Medicare Secondary Payer Act

This is the 7th and final installment in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

We can put many of the points discussed in the previous blogs into a practical context by examining two recent cases that highlight some of the struggles faced by payers in administering and processing MSP payments. These cases show that even sophisticated payers from different industries can still overlook this long-existent law, which can result in major costs to those payers. It also goes to show that a well-designed  compliance program can lead to decreased risks and potential regulatory costs.

Kane ex rel. United States v. Healthfirst, Inc. et al.[1]

In this case, the United States and the State of New York filed complaints-in-intervention  alleging that the defendant, Healthfirst, a private, non-profit insurance program with contracts with New York hospitals, issued electronic remittances to certain providers relating to Medicaid patients.  Though the remittances should have stated that Medicaid could not be billed as a secondary payer for certain covered services, due to an alleged computer software glitch, they failed to include that information; this resulted in improper payment by Medicaid for claims that  triggered MSP and FCA liability.[2]

The relator alleged that Healthfirst violated the 60 day window mandate by reimbursing Medicaid more than 60 days from the time the relator compiled the list of possible overpayments.  Healthfirst moved to dismiss the complaint, but the district court denied the motion.  It concluded that the 60 day window for reimbursement commenced when the provider was put on notice of a potential overpayment, noting that allowing an individual or entity to commence repayment only after definitively identifying an overpayment would be incompatible with the legislative history and intent of the FCA.  Subsequently, this case settled for $2.95 million.[3]

Negron ex rel. United States v. Progressive Cas. Ins. Co. et al.[4]

This FCA case based on an alleged violation of the MSP law has a twist: it involves the intersection of MSP law with New Jersey state automobile insurance law.  In Negron, the relator purchased an auto insurance policy from Progressive, which gave her the choice of selecting a “health first” policy or a “Personal Injury Protection (PIP)” policy as her primary insurer.  Under a health first policy, the enrollee’s private health insurer is the primary payer for medical bills resulting from an automobile accident.  The relator’s primary insurance was Medicare; however, Medicare and Medicaid recipients are not eligible for this type of insurance coverage because Medicare and Medicaid are treated as secondary payers in such situations.[5]

A few months later, after the relator was involved in a car accident. Medicare conditionally paid for a claim that should have been reimbursed by the auto insurance policy.  The relator brought a FCA action against Progressive and its New Jersey subsidiary, stating that the insurer had failed “to make reasonable and prudent inquiries to ensure compliance with the MSP Act” and that Medicare had improperly paid her bills as the primary payer.[6]  In response, the insurer moved to dismiss the complaint.  In denying the motion to dismiss, the court found that the practice of allowing Medicare and Medicaid beneficiaries to select the “health first” policy was a violation of the MSP, as it allows Progressive to remain willfully ignorant of a beneficiary’s primary plan coverage, and chided the auto insurance company for its lack of controls.  Specifically, the court looked at the underwriting process, which should have involved some investigation into the beneficiary’s eligibility for Medicare and Medicaid.  It also noted that the claims adjustment process should have involved an identical investigation to determine the appropriateness of a “health first” or “PIP” policy for each beneficiary.[7]

The court stated that Medicare should not pay conditionally for the services rendered to the relator just because the auto insurance company eventually paid Medicare back, and found that this manipulation of the “conditional payment” provision of the MSP ignores the requirement that a conditional payment is only to be made if prompt payment is not made by a primary payer.  Ignoring this requirement allows the defendants to “receiv[e] an interest free loan from the government on claims they are obligated to pay and were always obligated to pay.”[8]  As a result, the court found that there was a “sufficient allegation [in the complaint] demonstrating economic loss to plead that the claims were false or fraudulent.”  After the U.S. Department of Justice and the State of New Jersey intervened, the defendants settled the case for $2 million.[9]

Although Negron involves New Jersey state auto insurance laws, the key part of the court’s ruling for health care providers is that the MSP law places the burden of investigating a patient’s health insurance coverage squarely on the shoulders of the provider, and simply  allowing a patient to elect certain coverage without more inquiry may not be a sufficient defense against FCA liability based upon MSP violationspayer.

It is likely that we will see more of the MSP-based FCA cases in the coming months and years. Due to the nature of FCA cases, investigations can remain under seal for years at a time before their filing becomes public. As such, the newest trend of enforcement that has been seen may be only the tip of the iceberg of FCA actions brought against payers and providers of all types in the current health care marketplace.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] Kane ex rel. United States v. Healthfirst, Inc. et al., 120 F. Supp. 3d 370 (S.D.N.Y. 2015).

[2] Id. at 375-77.

[3] Manhattan U.S. Attorney Announces $2.95 Million Settlement With Hospital Group For Improperly Delaying Repayment Of Medicaid Funds, The United States Department of Justice (Aug. 24, 2016), https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-295-million-settlement-hospital-group-improperly.

[4] Negron ex rel. United States v. Progressive Cas. Ins. Co. et al, No. 14-577(NLH/KMW), 2016 U.S. Dist. LEXIS 24994 (D.N.J. Mar. 1, 2016).

[5] Id. at *5-*9.

[6] Id. at *27.

[7] Id. at *7.

[8] Id. at *8.

[9]  Two Insurance Companies Agree To Pay More Than $2 Million To Resolve False Claims Act Allegations, The United States Department of Justice (Nov. 14, 2017), https://www.justice.gov/usao-nj/pr/two-insurance-companies-agree-pay-more-2-million-resolve-false-claims-act-allegations.

This is part 6 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

The federal government’s most powerful and popular enforcement tool for Medicare and Medicaid reimbursement matters is the False Claims Act, 31 U.S.C. §§ 3729 et seq.. The FCA is a federal law that imposes fines and penalties on individuals and entities that submit false or fraudulent claims to the federal government, cause a false or fraudulent claim to be submitted, or submit a false certification of compliance with a law in order to have a claim paid by the government. A violation of the FCA can lead to the payment of triple damages, attorney’s fees, and fines for each false or fraudulent claim. False certifications may be expressly stated, such as when a contractor affirmatively states that it has complied with specific legal requirements, or may be implied, based on the theory that each claim or invoice would not be paid by the government unless all of the legal prerequisites have been met even if they are not expressly stated in the claim itself.  The “implied false certification” theory of wrongdoing under the FCA was endorsed recently by the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, which expands the potential for Medicare Secondary Payer (MSP) enforcement.[1]  The Supreme Court ruled that an implied false certification action can survive if the defendant made a misrepresentation “about compliance with a statutory, regulatory, or contractual requirement [that is] material to the Government’s payment decision.”  Through the implied false certification theory of liability both relators and the government have a potentially powerful tool to regulate noncompliance with several regulations and statutes, including the MSP.  One recent decision helps explain how the Escobar analysis is applied by trial courts. United States ex rel. Jersey Strong Pediatrics, LLC v. Wanaque Convalescent Center et al.[2]

In this case, a qui tam whistleblower (or relator) alleges that Wanaque Convalescent Center billed only Medicare/Medicaid for services rendered to patients admitted to its skilled nursing facility and failed to bill any third party, which resulted in overpayments triggering MSP and FCA liability.  In its amended complaint, the whistleblower detailed eight instances of allegedly incorrect billing where the patient’s medical record listed Medicare or Medicaid as payers even though the patient had multiple forms of insurance.[3]

The defendants filed a motion to dismiss the amended complaint, arguing that false claims were not submitted as private insurance plans did not cover the services rendered, and that this resulted in Medicare or Medicaid becoming the primary payer for the specific services.  The defendants further contended that the relator’s allegations lacked the heightened materiality standard set forth in Escobar, claiming that the relator merely cited to federal regulations that the relator deemed “material” to the government’s decision to reimburse, rather than providing specific facts that any claim for payment has been rejected as being noncompliant with the MSP or any other regulation.[4]  The relator responded that noncompliance with the MSP satisfies the “materiality” standard set by Escobar.

The court denied the motion to dismiss, noting that the government has a great interest in ensuring strict compliance with the MSP, and therefore compliance with the MSP is “material” to the government’s decision to render payment.  The court found that the amended complaint alleged sufficient detail to put the defendants on notice, sufficiently pled knowledge, and found that the relator sufficiently pled that “MSP laws are material to the government’s decision to pay Medicare/Medicaid claims in this context.”[5]

As this moves forward from the initial pleadings, the key issue is whether the defendant may be liable under the FCA for violations of the MSP for submitting allegedly improper claims to Medicare or Medicaid as the primary payer and impliedly certifying those claims as compliant with all federal laws and regulations.[6]

Small and mid-sized providers in particular should be alert to the application of this law, particularly if their payment and billing system is not as sophisticated as may be seen in a larger hospital system or medical group. Although there were Medicare and Medicaid beneficiaries who were disabled, the MSP law applies equally for those that are injured and may receive recovery, such as someone in a car accident. As part of a compliant screening process for patients, providers may want to inquire before or during the treatment of a patient whether the injuries of the patient were the result of an accident involving a third party. If so, providers should  be aware of potential billing issues that may arise if a third party is responsible  for the primary payment of a patient’s medical costs.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 136 S. Ct. 1989, 1996 (2016).

[2] United States ex rel. Jersey Strong Pediatrics v. Wanaque Convalescent Ctr., No. 14-6651-SDW-SCM, 2017 U.S. Dist. LEXIS 150566 (D.N.J. Sept. 18, 2017).

[3] Am. Compl. ¶¶ 76-127.

[4] Defs. Mot. to Dismiss the First Am. Compl., 5-7 (Aug. 29, 2017).

[5] Wanaque Convalescent Ctr., 2017 U.S. Dist. LEXIS 150566 at *7-9.

[6] Id. at *7-8.

This is part 5 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

Health care providers also have important responsibilities under the MSP law.  Small and mid-sized providers should be on special alert, as they may lack the same level of centralized data processing and availability of in-house counsel to keep them informed of Medicare enforcement trends and regulatory requirements. Healthcare providers have MSP responsibilities, although they are less onerous than those placed upon GHPs and NGHPs.  Generally, providers must implement certain procedures to determine each patient’s Medicare eligibility status and submit claims to the proper insurer for reimbursement.  These procedures include asking the patient his or her Medicare eligibility status, checking the Common Working File, and creating and maintaining an internal database that stores information on each patient’s insurance coverage.  When inquiring about a patient’s insurance coverage, providers are encouraged to use a CMS Questionnaire found on the CMS website.[1]  Providers must also submit an Explanation of Benefits (EOB) form with each claim to Medicare to ensure proper billing.[2]  Providers should inquire as to whether the reason the patient is being seen for treatment is prompted by an injury that would be covered by an NGHP provider, such as an automobile accident, fall, or injury in the workplace.

If a provider submits an improper claim to Medicare but receives a conditional payment, the provider must reimburse Medicare within 60 days of receiving the payment and will not be penalized if the provider maintains an internal database that stores information on each patient’s insurance coverage and the provider can show that the claim was submitted as a result of false information provided by the beneficiary or someone acting on the beneficiary’s behalf.[3]  However, if a provider does not reimburse a conditional payment within the timeframe mandated in a Medicare demand letter, it can face civil monetary penalties, such as paying interest on any outstanding payment and being assessed double damages.[4]

These rules are summarized below:

Acting Party Responsibilities Liabilities for Non-Compliance
Providers ·         Investigate each patient’s Medicare eligibility by asking the beneficiary his/her Medicare status and by checking the Common Working File to verify each patient’s Medicare status

·         Maintain a database that includes each patient’s insurance coverage

·         Properly bill Medicare

·         Include all relevant MSP information or Explanation of Benefits with Medicare claims

·         Reimburse Medicare in 60 days if improperly billed

·         Must pay interest on reimbursement if paid 60 days after issuance of demand letter

·         Possible FCA liability if the claims to Medicare were false or fraudulent

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/ProviderServices/Your-Billing-Responsibilities.html.

[2] Medicare Secondary Payer Manual, Ch. 3 § 30.5.B.

[3] 42 CFR § 489.20.

[4] 42 CFR § 489.24.

This is part 4 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

Our next blog installment turns to Non-Group Health Plans (NGHPs). While the reporting requirements for Group Health Plans are largely uniform, the same cannot be said for NGHPs. If professionals are not aware of the requirements and the potential consequences, these distinctions can lead to confusion, or worse, to double damages and a minimum fine of $1000 per day per unreported beneficiary. The most recent NGHP policy guidance covers several forms of liability insurance (including self-insurance), no-fault insurance, and workers compensation in several states of existence and decay, such as NGHPs that are in bankruptcy, those that are acquired by larger entities, those that are in the liquidation process, and those that are general self-insurance pools.[1]  Although we cannot cover every conceivable variation here, we set forth below what NGHPs are and what generally they will be required to report, so that counsel and compliance professionals can identify whether their organization is affected.

Generally, NGHPs are liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans.[2]  The intent behind the NGHP reporting requirements is that if a Medicare beneficiary is injured and another payer (such as a workers’ compensation plan) is responsible for paying for the medical treatment of the beneficiary, then the other party should be the primary payer.  Unlike GHPs, there is no blanket requirement that all NGHPs register with Medicare, but those that have reportable information must register at least a quarter before submitting a report.  NGHPs are required to submit a report when there is an Ongoing Responsibility for Medicals (ORM) or there is a Total Payment Obligation to the Claimant (TPOC).

An ORM must be reported when there is ongoing compensation to a party for medical care associated with a claim.  ORM reports do not include dollar amounts, but do report the start and end dates for payments made for ongoing medical expenses.  Additionally, an ORM report should include information about the cause of illness, injury, or incident associated with the claim so that Medicare can determine those claims for which the NGHP is the primary payer and those claims for which Medicare or another payer is designated as primary.  An ORM report is separate and distinct from a TPOC report.  TPOC reports are made when the sum of a total settlement, judgment, award, or other payment obligation is established.  Notably, the TPOC “date” is not when the funds are actually paid, but when the obligation is established.  There are various Mandatory Reporting Thresholds that are outlined by CMS in Chapter III of its NGHP User Guide, depending on the type of insurance and the date of payment.[3]  All dates listed in the User Guide have passed as of the date of this post and all thresholds have been reached (April 1, 2017 was the last listed date in the charts).  However, while a TPOC may have been technically established before a listed date, it may not have been paid or technically reported at the present time.  As an example of the reporting requirement, the User Guide provides that after January 1, 2017, where the total TPOC amount is over $750.00 for Liability Insurance (including self-insurance), Section 111 Reporting is or was required in the quarter beginning April 1, 2017.[4]

NGHPs should be aware of these reporting requirements, and the person or group responsible for overseeing compliance should be well versed in the intricacies of the payment structure and the CMS’s manual guidance, which is set out in six detailed reporting manuals issued on December 15, 2017.[5]

As discussed earlier, NGHPs are the primary payer in certain instances, and failure to uphold this responsibility can result in litigation.  GEICO, an NGHP, is currently involved in litigation for allegedly failing to reimburse a Medicare Advantage plan which made payments to beneficiaries.[6]  The plaintiffs filed two separate class action suits against GEICO—one involving injured beneficiaries covered by GEICO and another involving tortfeasors carrying GEICO insurance who later settled with the beneficiaries.  In both suits, the plaintiffs allege that Medicare Advantage plans made payments to beneficiaries that GEICO was statutorily required to pay in the first instance.  GEICO filed a motion to dismiss, arguing that the plaintiffs lacked standing because the plaintiffs did not suffer an injury.[7]  The plaintiffs responded that the Medicare Advantage plans assigned their rights of recovery to the plaintiffs, convincing the court that this assignment gives the plaintiffs standing.  GEICO also argued that the amended complaint lacks the necessary specificity to proceed.  The court noted that while the plaintiffs did not include a lot of detail in their amended complaint, the information included was sufficient to overcome a motion to dismiss, and that more specific information would need to be produced in discovery or the defendants would be entitled to file for summary judgment.[8]

Another example of a potential NGHP is a clinical research sponsor. Clinical research sponsors, such as pharmaceutical manufacturers, can be liable under the Medicare secondary payer laws and regulations if the sponsor affirmatively agrees—whether through an informed consent document, a clinical trial agreement, or some other contract—that the sponsor will pay for the costs associated with the diagnosis or treatment of any injuries or illnesses suffered by a research subject as a result of participation in the study. CMS has indicated in its Section 111 guidance that it considers that the commitment by sponsors to pay for these costs represents a form of liability insurance; therefore, a sponsor that assumes responsibility to pay for these costs is a Responsible Reporting Entity (RRE) and must meet the reporting requirements of an NGHP.[9] Generally, while a clinical research sponsor may decide to use a vendor to perform the bulk of the work required for the reporting process, the sponsor is ultimately responsible and liable for noncompliance with NGHP reporting requirements and the implementation of a functioning system of reporting.

The rules governing NGHPs are summarized in the following chart:

Acting Party Responsibilities Liabilities for Non-Compliance
Non-Group Health Plans

(NGHPs) (Liability Insurance, No-Fault Insurance, and Workers’ Compensation)

·         Reporting requirements differ among NGHPs and are fact specific

·         Must register with BCRC on the COBSW if NGHP has a reasonable expectation of having to report in the future

·         May register on behalf of itself or its direct subsidiary (may not register on behalf of its sibling or parent company)

·         May use agent for administrative duties, but RRE retains liability.

·         Ongoing Responsibility for Medicals (ORM) Reporting: Must report existence of ongoing payments associated with medicals to beneficiaries

·         Total Payment Obligation to the Claimant (TPOC) Reporting: Must report the sum of a total settlement, judgment, etc. in accordance with price and date schedules found in NGHP User Guide Chapter III: Policy Guidance

·         Must report all claims where injured party is or was a Medicare Beneficiary

·         Failure to report results in a minimum fine of $1,000 a day per unreported beneficiary, with CMS reserving the right to collect double damages

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] CMS, MMSEA Section 111 MSP Mandatory Reporting: NGHP User Guide 6-1—6-7 (v5.3 2017).

[2] 42 USC § 1395y(b)(8).

[3] CMS, MMSEA Section 111 MSP Mandatory Reporting: NGHP User Guide Ch. III (v5.3 2017).

[4] CMS, MMSEA Section 111 MSP Mandatory Reporting: NGHP User Guide 6-17 (v5.3 2017).

[5] https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/NGHP-User-Guide/NGHP-User-Guide.html.

[6] Recovery v. Gov’t Emples. Ins. Co., No. PWG-17-711 (D. Md. Feb. 21, 2018).

[7] Id. at *10.

[8] Id. at *24, *45.

[9]  “Centers for Medicare and Medicaid Services, MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting, Chap. III, Policy Guidance, 6-26 (V. 5.3, Rev. Dec. 15, 2017).

 

 

This is part 3 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

In our previous posts, we mentioned that the Medicare Secondary Payer (MSP) law imposes obligations upon Group Health Plans (GHPs).   This post will explain those obligations, both provided for in the regulations and in the CMS guidance, in more detail, and highlight the potential compliance pitfalls for GHPs. Given recent enforcement trends, and the risk of raising damages for non-compliance from double to treble, including a minimum fine of $1000 per day per unreported beneficiary, GHPs may want to review and audit their compliance with MSP requirements.

Generally, a GHP is sponsored by an employer to provide healthcare to employees and their families.[1]  These include self-insured plans that may be administered through a third party administrator (TPA) and plans arranged by employers through a health insurer.  The MSP requires that GHPs with 20 or more employees report certain information to CMS to avoid payment conflicts (although smaller companies have certain limited reporting obligations).  CMS refers to these plans as Responsible Reporting Entities (RREs), and they must report all Active Covered Individuals to Medicare.  An Active Covered Individual is defined as:

  • Those between 45 and 64 years of age covered through the GHP based on their own or a family member’s current employment status;
  • Those 65 and older covered based on their own or their spouse’s current employment status;
  • All individuals covered under a GHP who have been receiving kidney dialysis or have received a kidney transplant (ESRD); and
  • All individuals covered under a GHP who are under 45, are known to be entitled to Medicare, and have coverage in the plan based on their own or a family member’s current employment status.[2]

There are exceptions to this definition for (i) employers with less than 20 employees, who need not report unless a covered individual has ESRD, in which case the ESRD covered individuals must be reported, and (ii) employers with less than 20 employees who must report if they are part of a multi-employer/multiple employer GHP.[3]

CMS recognizes that this will constitute a large class of individuals for many GHPs, and also recognizes that many people who are currently not eligible for Medicare will have their information reported as a part of this process.[4]  Retirees and their spouses who are covered under a GHP do not count as Active Covered Individuals, but are termed Inactive Covered Individuals and do not need to be reported in the same manner as Active Covered Individuals.  The reason for this is that in most cases Inactive Covered Individuals (retirees) have Medicare as a primary payer.

GHP RREs have multiple reporting options, but the basic option requires a GHP RRE to submit an MSP Input File containing information about each Active Covered Individual, as outlined in the CMS manual.  The GHP RRE submits reports to a CMS website known as the Coordination of Benefits Secure Website (COBSW).[5]  The GHP may submit a Query Only Input File to the website, which helps the GHP assess if potential employees are covered by Medicare.

There are many situations that create potential pitfalls for GHPs.  For example, if an employer hires several new employees and adds them to its health plan, a GHP administrator may fail to ask the essential questions necessary to determine if any employee is an Active Covered Individual.  While it is clear that those over the age of 45 need to be reported, if the plan does not inquire about the current health coverage for an employee’s family, the plan might fall out of compliance with MSP reporting requirements if it did not know that a family member receives health care coverage due to a disability or has ESRD. In addition, while a GHP with less than 20 employees generally does not have to submit a report, the small GHP may forget to inquire about the coverage status of a new employee’s family.

The basic rules are summarized in the following chart:

Acting Party Responsibilities Liabilities for Non-Compliance
Group Health Plans (GHPs) (Generally Employer-Sponsored Plans)

 

 

·         20+ GHPs[6] must generally be the primary payer for all Active Covered Individuals except for ESRD patients

·         100+ GHPs[7] must generally be the primary payer for all Active Covered Individuals

·         20+ GHPs must report quarterly all Active Covered Individuals (includes all covered individuals over 45, including employees or spouses/partners, and those with ESRD regardless of age, and those under 45 who are known to be entitled to Medicare.)

·         Failure to report results in a minimum fine of $1000 a day per unreported beneficiary, with CMS reserving the right to collect double damages

 

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 26 USC § 5000(b)(1).

[2] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-2—7-3 (v5.0 2017).

[3] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-3 (v5.0 2017).

[4] CMS, MMSEA Section 111 MSP Mandatory Reporting: GHP User Guide 7-2 (v5.0 2017).

[5] https://www.cob.cms.hhs.gov/Section111/LoginWarning.action

[6] 20+” means GHPs with 20 or more employees

[7] 100+” means GHPs with 100 or more employees

This is part 2 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

Over the past three years, enforcement trends have focused attention on this often-overlooked area of law and highlighted why providers and suppliers need to know more about it. In this post, we will discuss Medicare conditional payment and subsequent repayment requirements.

As a general rule, Medicare will make a conditional payment to a beneficiary if there is a delay in payment by the primary payer to keep the beneficiary from experiencing a gap in coverage.[1] Medicare may then pursue reimbursement of conditional payments from:

  • A beneficiary or other party, if both a primary and conditional payment were received;
  • A primary payer, if a conditional payment was made pursuant to liability insurance settlements, disputed claims under group health plans, workers’ compensation plans, or no-fault insurance; and
  • The beneficiary or provider, if the filing of an improper claim resulted in a conditional payment, unless the claim was a result of false information provided by the beneficiary and the provider complied with certain regulatory procedures.

These conditional payments must be reimbursed to Medicare within 60 days of receipt of payment. If a primary payer or provider fails to pay back the conditional payments, CMS may recover double the amount of the Medicare primary payment.[2]

Both beneficiaries and their fiduciary agents, such as attorneys, can be sued for recovery of improper conditional payments. In one recent case, a Medicare Advantage (MA) plan operated by Humana made a conditional payment to a beneficiary injured in a motor vehicle accident.[3] The beneficiary sued several insurance companies for payment, resulting in a settlement and the disbursement of settlement funds to the beneficiary’s attorney. Humana issued a demand letter to the beneficiary seeking reimbursement for its conditional payment, which it alleged was partly contained in the settlement amount. When the beneficiary failed to pay, Humana commenced a lawsuit against both the beneficiary and the beneficiary’s counsel to recover the funds. On a motion to dismiss by the beneficiary’s attorneys, the court ruled that the MSP allowed the MA plan to pursue recovery of conditional payments and double damages against beneficiary’s counsel, as “plain language fails to limit the parties against whom suit may be maintained” and that there is a private right of action that a MA can use to recover conditional payments pursuant to 42 USC §1395y(b)(3)(A).[4]

The take-away from this decision is that all parties involved in the medical treatment and payment process of a Medicare beneficiary, including payers, providers, the beneficiaries, and their counsel, as well as fiduciaries, should be conscious that payment obligations do not end once Medicare has cut a check. Counsel may also want to be aware of Medicare conditional payment obligations in settlement negotiations. For example, in an unpublished opinion, the Third Circuit affirmed a District Court’s ruling that the estate of David Trostle had not exhausted administrative review procedures and therefore the court lacked subject matter jurisdiction. The action was brought after Trostle received the wrong prescription from a pharmacy, causing him to fall gravely ill. While hospitalized, Trostle received a conditional payment, stopping Trostle from experiencing a gap in insurance coverage. As a result of the conditional payment, CMS asserted a lien against any potential recovery Trostle possibly would receive in order to recoup the funds disbursed in the conditional payment. CMS stated that the lien was for $1,212 and reserved the right to adjust the amount if necessary. Trostle’s actual medical costs paid by CMS for a sixty-six day hospital stay was nearly $100,000. Trostle settled the tort claim against the pharmacy which allegedly caused the injury, receiving $225,000 in July of 2014. After Trostle informed CMS of the settlement amount, CMS revised the lien amount substantially upward to $53,295. Trostle challenged the $53,295 lien, arguing that CMS induced Trostle to rely upon the $1,212 lien, a much lower number, when negotiating the settlement.

While the court found it could not assess the claim since Trostle had failed to exhaust all administrative review procedures, and therefore did not reach this issue, the facts of this case demonstrate a potential area of unknown for counsel, beneficiaries, and other fiduciaries who may attempt to secure settlements from NGHP’s without full knowledge of how conditional payments function.[5]

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 42 USC § 1395y(b)(2)(B); 42 CFR §§ 411.21 & 411.24.

[2] 42 CFR § 411.24(c)

[3] Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp. 3d 676 (E.D. Va. 2016).

[4] Id. at 681.

[5] Trostle v. Ctrs. for Medicare & Medicaid Servs., No. 16-4062, 2017 U.S. App. LEXIS 19431 (3d Cir. Oct. 5, 2017).

All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

This post is the first in a series from Epstein Becker Green on the growing area of enforcement of the Medicare Secondary Payer Act (MSP). There has been a recent growth in enforcement actions and regulatory interest that may not have yet attracted the attention of many providers and traditional and non-traditional payers. Noncompliance with the MSP can result in monetary penalties and government enforcement action. In particular, the MSP is garnering attention as an enforcement tool under the False Claims Act (FCA).  This series of blogs provides a general overview of the MSP, discusses requirements for compliance for differing entities, describes recent MSP enforcement actions under the False Claims Act (FCA), and sets forth  key takeaways to potentially reduce liability.

The Medicare Secondary Payer Act: The Basics

In order to understand why the MSP is relevant and may create new risks for payers and providers, we’ll start with an overview of the law and why Congress wanted to remedy a problem with the Medicare program. Before the MSP was enacted, Medicare made payments on behalf of its beneficiaries for any medical services, except those covered by workers’ compensation.  In many cases, claims were paid by the Medicare program even though beneficiaries had other sources of coverage for their care. This resulted in a rapid depletion of the Medicare Trust Fund, and in 1980 Congress passed the MSP statute to cut health care costs and reduce Medicare disbursements. The MSP currently affects providers, employer sponsored group health plans (GHPs), liability and no-fault insurers, workers’ compensation funds and plans (collectively, Non-Group Health Plans, or NGHPs), and Medicare beneficiaries.  Generally, the MSP:

(1) requires that Medicare be a secondary payer if a beneficiary carries certain types of employer sponsored health plans[1];

(2) prohibits the Centers for Medicare and Medicaid Services (CMS) from making payments for Medicare-covered services if payment has been made, or can reasonably be expected to be made, by a another payer[2]; and

(3) permits CMS to make “conditional payments” to the beneficiary if there is a delay in reimbursement from another entity for a covered service.[3]

Congress also enacted a parallel MSP provision that applies to state Medicaid plans.[4]

Special rules apply to Medicare beneficiaries covered under a GHP,[5] and Medicare is generally the secondary payer for these covered services when:

  • A beneficiary is entitled to Medicare on the basis of age, but is covered under a GHP by virtue of his or her current employment or the current employment status of a spouse of any age; or
  • A beneficiary is entitled to Medicare on the basis of End Stage Renal Disease (ESRD) for the first 18 months of eligibility; or
  • A beneficiary is entitled to Medicare on the basis of disability, but is covered under a GHP by virtue of his or her current employment status or the current employment status of a family member.[6]

In order to help primary payers and providers in meeting their MSP obligations, CMS established a Coordination of Benefits (COB) system that collects beneficiary coverage data.  The Benefits Coordination & Recovery Center (BCRC) administers the COB by ensuring the accuracy of the Common Working File (CWF), a CMS database that stores information regarding MSP data and investigations.  CMS shares this data with other payers to ensure proper claim submission to Medicare.  The COB collects data from a variety of sources, including:

  • IRS/SSA/CMS Claims Data Match – By law, the IRS, Social Security Administration (SSA) and CMS must share information regarding beneficiaries. Employers must complete the IRS/SSA/CMS Claims Data Match questionnaire for each GHP that Medicare eligible beneficiaries and their spouses choose.
  • Voluntary Data Sharing Agreements (VDSAs) – These agreements allow employers and CMS to exchange GHP enrollment information.
  • COB Agreement (COBA) Program – This program established a national standard contract between the BCRC and other health insurance organizations for the purpose of transmitting beneficiary eligibility data and Medicare paid claims data.
  • Section 111 Required Reporting Requirements – Under this law, GHPs, workers’ compensation, self-insurance, and no-fault insurance (collectively, non-group health plans, or NGHPs) must register as a Responsible Reporting Entity (RRE) and report certain information pertaining to each enrollee’s Medicare eligibility, as discussed in more detail below.
  • Other Data Exchanges – CMS has created data exchanges with other entities, such as Pharmaceutical Benefit Managers, State Pharmaceutical Assistance Programs, and other prescription drug payers for the purpose of educating these entities regarding COB processes and the MSP framework.

Through these databases, the COB coordinates efforts between CMS, primary payers, and providers to ensure that Medicare is billed properly.

This wide variety of reporting sources may be daunting for many providers and payers who are required to report. However, these  fears can be overcome by incorporating these tasks into the organization’s existing compliance program if the requirements for reporting are known. In the next blog post, we will be addressing compliance with conditional payment requirements provided by Medicare.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 42 USC § 1395y(b)(2)(A)(i); 42 CFR § 411.20.

[2] 42 USC § 1395y(b)(2)(A)(ii); 42 CFR § 411.20.

[3] 42 USC § 1395y(b)(2)(B); 42 CFR §§ 411.21 & 411.24.

[4] 42 USC § 1396a(a)(25); 42 CFR §§ 433.135-140.

[5] 42 USC § 1395y(b)(1); 26 USC § 5000(b)(1).

[6] 42 CFR § 411.20