Coordination Of Benefits and Medicare Secondary Payer

The provisions are known as the Medicare Secondary Payer (MSP) provisions and are found at section 1862(b) of the Social Security Act (the Act). These provisions prohibit Medicare from making payment if payment has been made or can reasonably be expected to be made by the following primary plans when certain conditions are satisfied: group health plans, workers’ compensation plans, liability insurance, or no-fault insurance. If payment has not been made or cannot be expected to be made promptly by a workers’ compensation plan, liability insurance, or no-fault insurance, Medicare may make a conditional payment, under some circumstances, subject to Medicare payment rules. Conditional payments are made subject to repayment when the primary plan makes payment. When Medicare is secondary payer, the order of payment is the reverse of what it is when Medicare is primary. The other payer pays first and Medicare pays second. CMS divides the implementation of this act into two pieces:

 

Mandatory Insurer Reporting -- avoiding cost to Medicare by providing information to claims processors about a beneficiary benefits:

 

 • Group Health Plan coverage,

 • Worker's compensation settlements / set-asides,

 • Liability insurance (pending law suits) and

 • No-fault coverage

 

These tasks are performed by the Coordination Of Benefits Contractor (COBC).  The COBC generates leads from provider intake information, employer data matching, plaintiff attorneys and MMSEA reporting.  To preclude Medicare from paying primary, the COBC posts information about primary insurers on the Common Working File (CWF).  The information in the CWF is referenced by Providers and Medicare Claims Processors as part of their task to make sure Medicare doesn't pay if another plan should pay primary.

 

Collecting this information from diverse sources and dealing with the inconsistencies has been source of frustration for the COBC.  For instance, changes in  a working (referred to as "working-aged") beneficiary's GHP coverage, retirement or departure have not been regularly reported leading to denied claims for the beneficiary and extra work for the insurance plan in defenses.

 

Directly collecting information about workers’ compensation plan’s “Ongoing Responsibility for Medicals” or ORM, which is similar to a GHP’s responsibility to pay for medicals, is new and the CRC processes (recovery) associated with them are new too.

 

The COBC has historically learned of most Non-GHP cases through Medicare Secondary Payer Questionnaires, attorneys reporting their intent to litigate on behalf of a beneficiary and some medical review and allocator companies that regularly report workers' compensation cases.

 

Requiring all plans to report under Mandatory Insurer reporting on a regular basis should significantly improve the situation.

 

Medicare Secondary Payer Recovery -- recovering "over payments" or “conditional payments” made by Medicare

 

Payments that should have been paid by an employer's Group Health Plan (GHP)

Conditional payments made to a provider, because the beneficiary was incapacitated or the GHP denied coverage

 

Payments that should have been paid by no-fault insurance

Conditional payments made to a beneficiary pending the result of a liability or worker's compensation settlement

 

CMS seeks recovery for money they spent on medical claims that rightly should have been paid by another entity.  These claims go by various names according to the industry dealing with them.   Medicare tends to call them "over payments," plaintiff attorneys call them "liens" or "reimbursement claims" and in statute they are "conditional payments."  By whichever term they are referred to, it means the collection of individual Medicare claims that Medicare deems should have been paid by another entity as documented in a Conditional Payment Letter sent to a beneficiary, the Conditional Payment Notice sent to an insurer and formally in the Demand Letter.  With the advent of Mandatory Insurer Reporting, a large number of these conditional payments will be stopped and there will be a reduced need for MSP Recovery; however, no data collection system is perfect and there are situations where there is little chance of avoiding the necessity to pay conditionally, particularly in liability settlements.

 

Recovering payments that should have been made by a Group Health Plan (GHP)

 

Based on the information gathered by the COBC, Medicare's computer systems compare their records of who has group health insurance coverage and identifies payments where Medicare mistakenly paid primary.  Medicare sends Demand letters (or for large volume recoveries “Demand Packages”) containing the Medicare claims to the Primary Plan with a summary copy to the employer.  It is important to note that Medicare holds the employer, not the Plan, responsible for payment of the demand.  Insurers process the demand package as part of their service to the employer.

 

Recovering payments that should have been made by a Workers’ Compensation Plan or No-Fault Insurer

 

Workers’ Compensation Plans and No-Fault insurers have what Medicare calls “Ongoing Responsibility for Medicals” or ORM.  When the COBC discovers that a No-Fault insurer or a workers’ compensation plan should pay primary, either through reporting or a Medicare Secondary Payer Questionnaire, the COBC adds a record to the CWF to indicate that claims processors should deny Medicare claims related to that incident.  Providers have to bill either the No-Fault insurance or the Workers’ Compensation carrier for for payment.  The COBC indicates "relatedness" by adding appropriate ICD codes to the CWF.  The record remains on the CWF as an "on-going" obligation and claims are denied until the benefits have exhausted as evidenced by reporting exhaustion via Section 111 reporting or, historically, sending an exhaust letter sent to the MSPRC.  The MSPRC monitors these cases to determine if they are being correctly denied while benefits exist and will check the case after exhaust to determine if Medicare mistakenly paid claims.  If Medicare made conditional payments before the benefits exhaust, Medicare will seek recovery from the insurer.  If the benefits have exhausted and all of the payments were made appropriately, then Medicare does not seek to recover their conditional payments.  If the benefits have exhausted, but there was a settlement made to the beneficiary that was not used by the beneficiary in the context of recovering from his injury (e.g. he bought a new television), then Medicare may pursue recovery from the beneficiary.  For No-Fault insurers, Medicare's recovery efforts from the insurer in these situations can not exceed the no-fault insurance limit.   For example:

 

A beneficiary with a $10,000 no-fault policy limit was injured in a car accident and Medicare conditionally paid $2,000 for first hospital visit.  Subsequently, before Medicare sought reimbursement from the insurance carrier, the $10,000 was properly exhausted on related medical services.  Medicare will not seek recovery.

 

A beneficiary with an unlimited no-fault policy limit was injured in car accident and Medicare conditionally paid $2,000 for the first hospital visit.  Medicare will seek recovery for the $2,000 in claims and any subsequent claims related to the incident that are mistakenly billed to Medicare.

 

A beneficiary with an unlimited no-fault policy limit settles with the insurer for a lump sum.  Medicare may seek reimbursement of any conditional payments before the settlement from the insurer and from the beneficiary after the settlement.

 

The insurers' Mandatory Insurer Report will alert the COBC to the existence of the claim against their No-Fault plan  and the ORM data will aid Medicare in any recovery efforts.

 

Remember that CMS follows the money.  If the provider was paid by the insurer and Medicare, Medicare will recover the payment from the provider (Duplicate Primary Payment).  If the insurer settled with the beneficiary, Medicare will recover from the beneficiary.  If the beneficiary does not pay, they are subject to referral to Treasury for collections.

 

If the workers’ compensation or no-fault benefits have not been properly exhausted, Medicare will seek to recover from the insurer before seeking to recover from the beneficiary with an informal demand letter.  This informal demand process of seeking recovery from the no-fault insurer does not follow the standard MSP recovery process (e.g., accrue interest and subsequent referral to Treasury for collections), but a recalcitrant insurer may be pursued by Medicare through the courts.

 

Recovering from workers' compensation settlement, judgement or award

 

Prior to settlement, the COBC follows the same process as above for adding a record to the CWF to deny claims and encourage providers to bill workers' compensation and seek recovery of any mistaken payments.  Medicare will seek recovery from a lump sum settlement that does not have provisions for future medical costs and the beneficiary is explicitly liable for reimbursing Medicare for the conditional payments.  If an award includes provisions for future medical costs and exceeds $25,000, the beneficiary may request that a structured settlement (set-aside) be established.  If the beneficiary does not want a structured settlement, then the claims related to the incident are denied until the workers' compensation settlement is exhausted and Medicare becomes primary.

 

If the beneficiary, or the courts, decide that a structured settlement must be established, the process is the same, except that the beneficiary reports annual exhaustion of the annuity funds to the MSPRC.  Once the annual allotment has exhausted, providers can bill Medicare as the primary insurer. There is no recovery process related to workers' compensation future medicals as Medicare claims are regularly denied until exhaustion, although Medicare may pursue individuals that use the set-aside for other than related medical costs in the courts.

 

Reporting and Recovering from a liability settlement, judgment or award

 

Medicare has asserted in Federal Court that insurers have always been required by HHS regulations to report liability settlements, but prior to the passage of MMSEA Section 111 Mandatory Insurer Reporting the COBC learned of a pending liability suit from a Medicare Secondary Payer Questionnaire or directly from a plaintiff attorney.

 

Plaintiff attorneys are required to report a pending lawsuit and that is to the advantage of the attorney as he will receive an interim conditional payment letter that he can take forward as part of the litigation for special damages.  If the attorney ignores this step, in addition to civil penalties for not reporting, he may open himself up to a malpractice suit on behalf of the surprised beneficiary when Medicare pursues recovery from the beneficiary.  Remember, insurers and self-insured are not required to report pending settlement: they report the outcome of the settlement to Medicare.

 

Medicare, through the MSP recovery process seeks reimbursement from a liability settlement from the beneficiary, not the insurer, self-insured or the beneficiary's attorney.  A liability insurer's decision to settle a claim is their business decision (e.g., avoid a potential lawsuit) or as the result of a legal action, they have no a priori obligation to pay.  Injured parties and / or their plaintiff attorneys pursue payment, judgment or award -- not Medicare.  In contrast, Group Health Plans, No-Fault insurers and Workers’ Compensation plans have an a priori obligation to pay and much of the statute and provisions were conceived to enforce that obligation; and even then it is very important to note that Medicare holds employer, not their GHP insurers, liable for accrued interest and employers are the ones that are referred to Treasury for collections.  Could Medicare pursue damages from a liability insurer if they are unable to recover from the beneficiary -- yes, they subrogate the beneficiary's right to recovery, but they pursue such cases through the civil courts.  Again, beneficiaries are held liable and are referred to Treasury for collections without Medicare turning to the insurers for damages.

 

Read -- Protecting Medicare's Interest

 

Summary

 

In summary, the new MSP processes do not include pursuing insurers or self-insured for conditional payments arising from liability suits.  Like a workers' compensation lump sum settlement, the beneficiary is held liable.  They do not explicitly require that insurers and self-insured protect Medicare’s interest, but it is probably in the best interest of the insurers and Medicare if the insurers take some steps to alert the beneficiary to any outstanding over payments.

 

Direct recovery from the liability insurer and double damages are allow by the statute and may be applied through the courts in unusual circumstances -- they are NOT part of the normal MSP processes.