It’s important that those who work with personal injury settlements stay up to date on the various requirements of the Centers for Medicare & Medicaid Services (CMS). Therefore, we once again present our beginning-of-the-year summary of important updates and trends in Medicare Secondary Payer laws, processes, and procedures.
PAID Act Implemented
CMS fully implemented the PAID (Provide Accurate Information Directly) Act on December 11, 2021. (Our previous blog post describing the provisions of the PAID Act is available here.) Earlier in 2021, CMS updated the software used to access its query system. It allowed users to begin testing this new software in September 2021.
Now when the system is queried about whether a claimant is enrolled in Medicare, the results will indicate the person’s status under Parts A, B, C and D. Query results for enrollment in Parts C and D will include information going back as far as three years before the query. Results will also report up to 12 instances of coverage under each Part.
Previously, query results only indicated whether a claimant was enrolled in Parts A or B. That left in the dark those needing to know whether a claimant was enrolled in Parts C or D. This lack of transparency increased the risk that those who settle or pay personal injury claims to Medicare beneficiaries would later receive a demand for reimbursement from a Part C or Part D coverage provider. This additional enrollment information promises to significantly help primary payers in their ability to comply with reporting and reimbursement obligations.
Medicare Set Asides – Workers’ Compensation
Medicare Secondary Payer (MSP) law imposes obligations on those who settle or pay personal injury claims involving Medicare beneficiaries. These obligations fall into three broad categories: (1) report the settlement pursuant to Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007, (2) reimburse Medicare for conditional payments it has made, and (3) establish (when appropriate) a plan to protect the Medicare trust funds from having to pay for future injury-related medical care.
With respect to indemnifying for the cost of future medical care, CMS does not dictate the precise method parties must employ to protect the trust fund. Medicare set-asides (MSA) are one of the ways parties satisfy this obligation. Under an MSA, a portion of the settlement proceeds is segregated and earmarked specifically to pay the expected cost of the claimant’s future injury-related medical care. CMS will then not pay for this future care until the set-aside has been exhausted.
More than 20 years ago, CMS adopted a procedure where it reviews and approves set-aside plans prepared by parties to workers’ compensation cases. Once CMS approves a workers’ compensation set-aside plan, the litigants and insurance carriers involved in the case know the amount CMS will accept to satisfy this obligation. This certainty helps facilitate resolution of these types of claims.
CMS details this review/approval process in its Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide (which is available here). Of particular note in the just-released Version 3.5 is the newly added Section 4.3. This section recognizes that “a number of industry products exist” that are designed to establish and withhold an amount from settlement proceeds for the cost of future injury-related medical care, but these products do not submit these amounts for approval.
Section 4.3 strongly warns that CMS’ position is that it will require exhaustion of the entire net proceeds of a settlement (rather than the limited set-aside amount) if it has not approved a set-aside arrangement adopted by the parties. However, the reference guide also admits that CMS’ review process is recommended but voluntary, not mandatory. It will be interesting to see if parties push back against the CMS position on this point and continue to use set-asides that have not been submitted for approval.
Medicare Set Asides – Liability
Unlike workers’ compensation cases, CMS has not yet established procedures for approval of Medicare set-asides in liability cases (LMSA). Medicare beneficiaries and primary payers settling personal injury claims are obligated to not shift the cost of future injury-related medical care to the Medicare trust funds. However, CMS has not provided guidance on what procedures it would find acceptable to satisfy this obligation. Several times the industry has expected CMS to issue proposed rules governing this situation, but CMS has not yet done so.
In the fall of 2021, the U.S. Office of Information and Regulatory Affairs (OIRA) announced that in February 2022, CMS would issue a Notice of Proposed Rulemaking on the issue of future medical expenses. (Of note, the OIRA had issued similar updates multiple times from 2019 to 2021, but each time, the expected release date was pushed back.) The abstract in the OIRA announcement states that the “proposed rule would clarify existing Medicare Secondary Payer (MSP) obligations associated with future medical items services related to liability insurance (including self-insurance), no fault insurance, and worker’s compensation settlements, judgments, awards, or other payments.”
In addition to establishing rules in liability and no-fault cases, these proposed rules could impact the already-existing workers’ compensation set-aside process. Such a framework could be beneficial and provide much needed guidance to those trying to comply with MSP obligations when resolving liability and no-fault personal injury claims with Medicare beneficiaries.
Odds and Ends
- As is required annually, in December 2021 CMS announced minimum dollar reporting thresholds for 2022. These dollar thresholds will remain unchanged from 2021 and will stay at very low amounts. For physical-trauma-based injury claims, if all other criteria are met, liability insurance (including self-insurance), no fault, and workers’ compensation settlements, judgments, awards, or other payments greater than $750 must be reported. If the dollar amount is at or below $750, no reporting is required. As was true last year, there is no minimum dollar threshold for non-trauma-based injury claims. These include alleged ingestion-, implantation-, and exposure-related injuries. When all other criteria are met, these settlements must be reported, regardless of the dollar amount.
- On January 20, 2022, CMS issued the latest version of its MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting Non-Group Health Plan User Guide, Version 6.7. This version of the User Guide incorporates the query response requirements of the PAID Act described above. (This User guide is available here.)
- The Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007 authorizes CMS to impose civil money penalties (CMPs) if parties fail to properly report settlements required by MSP law. In February 2020, CMS issued proposed rules imposing CMPs for failing to report settlements that satisfy the reporting criteria. The public comment period for these proposed rules closed in April 2020. CMS has yet to issue its final rules governing the issue of when and how it will impose CMPs. The standardized three-year period for release of final rules from the date of publication of proposed rules expires in February 2023. However, CMS announced it will not delay publishing its final regulations until this expiration date if it can publish them sooner. When published, the final regulations hopefully will provide clear guidance to well-intentioned parties on how they can satisfy their reporting obligations and avoid CMPs.
- Primary payers should continue to be aware of increased efforts by Medicare Advantage and prescription drug coverage providers to recover conditional payments they make. These providers and their assignees continue to bring reimbursement suits nationwide against multiple entities for allegedly failing to accept primary payer responsibility when required. There is no reason to believe these secondary payers will discontinue this assertive trend in 2022. After all, the whole purpose of the PAID Act was to inform primary payers of the existence of these private Medicare coverage providers in order to foster reimbursement of legitimate secondary payer claims on a timely basis.