News + Events
Is The Sky Really Falling? – Preparing For And Understanding The New Medicare Reporting Requirements
March 31, 2009
You have undoubtedly heard about the new Medicare reporting requirements that will go into effect on July 1, 2009. If you are like most of us, however, you haven’t received a good explanation of how the regulations will work, and more importantly, how they affect you and your company. The purpose of this alert is to provide a general overview of the new reporting requirements mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (the “Act”).
A. Medicare – The Basics
Medicare is a federally funded healthcare, hospitalization, and prescription drug program for qualified beneficiaries. It covers not only the elderly, but also certain beneficiaries who are disabled or diagnosed with specifically enumerated medical conditions. Where an insurer has an obligation to pay for a beneficiary’s medical expenses, Medicare’s obligation becomes secondary to that of the insurer. Thus Medicare is a secondary payer to liability insurers (including self-insurers), no-fault insurers, workers’ compensation plans, and group health plans. These entities, also known as Responsible Reporting Entities (“RREs”), bear the primary responsibility for paying a Medicare eligible beneficiary’s medical expenses as a result of the terms of a policy, a settlement, or a verdict for a claimant in a tort suit.
B. Missed Opportunities for Medicare
Since the inception of the primary payer/secondary payer distinction in the 1980s, all primary payers under the Medicare system had an implicit obligation to identify Medicare eligible claimants and report those claimants and the presence of alternative insurance to the Center for Medicare and Medicaid Services (“CMS”). Despite the implicit obligation, however, CMS was not being notified of settlements involving Medicare eligible claimants or covered individuals. The practical effect was an overburdened CMS paying millions of Medicare dollars for medical expenses that Insurers were legally obligated to pay. CMS first sought to step up insurers’ compliance with reporting obligations in workers compensation cases, but CMS was still unable to track all of those instances in which Medicare was legally required to be reimbursed for medical expenses. As a result, CMS sought to explicitly put the burden of identifying Medicare-eligible claimants and covered individuals on primary payers, thereby permitting CMS to more aggressively assert its secondary payer status.
C.Shifting the Burden – Mandatory Reporting Requirements
The new reporting requirements under the Act are designed to lighten the burden on CMS of identifying Medicare-eligible claimants and covered individuals, permitting CMS to more aggressively protect Medicare’s interests by enforcing the responsibility of primary payers. The Act imposes an explicit obligation on RREs to alert Medicare of all instances in which Medicare has secondary payer status. RREs are required to implement internal policies that will successfully identify Medicare eligible claimants or covered individuals and report the identity of those persons and their claim or insurance coverage to CMS. (This requirement went into effect on January 1, 2009, for group health plans.) Reporting will occur via an online reporting system with CMS, and RREs are required to sign up and test their reporting practices later this spring. The failure to implement policies and report Medicare eligible claimants and covered individuals carries a penalty of $1,000 for each day of noncompliance for each individual claimant. The duty to report does not, however, extend the 60-day requirement to reimburse Medicare for medical payments it has made for a claimant on a conditional basis as the secondary payer.
Not only do the new requirements signal a desire by CMS to seek repayment of conditional payments already made by Medicare as the secondary payer, but commentators also believe they signal an increased desire to require set-asides for the payment of future medical expenses for claimants and covered individuals. The failure to pay for past medical expenses or set aside sufficient funds for future medical expenses can result in the Insureds being liable, counsel being liable, covered individuals being liable, or even the denial of coverage to Medicare eligible individuals.
D. So What Do These Regulations Mean for You?
Any RRE must develop and implement internal policies and procedures to ensure compliance with the new reporting requirements. Those procedures must determine the Medicare eligibility status of every claimant and must report claims or coverage by a group health policy to CMS at the time intervals designated by CMS. Because most companies have already developed reporting policies in workers’ compensation cases, they simply need to formalize and expand those policies to include group health plans, liability insurance (including self-insurance), and no-fault insurance as well. The sooner a Medicare eligible claimant or covered individual can be identified by an Insurer, the easier it will be to coordinate with CMS and guarantee that Medicare’s interests are protected in the settlement—thereby relieving the Insurer of any liability to Medicare.