payment has been made (or can reasonably be expected to be made) by a primary payer. Nonetheless, because litigation can take years, Medicare will often make payments on behalf of a beneficiary with the payment being conditioned upon reimbursement by the primary payer.

To ensure its reimbursement, Medicare is afforded a number of ways to recover: it may use direct collection from the primary payer; it may bring an action for double damages against any responsible entity for repayment; it has a separate subrogation right to recovery; and it may join in any action related to the events that gave rise to the need for services for which Medicare paid.

After attempts over the years to give the legislation teeth, Congress enacted MMSEA in 2007 to establish a reporting protocol and, for the first time, hold liability insurers directly responsible for failure to properly report settlements or judgments involving Medicare beneficiaries. MMSEA is, in essence, an attempt by CMS to "partner" with insurers and self-insured entities in an effort to obtain detailed reporting. By forcing reporting entities to provide the information, CMS hopes to ensure that Medicare will receive greater consideration in payments for past and anticipated medical care of claimants.

The entities responsible for reporting are referred to as Responsible Reporting Entities (RREs). An RRE is defined as the administrator of a liability insurance plan (including self insurance), no fault insurance plan or workers' compensation plan. The RRE is responsible for reporting Medicare beneficiaries with whom they have a settlement, judgment, award or other means of payment such that CMS can recover any conditional payments made on the beneficiary's behalf. Insurance companies may use an agent or third party administrator to conduct the technical reporting process; however, they remain liable for RRE reporting notwithstanding any contract, settlement agreement or other method of limiting liability. Furthermore, in multi-party litigation, an agreement among co-defendants to have one of the defendant's insurers issue payment in obligation to Medicare will not shift or remove the responsibility away from any other RRE involved.

There are rules related to corporate parent and subsidiary relationships in an RRE which are outside the scope of this article; however, insurers should be aware that those rules exist. In short, the general rule is, "he who makes payment is he who must report." It is crucial to note that, while the act of reporting can be assigned to another party, the responsibility for reporting can never be shifted to another.

The MMSEA requires that RREs provide the identity of any potential Medicare beneficiary. The RRE must provide 130 claim-related data points, such as the individual's Social Security number, first and last name, date of birth, gender, the nature of injury and amount of settlement or judgment. That data is then matched with the Medicare databases to determine what, if any, benefits Medicare has paid for the individual. Interestingly, while RREs are mandated to provide social security numbers and other personal and medical information, they are not protected from privacy liability by the statute. That type of conflict with other existing federal laws will be a tricky road to navigate over the next several years while MMSEA is further developed.

There are reporting amount thresholds while CMS is implementing the process, based on the type of payment the RRE is making to the Medicare beneficiary. There is no minimum dollar threshold where an RRE has an On-Going Responsibility for an Individual's Medicals (ORM). On the other hand, thresholds do exist if the insurer owes a Total Payment Obligation to the Claimant (TPOC). A TPOC is generally a one-time or lump sum payment (regardless of payment terms) from a settlement, judgment, award or other payment intended to resolve or partially resolve the claim. RREs must report all claims over $5,000 in 2010 and 2011, over $2,000 in 2012, and over $600 in 2013. Not surprisingly, those thresholds are subject to change.

How do RREs comply with MMSEA?

The MMSEA simply adds reporting rules to the existing statutory provisions or regulations under the original MSP. Accordingly, under the original statute, liability insurers are required to put CMS on notice that Medicare has made a payment for which the primary payer is ultimately responsible without respect to any thresholds. If a beneficiary receives a payment from an insurer, the beneficiary or "other party" must reimburse Medicare within 60 days. If the beneficiary does not do so, the insurer may be required to reimburse Medicare even though it already reimbursed the beneficiary. There is no guidance as to the best method for making payment upon settlement, how to calculate future medical costs, or even how to properly effectuate a settlement to the satisfaction of CMS.

The new reporting rules mandate the electronic process by which CMS obtains notification of Medicare beneficiaries receiving settlements or judgments from insurers. RREs must register with the CMS Coordination of Benefits Contractor (COBC) to submit claim files. First, each RRE must assign an Authorized Representative; that is the individual in the RRE organization who has the legal authority to bind the organization to a contract and the terms of the MMSEA requirements. The RRE must also assign an Account Manager who controls the actual administration of an RRE's reports. Once the initial set up process is complete, RREs must pass a testing process for inputting claims before they can begin submitting "actual" claims.

Next, the RREs are assigned a quarterly filing submission time frame for reporting claims involving a Medicare beneficiary. Subsequent quarterly submissions are only to include new or changed information. Once the COBC processes the data submitted by an RRE it determines whether the injured party is a Medicare beneficiary and will notify the RRE within 45 days of its responsibility for reimbursing Medicare. CMS has specifically advised that RREs are responsible for implementing procedures in their claims review process to determine whether an injured party is a Medicare beneficiary.

When a claim is in litigation, attorneys may gather the information through discovery. However, the attorney's responsibility for gathering the information does not divest the RRE of liability for failing to properly report to CMS. RREs must be certain they have adequate communication with counsel regarding potential Medicare beneficiaries. It is also prudent to ensure that counsel is aware of MMSEA and that proper discovery and settlement procedures are in place. While the reporting process is designed to determine whether reported parties are in fact Medicare beneficiaries through a matching system with Medicare databases, RREs are to report only with respect to known Medicare beneficiaries. It is not acceptable for an RRE to send information on every claim without regard to Medicare status. RREs must strike a balance of reporting only Medicare beneficiaries or those for which they have a reasonable basis to believe are subject to reporting.

Perhaps the most confusing part of the MMSEA legislation lies in when RREs become responsible for reporting and timing reports. Reporting start dates are based on the type of claim and how it is being handled by the insurer. For ORM claims, those in which the RRE has ongoing responsibility for medicals, the RRE must report all claims in which responsibility is assumed on or after July 1, 2009. For TPOC settlements, in which the insurer makes a lump sum or one-time payment, the insurer must report claim information when there has been a TPOC settlement, judgment, award or other payment on or after January 1, 2010 (subject to the previously discussed thresholds). Remember, the RRE is not relieved from the specific reporting requirements even if it has provided notice of a pending claim to CMS as required by the original MSP prior to January 2010.

Once an RRE is successfully registered and has passed testing, it must update its claims files dependent on the type of claim. For ORM files, the RRE must only provide information during the initial claim and then update the claim when it is known that the ongoing medical payments will cease. For TPOC claims, the RRE is responsible for reporting quarterly, during a one-week period in each quarter assigned by CMS. However, the quarterly reports exclude claims during the 45 days prior to the start of the required filing time frame.

To add to the confusion about when the statute requires reporting, the CMS implementation timetable mandates the first quarter of 2010 a testing period and indicates RREs to submit their first files in the second quarter of 2010. CMS apparently ignores the $1,000 a day penalty for failing to comply with reporting requirements after indicating that responsibility for reporting begins July 1, 2009 or January 1, 2010. Further complicating the timing question, CMS states that all Medicare beneficiary claims must be reported regardless of the date an RRE's first submission is allowed.

RREs are not required to register with CMS if they will not have anything to report. Nonetheless, those who do not register initially because they have no expectation of having claims to report must register in time to allow a full quarter for testing if they foresee situations where they would have a reasonable expectation of having to report. Again, one is left wondering if the three-month gap opens the door to $1,000 a day sanctions. Insurers would be well advised to implement the CMS system as quickly as possible to avoid unnecessary penalties and comply with the second quarter reporting schedule. Further, insurers and litigation counsel should address existing litigation that may be approaching resolution to determine the likelihood of having to report the claim.

Conclusion

The MMSEA seemingly raises more questions than it resolves with its countless ambiguities. While it imposes strict requirements and severe penalties, it is almost devoid of guidelines to assist insurers and counsel on the practical considerations of satisfying its terms. Hopefully, it will evolve over the next several years to become a smoother process. Insurers, as the responsible parties, must keep abreast of developments. It is imperative that potential RREs register and put a system in place for reporting. As noted, failure to comply with the MMSEA reporting requirements can result in hefty fines and penalties for just one case, let alone multiple cases.

In addition, settlement procedures must be tailored to take Medicare into account for existing or potential beneficiaries. Insurers should have discussions with representatives and counsel to develop a strategy for discovering pertinent information. Of crucial importance is to develop a strategy for effectuating settlements. The duty to report and make payment to Medicare cannot be delegated to the claimant or another party by any means; consequently the insurer must have a practice in place to identify existing or potential Medicare beneficiaries early on and to make specific provisions for Medicare information requests and Medicare payment as a condition of settlement. The failure to put adequate procedures in place can lead to harsh sanctions in the form of the $1,000 a day penalty for each day of noncompliance. Furthermore, the previous enforcement options, such as double recovery of Medicare payments, remain in full force and effect. The purpose of this article is only to provide a brief overview of the various complex provisions that are presently taking effect. Please consult the CMS website and relevant publications on an ongoing basis in order to keep abreast of the myriad issues that will arise as this law develops.

Helenemarie Blake is a shareholder with Fowler White Burnett, P.A. A civil litigator, she represents business entities, non-profit organizations and major insurance carriers against significant claims, with particular emphasis on the defense of medical malpractice and health care-related cases. Junilla Kershner is an associate attorney with the firm's Medical Malpractice, Health Care and Insurance practice groups.



Sources
42 CFR 411.20-37
42 U.S.C. 1395y(b)(7)&(b)(8)
ALERT for Liability Insurance (Including Self-insurance), No-Fault insurance, and Worker's
Compensation re: identifying RREs. Published by CMS.
Available at http://www.cms.hhs.gov/MandatoryInsRep/

MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Worker's Compensation USER GUIDE, Version 2.0, July 31, 2009. Published by CMS.
Available at http://www.cms.hhs.gov/MandatoryInsRep/).
MMSEA Revised Implementation Timeline, May 12, 2009.