Question: How much does the Medicare Secondary Payer program really impact the Medicare program? Does it really make it more likely that Medicare will be around when I am old enough to qualify for this entitlement program?
CMS’ most recent Financial Report claimed the Medicare Secondary Payer (MSP) program saved the Medicare Trust Funds approximately $8.5 billion in fiscal year (FY) 2017. While the FY 2017 annual report has already been published, the FY 2017 Medicare and Medicaid Integrity report is not yet available. Hence, many of the figures below should be used as “ballpark” figures rather than actual FY 2017 savings to the Medicare program.
The Medicare Secondary Payer program has three main components: Mandatory insurer (Section 111) reporting; conditional payment recovery; and Medicare Set-Asides. Section 111 insurer reporting ensures Medicare is able to identify situations where another, primary payer exists. Medicare denies payments for medical bills related to those claims, hence translating into pure savings to the Medicare program. Conditional payment recovery involves identification of payments Medicare already made and seeking reimbursement for said payments. Medicare Set-Asides (MSAs) are financial agreements where a portion of a settlement is allocated for future medical expenses. Theoretically, once such settlement funds are allocated, Medicare should deny payment until said funds are exhausted. Formal MSA approval by CMS is offered for workers’ compensation claims meeting certain thresholds, and CMS only tracks savings from CMS-approved MSAs.
Conditional Payments: Section 1893(h) of the Social Security Act allows Medicare to enter into contracts with recovery audit contractors (RAC Auditors) to identify and recover conditional payments. Subsection (8) also requires CMS to provide Congress with annual reports on the comparative performance of such contractors and savings to the program. In FY 2017, the Commercial Repayment Center (CRC) identified $560.06 million in mistaken payments and recaptured $160.78 million of those payments. After program expenses and auditor fees, Medicare netted $131.78 million in recovery in FY 2017 from the conditional payment recovery program. This is an increase from the $88.35 million returned in FY 2016. It should be noted that the CRC handled both group health plan and non-group health plan cases with ongoing responsibility for medical payments during that year, so these numbers include all of those collections.
As of February 12, 2018, the CRC contract is currently held by Performant Recovery, Inc. Therefore, the above numbers are reflective of the recoveries of the former CRC contractor. Our experience is that Performant’s efforts have been more efficient, so fiscal year 2018’s recovery figures should hopefully improve.
Medicare Set-Asides: As mentioned above, the MSP program saved the Medicare Trust Funds approximately $8.5 billion in FY 2017. While the Social Security Act mandates that CMS report the performance of its conditional payment recovery contractors to Congress, there is no similar requirement for either Medicare Set-Asides or Section 111 reporting. The last data on the cost-avoidant savings stemming from MSAs which I was able to find came from CMS’ Annual Financial Report from FY 2012, when CMS approved workers’ compensation MSA amounts totaling approximately $1.52 billion.
Section 111 Reporting/Denial of Payment: Just as with Medicare Set-Asides, the last data I was able to find on Medicare savings from Section 111 reporting came from CMS’ Annual Financial Report from FY 2012. In that year, CMS reported cost-avoidant savings from Section 111 reporting at over $7 billion per year in FY 2011 and FY 2012, up from $6.5 billion in FY 2007.
In 2017, Medicare benefit payments totaled $702 billion, with net spending of $591 billion. This constitutes 15% of the Federal budget. The $8.5 million in savings offered by the MSP program represent only a small part, less than 1.5%, of what Medicare spends in a year. While those of us in injury-related litigation jobs find the MSP program to be complex, onerous and sometimes poorly executed, it does tack on about 6 days to Medicare’s liquidity, but is only a drop in the bucket. With Medicare Part A insolvency predicted for the year 2026, those 6 days per year will not do much to keep Medicare around for most of us.
With that noted, and not to leave you on a down note, Medicare is constantly making changes to improve the liquidity of the Medicare Trust Funds. With greater enrollment in Medicare Advantage Plans, coverage changes, introduction of the quality payment program, actions to reduce identity theft, and improved MSP actions likely on the horizon, Medicare (or its equivalent) will almost certainly be around longer than 2026. We may see changes from the Division of MSP Program Operations at CMS in the near future to improve the solvency of the Funds, including: tracking of MSAs which were not approved by CMS, a liability MSA review process, improved efficiencies in data exchange, and more.
 CMS Financial Report FY 2017, published November 3, 2017, publication number 909418, inventory control number 952017, page 18. Found at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CFOReport/Downloads/2017_CMS_Financial_Report.pdf
Department of Health and Human Services Agency Financial Report, FY 2017, page 220. Found at: https://www.hhs.gov/sites/default/files/fy-2017-hhs-agency-financial-report.pdf
 Id. at 223.
 The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2017, Report to Congress, March, 2018, at 2. Found at: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Downloads/The-Medicare-Secondary-Payer-Commercial-Repayment-Center-in-Fiscal-Year-2017.pdf
 CMS Financial report, FY 2012, page 23. Found at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CFOReport/Downloads/2012_CMS_Financial_Report.pdf
 KFF analysis of federal spending from the Congressional Budget Office, found at https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/