Claim Team Perspectives on Medicare Secondary Payer

MARCH 23, 2023

Members of the claim management team play many vital roles in the handling of insurance claims.  This is especially true when it comes to Medicare Secondary Payer compliance.  Since the issuance of the Patel Memorandum in July 2001 and the addition of Section 111 Reporting requirements, their role has been essential to the resolution of claims promptly. This requires communication from their insureds, assistance from defense counsel, and the cooperation of injured parties and their attorneys.

Claim Perspectives

Claim handlers are essential in a claim regarding Medicare Secondary Payer compliance issues.  It requires the stakeholders in the claim to provide timely and accurate information.  While the claim handler may seem over-demanding, it is essential to consider what they may be asking for information and why it is critical to provide it on time.

Section 111 Reporting

Section 111 Reporting requirements originated in the Medicare, Medicaid, SCHIP Extension (MMSEA) Act of 2007.  Under the Act, Congress established various reporting requirements for Responsible Reporting Entities (RRE), loosely defined as insurance carriers and self-insured who handle claims.  These reporting requirements specified that RREs were to review claims quarterly and report instances where there was an Ongoing Responsible for Medical (ORM).  This reporting would continue until the settlement of the claim when there is a payment per a settlement, judgment, or award.  This is known as Total Payment Obligation to Claimant (TPOC).

The MMSEA initially provided a civil penalty to an RRE of $1,000 per day/claimant for failing to report to CMS the specified data correctly.  This was subsequently chanted under the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012, of a fine of up to $1,000 per day/claimant.  Notwithstanding the fact CMS has yet to issue a single penalty under the MMSEA, the insurance industry has quickly implemented the required regulatory program and ensured it is up to date.

The system does rely on others outside the RRE to assist in collecting data.  This includes many data points, often not on claim materials.  The result is claim handlers or attorneys representing their interest inquire about injured parties or their attorneys.  While most inquiries are welcome, some have spawned litigation.

Conditional Payments

Conditional payments are defined under 42 U.S.C. §1395y(b)(2)(A)(ii).  Under this statutory framework, Medicare is not allowed to make payments unless it is determined payment will not be made promptly.  Once Medicare makes a payment, it is conditioned on reimbursement when there is demonstrated responsibility under §1395y(b)(2)(B)(ii) of the Medicare Secondary Payer Act.

The resolution of conditional payments requires the assistance of all stakeholders.  Areas where attorneys can assist the claim handler in obtaining a correct statement of payments made by Medicare, include:

• Authorization:  Execution and return of all Medicare-related authorizations related to access and review with Medicare and their contractors;

• Claim Identification:  Specify the injuries as part of the claim.  Medicare needs specific ICD-10 codes reported to generate a conditional payment letter;

• Correspondence and Letters:  Providing copies to all parties of correspondence generated by Medicare and sent to Medicare.  These letters do not contain confidential or privileged information and ensure everyone knows the status of payments; and

• Coordination of Efforts:  Parties sometimes reach out to Medicare and provide information.  An example of this is the reporting a claim has been resolved.  This can trigger repayment requirements.  Everyone needs to be on the same page on these issues.

It is also important to remember that Medicare Advantage Plans have the same rights of recovery as Medicare Parts A and B.  Passage of the Provide Accurate Information Directly (PAID) Act and its implementation in 2021 have allowed stakeholders more significant access to this beneficiary information.

Medicare Set-Asides

A “Medicare Set-aside” is a term of art only found in Medicare-related policy – not in statute or regulation.  It is a tool used to consider Medicare’s future interests and prevent it from becoming the primary payer post-settlement.  It can also be used to protect the interests of the parties.

Confusion remains regarding Medicare Set-asides.  Common areas include:

• “Requirements” of including a Medicare Set-aside.  It is essential to not think of it as a “requirement” but as whether one is recommended to comply with the Act.

• Use of Medicare Set-asides in non-workers’ compensation claims.  The Medicare Secondary Payer Act applies to all personal injury cases – workers’ compensation, no-fault, and liability claims.

• Other considerations regarding Medicare Secondary Payer.  If a Medicare Set-aside should be used in workers’ compensation cases where it cannot be submitted for voluntary review and approval.  Remember that Medicare must be the secondary payer in all injury cases.  CMS policy cautions parties not to settle claims with impunity.

Insurance carriers often lead by working with a service provider to obtain a Medicare Set-aside allocation.  This is not the case in other personal injury claims.

Anatomy of a Medicare Set-Aside

There is no set form or format of Medicare Set-aside.  The main requirement is that the monies placed in the Set-aside are designed for future medical care for the injured party and used for Medicare-reimbursable items and services. 

The amount placed in a Medicare Set-aside starts with an allocation.  Parties in workers’ compensation claims can use the voluntary review and approval process subject to the parameters of the Workers’ Compensation Medicare Set-aside Reference Guide.  A typical allocation will include the following:

• Medicare Reimbursable Amounts:  This is the total amount of Medicare reimbursable items and services.  It will include medical care, surgery, physical therapy, prescription medications, and durable medical equipment.

• Non-Medicare Reimbursable Amounts:  Most allocations include a section for non-Medicare amounts.  These are items and services related to the injury but not covered by Medicare.  This amount can include items such as medical mileage.

• Administration of a Medicare Set-aside:  Medicare permits self and professional administration.  Regardless of who administrated the Set-aside, it must be placed into a separate interest-bearing account for the claimant/beneficiary. 

• Funding Tools:  Medicare Set-asides can be funded only via lump sum or structured settlements.  This term needs to be documented in the documents creating the account.

• Reversionary Clauses:  Every Medicare Set-aside should document what happens to funds in the account if the claimant/beneficiary dies before exhaustion.  This clause is a “must” and needs to be discussed at the time of settlement.

Avoid using boilerplate or forms when creating a Medicare Set-aside.   Always consult with a legal professional.  Precision in drafting is paramount.

Cooperation Means Everything

Getting cooperation is critical from the perspective of a claim handler.  When parties do not assist with reasonable requests, the result is a difficulty, delay, and unnecessary litigation.

•  Query Data Elements:  This includes the Social Security Number, Medicare Beneficiary Identifier (formerly known as HICN), full legal name, date of birth, and gender of a claimant is essential information.  Without this information, they cannot correctly report under Section 111.

• Tools:  Insurance carriers have tools to identify whether the claimant is a Medicare beneficiary.  Using these tools, they can assist everyone on the claim in knowing the next steps in Medicare Secondary Payer compliance.

• Medicare Advantage Plans:  Never forget about Medicare Advantage Plans.  These Plans are private insurance carriers who provide Medicare coverage for roughly 35% of Medicare beneficiaries – and the percentage continues to grow.  Never forget to check whether the claimant receives coverage under a Medicare Advantage Plan.

Disputed claims and litigation breed distrust.  Regardless of the state of a claim, it is critical to remain focused on the goal or ensure parties have the accurate information to comply with the Medicare Secondary Payer Act.

Conclusions

Effective Medicare Secondary Payer compliance requires teamwork.  This includes involving everyone working together and can be accomplished even when they work for their best interests.  When done correctly, the process will drive settlements and prevent needless litigation.

Special thanks to Shawn Kelderman of Society Insurance and Amber Worman of AK Worman & Associates for their help and insight on this article.