Claims compliance standards are getting stickier with the addition of the Medicare, Medicaid and SCHIP Extension Act.
Is the federal government intentionally trying to sabotage the prompt settlement of property and casualty (P&C) claims when the injured party is Medicare-entitled? Here are the facts:
- The Medicare Secondary Payer (MSP) law—embedded in the Omnibus Budget Reconciliation Act of 1980—was passed by Congress with the intent to protect Medicare as a secondary payer when a primary payer (workers’ compensation, liability and auto no-fault) exists.
- In December 2007, Congress passed the Medicare, Medicaid and SCHIP Extension Act (MMSEA) requiring quarterly P&C industry reporting to the federal government of claims involving Medicare-entitled people.
These laws not only protect Medicare from making unnecessary payments but, by identifying primary payers, allow Medicare to pursue its statutory right of recovery when it has made conditional payments that were a third party’s responsibility. In addition, Medicare’s interest is to be taken into consideration under the following circumstances: when settlements are being formulated that involve irrevocable closure of future medical benefits; when the injured party is Medicare-entitled at the time of resolution; and when the injured party has potential Medicare entitlement within 30 months of the date of settlement.
So what’s the beef?
Two Laws, One Giant Headache
Under the 1980 law, the methodology of protecting Medicare was a financial vehicle called a Medicare Set-Aside Allocation (MSA). MSA requires the primary payer to set aside a certain amount of funds at settlement in an account that is meant to protect Medicare from making any future medical payments related to the condition or injury for which the primary payer settled a claim.
The need for MSAs, some of which were to be submitted to the Centers for Medicare and Medicaid Services (CMS) for review of adequacy prior to settlement, added a whole new layer of costs on claims involving Medicare-entitled claimants and potentially Medicare-entitled beneficiaries. First, a “cottage industry” sprang up to provide MSAs to primary payers at an average cost of $2,500 of allocated expense per MSA. Second, the settlement of the claims was delayed while awaiting CMS review of the MSA amount. This resulted in workers’ compensation primary payers spending more on indemnity and medical benefits while they were waiting for CMS to respond on the acceptability of the dollar amount to be set aside to protect Medicare in the MSA at the time of resolution.
To further complicate matters, the Code of Federal Regulations (Title 42, Section 411.20) stipulates that the three primary payers in the P&C industry are workers’ compensation, liability and no-fault auto. Yet the CMS procedural memoranda dealt only with procedures for workers’ compensation claims.
