In what appears to be a trend lately, we are seeing more instances of cases where The Centers for Medicare and Medicaid Services (CMS) is referring older claims (often thought by the adjuster to have been closed long ago) to the United States Treasury for collection. Here are some tips for how to avoid having this happen, and for how to defend yourself once it does happen.
The Medicare Secondary Payer (MSP) statute (42 USC §1395y, et seq.) states that Medicare is secondary to other forms of insurance, including “Non-Group Health Plans” (NGHP), which include workers’ compensation, liability, and no-fault insurance plans or self-insured plans. When Medicare conditionally pays medical bills it believes are the responsibility of an NGHP, the statute requires CMS to seek reimbursement of its payments. CMS will open a claim file and send notice to the NGHP. If the NGHP does not respond within a certain time, CMS will refer the case to the Treasury to collect the amount claimed. The Treasury has the power to “offset” the debt owed, meaning it can grab all or part of any pending payment from the US Government to the insurer or self-insured employer in order to repay the amount claimed by CMS. CMS most often learns of the existence of a primary payer NGHP through the mandatory insurer reporting program under Section 111 of the MMSEA[i], but the primary payer may also be identified by the beneficiary at the time of settlement. But if there is no final settlement, and the insurer closes its claim and releases its reserves, the “closed” file may eventually detonate when the Treasury gets involved.
How does this happen? A typical scenario involves a medical-only case, or a case where the claimant abandons his case after medical recovery is achieved. No final settlement is offered, and after a period of time the claim file is closed by the adjuster. Sometime later, maybe years later, CMS gets wind of the case and searches its records for conditional payments it made that are believed to be related to the injury involved in the claim. A reimbursement demand notice is sent to the insurer, but the insurer does not respond, perhaps because no active claims handler was assigned to the closed file, perhaps because the insurer moved after the file was closed, perhaps because the insurer misapprehended its duty to respond, or perhaps just due to the insurer’s bad luck. A few months later, the insurer notices a payment it is expecting from a governmental entity has been cut short due to a deduction taken by the Treasury, but this deduction initially appears to have no immediate connection to Medicare or to an old claim. Eventually the deduction is traced back to the original claim and to the CMS reimbursement demand. The explosion has occurred, and the money is gone! What could have been done? What can be done?
Prevention of this typical scenario is as straightforward as establishing an internal “bomb squad” within the insurer’s organization. This squad of designated staff members can provide a double-check on Section 111 compliance, review of Open Debt reports, and performing immediate triage of any communications received from CMS on closed files. Each of these tasks protects the insurer or self-insured against the occurrence of ticking Treasury bombs.
We all know no case file is absolutely immune from a reimbursement claim by Medicare, but that does not mean that Medicare will necessarily prevail in the end. The first step of prevention is to maintain an accurate and timely Section 111 system. Most internal systems provide for reporting to CMS when a claim is accepted and the insurer has an “ongoing responsibility for medical” (ORM) or when the case completely settles. The complete settlement is reported to CMS in a Section 111 Total Payment Obligation to Claimant (TPOC) report. When ORM is terminated or a TPOC is established through settlement, the insurer can tick a box in its next Section 111 report to CMS, and this will normally prevent CMS from seeking any conditional payments made by it for services rendered after the date of settlement. At that point, the insurer can resolve any pre-settlement conditional payments prior to closing its file. Even when a case does not resolve with a final settlement document, the insurer can terminate ORM in its Section 111 report when something occurs that legally severs its liability. The most common example occurs when the statute of limitations expires on the underlying claim. Another frequent basis is the exhaustion of the insurance policy limits in a no-fault claim. Before “closing” a claim, the insurer’s bomb squad should establish a protocol to make sure the ORM issue was addressed and properly reported under Section 111. The squad should also follow-up on any pre-closure conditional payments issues to make sure they are resolved before the claim file is officially closed. All evidence that supports the proper closure of the claim and any previous resolutions of any Medicare issues should be maintained in case of future involvement with CMS. This documentation should include evidence and analysis of relevant defenses like the statute of limitations, policy limits expirations, or any defense—including causation, employment relationship or the like—which led to the closure of the claim. The squad should also make sure CMS has updated contact information to reach the insurer in case any future communications are needed. Lastly, the squad should have a protocol for monitoring when claimants reach Medicare age (usually 65), and to double-check that the Medicare issues were properly resolved prior to claim closure.
The latest tool for an insurer’s bomb squad is the new access that CMS allowed as of October 7, 2019, to the insurer’s “Open Debt Report.” This report lists all open conditional payments claims CMS has asserted against that insurer or self-insured. The squad should check these reports on a regular basis to see if any closed files are listed among conditional payments claims. If so, appropriate remedial action can be taken before one of these potential bombs goes off.
Lastly, the squad should establish a procedure for receiving and responding to any communications from CMS on closed files. This could be as simple as designating a person (and at least one back-up) to immediately investigate any notices involving closed files. Even if the file was properly closed and the evidence is clear that CMS is not entitled to reimbursement, a timely response provides the only method to forestall further action by CMS or the Treasury. This is the time when the prior documentation may be critical to establish that CMS has no right to reimbursement. Defusing these bombs is a matter of timing. Each missed CMS deadline ticks the clock closer to a Treasury problem.
We at Nyhan Bambrick Kinzie & Lowry are prepared to assist with developing your company’s bomb squad, as well as to assist with any conditional payments issues, and all other aspects of MSP compliance. Please contact a member of our MSP team with any questions you may have.
[i] Section 111 of Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), Public Law 110-173, is codified at 42 USC §1395y(b)7, et seq.