Medicare Secondary Payer

Penalties Set to Arrive in 2020

By: Heather Sanderson, chief legal officer, Franco Signor LLC

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) imposed mandatory reporting requirements on liability insurance (including self-insurance), no-fault insurance, or workers’ compensation, collectively referred to as Non-Group Health Plan (NGHP) or NGHP insurance who are responsible to pay settlements, judgments, awards or other payment obligations to Medicare beneficiaries.

(Note: Section 111 of the MMSEA is sometimes referred to as “Section 111”. The provisions for Liability Insurance, No-Fault Insurance, and Workers’ Compensation can be found at 42 U.S.C. 1395y(b)(8). An organization that must report under Section 111 is referred to as a Responsible Reporting Entity (RRE).)

The Office of Management and Budget (OMB) recently posted on its website about a forthcoming Notice of Proposed Rulemaking (NPRM) on Civil Monetary Penalties (CMPs) and Medicare Secondary Payer Requirements which intend to set out parameters around the amount and criteria in which CMPs would be imposed upon RREs for noncompliance with MSP Reporting requirements. The intended release date for issuance of the NPRM was October 2019, and although this date has passed, the industry expects that the NPRM will be released by the end of calendar year 2019, or early 2020.

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The industry has been waiting for this NPRM because under the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act), CMS was required to establish criteria and practices in which CMPs would be imposed under the Act. Through the SMART Act, specifically Section 42 USC 1395y(b)(8), the imposition of CMPs of $1000 per day per claim for noncompliant RREs was modified to provide that such CMPs would be “up to $1000 each day of noncompliance with respect to each claimant.”

In other words, the SMART Act allowed for CMPs to be discretionary rather than mandatory and capped penalties at $1000 per day per claim. To set parameters around CMS’ discretion for imposing a range of penalties CMS must develop safe harbors and standards for RREs to determine when CMPs should be issued and the monetary amount of such CMP. Back in 2013, CMS issued an Advanced Notice of Proposed Rulemaking (ANPRM) regarding these safe harbors, but for the past five years has taken no further regulatory action until now.

It is anticipated that the NPRM will provide for safe harbors for RREs which can evidence good faith efforts to report or report properly. However, in scenarios where RREs have failed to either register as an RRE or report reportable claims, or scenarios in which there is improper termination of Ongoing Responsibility for Medical (ORM), it is anticipated that the RRE will likely be subject to CMPs. There is no indication at this time whether the CMPs will be issued retroactively versus prospectively.

The NPRM is going to require a great deal of consideration by the industry and by CMS to determine reasonable standards for penalty scenarios. There are a large number of variables for an RRE to successfully report: cooperation by the injured party, a successful query result with CMS, and then the RRE has to successfully populate 164 data fields regarding the claim in its claim input file to CMS.

Essentially, the burden upon the RRE is great, and CMS should consider all of these factors before sanctioning an RRE with a CMP. However, as the standards for issuing Section 111 CMPs are unknown at this time, RREs should take proactive steps now to effectuate compliance with Section 111 Reporting, before CMPs are issued.