Segal McCambridge Legal Blog

In a recent Alert, the Centers for Medicare and Medicaid Services posted new mandatory minimum Total Payment Obligation to Claimant reporting thresholds as applicable through January 2015. What sets this June 20, 2012 Alert apart from previous directives is that the minimum TPOC reporting thresholds previously decreased to no threshold – such that all liability insurance (and self-insurance) personal injury settlements, judgments, awards and other payments to a Medicare beneficiary would require reporting in 2015. The June 20 Alert gradually decreases the minimum TPOC amount to $300. Thus for cases with a TPOC date on or after 10/1/2014, if the TPOC is over $300, the settlement will need to be reported in the first quarter of 2015. The current TPOC minimum threshold requires reporting where the settlement, judgment, award or other payment exceeds $50,000. This amount decreases over the upcoming months as set forth in the Alert.

With this Alert, the $300 threshold previously implemented for certain liability insurance (and self insurance) recovery cases, that had excluded exposure, ingestion and inhalation cases, will now apply to all liability insurance and self insurance recovery cases. Click here to read the Alert.

Similar Alerts were issued regarding Workers’ Compensation and are available here.

In June 19′s NGHP Town Hall Teleconference, the CMS stated that Alerts were forthcoming and a new MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide ought to issue before the 4th of July holiday.

As announced on its site, the CMS will roll out a service in July 2012 called “The Medicare Secondary Payer Recovery Portal” to allow attorneys, insurers, beneficiaries, and TPAs online access to case information. Per the CMS, the Portal will be “[a] new online Self-Service Tool to help manage your Medicare recovery case.”

The CMS provided the following information on the Portal:

The Centers for Medicare & Medicaid Services (CMS) is in the process of implementing a new web-based tool designed to assist in and accelerate the resolution of Liability Insurance, No-Fault Insurance, and Workers’ Compensation Medicare recovery cases. The new tool is called, The Medicare Secondary Payer Recovery Portal (MSPRP).

The MSPRP will give users (attorneys, insurers, beneficiaries, and TPAs) the ability to access and update certain case specific information online. Activities that currently require written communication or telephone calls to the Medicare Secondary Payer Recovery Contractor will soon be able to be done through the portal.

The MSPRP will allow users the ability to electronically perform the following activities:

• Submit Proof of Representation or Consent to Release documentation – Instead of mailing in an authorization, users will be able to upload authorizations through the portal.
• Request conditional payment information – Requesting an updated conditional payment amount or a copy of a current conditional payment letter will be as simple as clicking a few buttons.
• Dispute claims included in a conditional payment letter - Users will be able to view the claims listed on the conditional payment letter and dispute unrelated claims online.
• Submit case settlement information – Users will be able to input settlement information online and upload a copy of the settlement documentation through the portal.

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Since December 5, 1980, Medicare has been a secondary payer, meaning that if a Medicare recipient has another source of funds for medical care, that source must pay first. Thus, in personal injury actions where an injured plaintiff whose related treatment was paid for by Medicare, Medicare must be reimbursed out of funds from a settlement, judgment or other award.  Medicare has just implemented a $300 settlement threshold for certain Liability Insurance cases.  For cases meeting the below criteria, where the lump sum settlement payment was $300 or less, Medicare will not seek to recover from the settlement, judgment or award.  This limit to recovery does not apply to exposure cases, such as asbestos-related disease cases, nor does it apply to cases where an insurer is paying on-going medical bills. The criteria established by MSPRC is (quoting from  http://www.msprc.info/index.cfm?content=toolkitsalert):

• The beneficiary’s settlement, judgment, award or other payment claims/releases a physical trauma-based incident/injury/accident/illness. (This does not include alleged ingestion, implantation or exposure-based incident/injury/accident/illness).
• The beneficiary obtains a liability insurance (including self- insurance) settlement, judgment, award, or other payment for a Total Payment Obligation to Claimant (TPOC) of $300 or less.
• There are no multiple settlements, judgments, awards or other payments for the same underlying claim which total more than $300.
• A demand [letter from MSPRC] has not been issued.

Currently, reporting requirements under the Medicare Secondary Payer (MSP) Act require claims resolved on or after October 1, 2011 for over $5,000 to be reported to the Centers for Medicare and Medicaid Services (CMS) starting January 1, 2012. In an effort to analyze the impact of the threshold on both funds recovered and costs of compliance, RAND looked at data from auto injuries and medical malpractice claims in a recently published Occasional Paper, “Recovery Under the Medicare Secondary Payer Act: Impact of Reporting Thresholds.” RAND authors Eric Helland and Fred Kipperman concluded that maintaining a reporting threshold for cases resolved, such as $5,000, will have a minimal impact on revenue and significantly relieve reporting burdens. Using auto accidents as an example, and  assuming there is no reimbursement to Medicare from recoveries on claims under the threshold, “retaining the $5,000 reporting threshold would reduce recoveries by 2.4 percent, or $24 million, while reducing the number of claims that must be reported by 43 percent.” As many insurers have implemented procedures to address conditional payments on every claim involving a Medicare recipient, regardless of the reporting threshold, it is possible this reduction in recovery will be even less, with great savings to the insurance industry. As costs are often passed on to consumers, many may benefit should CMS maintain a $5,000 reporting threshold.
The RAND paper may be accessed at http://www.rand.org/pubs/occasional_papers/OP332.html

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In Wilson v. State Farm, a ruling made June 14, 2011 in the USDC, WD KY, the court found an insurer did not act in bad faith in its refusal to pay a settlement while Medicare as Secondary Payer issues remain unresolved.    In summary, a settlement agreement was reached, the defendant wanted to resolve Medicare liens before paying the plaintiff and plaintiff's counsel refused to cooperate and would not let State Farm talk to Medicare. Instead he "asked State Farm to deposit the full policy limits in an escrow account from which the Medicare lien would be paid. Plaintiff agreed “to hold State Farm . . . harmless from any claim by Medicare.” Medicare was not involved in nor bound by this agreement. As an alternative, State Farm suggested including Medicare as a payee on the settlement check. Plaintiff rejected this request. Finally, State Farm decided to await Medicare’s determination of the value of its lien and then issue separate checks to Medicare and Plaintiff."

Plaintiff filed an action claiming "to delay payment of the $50,000 more than thirty days merely to protect Defendant from later liability to Medicare" was bad faith. Plaintiff ad a separate count under a KY statute that would allow for 12 percent interest and reasonable attorneys fees where an insurer failed to settle a claim without reasonable foundation. While the bad faith action was pending, State Farm learned the lien amount and paid the plaintiff and Medicare.  

The court found that " to comply with federal law and to protect its own legitimate interest against overpayment is reasonable and certainly is not in bad faith. Defendant did not delay payment in order to pay less or harass Plaintiff. Motorists Mut. Ins. Co., 996 S.W.2d at 452-453 (stating that “there must be proof or evidence supporting a reasonable inference that the purpose of the delay was to extort a more favorable settlement or to deceive the insured with respect to the applicable coverage”). While it may serve Defendant’s self interest to comply with federal law, such action was not bad faith, especially when Plaintiff apparently refused to cooperate with Defendant’s attempts to pay the claim more quickly."

The court also found that the delay was based on a " ' reasonable  foundation' " when the delay in payment of the settlement was to seek "assurances concerning the amount and payment of the lien."

This is a great ruling for companies who are struggling with resolving Medicare issues on settled cases, working under threat of suit for sanctions.

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