The Medicare Secondary Payer Act and Section 111 of the Medicare, Medicaid, SCHIP Extension Act of 2007: Implications for Claim Management and Resolution for Liability Insurance Plans

Article excerpt

IN THE UNITED STATES, Medicare, along with other government-sponsored health benefit plans including Medicaid and SCHIP (State Children's Health Insurance Program), is a stabilizing giant in public health intervention. The United States Department of Health and Human Services (DHHS) and its operating division, the Centers for Medicare and Medicaid Services (CMS) together operate one of the largest health care businesses in the world. Medicare, funded entirely by the United States government, provides benefits to persons over 65 years of age, persons with end stage renal disease, and persons receiving Social Security Disability for at least twenty four (24) months] Medicaid and SCHIP are needs-based programs funded through both state and federal resources. (2)

One in every four Americans receives benefits from these programs, and the populations served are those considered most vulnerable due to age, socioeconomic status, underlying health conditions, and other immutable factors. (3) Medicare, Medicaid, and SCHIP spending exceeded that of the Department of Defense in 2009, despite the country being in two (2) wars and engaged in numerous other defense-related missions. (4) Because of the programs' suprainflationary cost increases, calls to action for health care expenditure cost containment and control have been made often since these programs were established. (5) Fiscal responsibility is generally recognized as a necessity if these programs are to survive.

In 1980, Congress reversed twenty-five (25) years of uncontrolled payment of health care benefit claims through passage of the Medicare Secondary Payer Act (MSP). (6) The MSP declares that Medicare is the secondary payer to other available payment sources for healthcare-related costs arising out of a particular triggering event (qualifying) event. The MSP provides that Medicare is not obligated to pay where there exists in place, for the benefit of the individual Medicare participant, another payment source. Medicare beneficiaries, beneficiaries' attorneys, and alternative payment source plans (including, as discussed in greater detail below, liability insurers, self-insurance plans, employer-based group health plans, and workers' compensation plans (private or state-funded (7))) are all subject to the MSP's mandates.

MSP recovery efforts by CMS have been robust. The DHHS estimates that in the first eleven (11) months of 2009, alone, MSP enforcement saved the Medicare trust approximately $6.24 billion dollars. (8) However, $6.24 billion dollars is miniscule in comparison to the program, representing a mere 1.2% of Medicare's 2009 total benefits payments. (9)

From inception and until 2007, CMS' MSP recovery efforts were through a framework designed around trailing indicators. CMS relied upon published mandates providing that notice and repayment obligations be satisfied by beneficiaries within sixty (60) days (the "60-day rule") of receipt of a settlement or resolution payment. Beneficiaries and their attorneys regularly signed settlement releases affirming these repayment obligations had been or would be satisfied within the 60-day rule requirement. Insurers and payer sources had no separate obligation to report payments to CMS.

In 2007, Congress passed Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (MMSEA), changing this paradigm by imposing an obligatory, leading indicator framework system upon primary payer sources. (10) MMSEA mandatory reporting is anticipated to result in significant costs savings for the government, both in procurement (collection) and administrative (clerical) related expenses. (11) The MMSEA accomplishes these savings by shifting the onerous burden to primary payers to timely report payments when made to beneficiaries and/or their counsel. Failure to timely report payments exposes primary payers to substantial noncompliance penalties ($1,000 a day) if there is a failure to report either single (lump sum) payments or ongoing (ongoing medical) payment agreements, as well as to MSP recovery action, which allows for double damages. …