Case, Congressional Hearing May Shape Future of Medicare Secondary Payer Act

Workers' comp payers are getting a slight break thanks to a recent court ruling in a Medicare Secondary Payer case. At the same time, a congressional panel heard industry representatives testify in favor of a proposal many say will help streamline the process.

In Patricia Hara, et al. v. Kathleen Sebelius, a District Court judge issued an order that one expert says makes a much-needed correction on the amount of interest paid to the Centers for Medicare and Medicaid Services.

In the Final Demand Letters that Medicare issues seeking reimbursement of conditional payments made while a workers' comp case is pending, the agency has demanded interest payments if the entire amount was not paid within 60 days -- even on a disputed amount.

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"In other words, Medicare may have sent you a letter saying you owed $20,000, but the litigant believes he owes $10,000," said Jim Pocius, shareholder for Marshall, Dennehey, Warner, Coleman & Goggin in Philadelphia. "Medicare would begin charging interest on the full $20,000 if the total amount was not paid within 60 days."

Pocius said the interest on the full amount was required even if Medicare later agreed the amount should only be $10,000. "The procedure was to argue with Medicare and try to get the money back," he said. "That was a long and tedious process."

The judge essentially said Medicare cannot continue the practice. "In layman's terms, if you think you owe Medicare $10,000 and Medicare thinks it is $20,000, there's a disputed amount of $10,000," Pocius said. "If you pay Medicare $10,000, that stops the interest running and Medicare can't seek interest until it is an undisputed amount."

Pocius, who is the legal program chair for the National Workers' Compensation and Disability Conference® & Expo, cautions that the ruling does not say Medicare cannot sue plaintiffs' attorneys to recover funds under the Medicare Secondary Payer Act. "Attorneys and their beneficiaries cannot be sued only in the instance where there are disputed amounts in the payment request from Medicare," he said. "They still can be sued for undisputed amounts."

Congressional panel weighs in. The legislative branch of the federal government has also taken a recent interest in Medicare reimbursements. The House Committee on Energy and Commerce's Subcommittee on Oversight and Investigations held a hearing to "examine the state of the current system and whether it adequately protects the interests of Medicare beneficiaries, businesses, health plans, taxpayers, and the Medicare Trust Fund," according to an internal memo to committee members.

Specifically, the hearing was called to look at the system since mandatory reporting requirements were implemented in accordance with the Medicare, Medicaid, and SCHIP Extension Act of 2007. Workers' comp insurers began reporting claim settlements and other payments made to beneficiaries in January.

"For workers' comp cases, CMS has -- through informal agency memoranda -- created a voluntary procedure for parties to seek review and approval of the medical allocations in their proposed settlements. However, according to various stakeholders the process for approval is unclear, does not recognize requirements of settlements under state workers' comp statutes, and causes delays and inefficiency," according to the subcommittee memo. The hearing sought to address several questions, including:

Should CMS be authorized to provide settling parties with the amount of the parties' repayment amount to Medicare and future set-aside obligations prior to settlement?
What are the savings that could be obtained via changes to Medicare Secondary Payer regulations or policies at CMS?
Is CMS utilizing the most efficient methods to determine how much is owed Medicare and then communicating this with interested parties in a timely and effective manner?
How does CMS currently work with settling parties to ensure they consider Medicare's interests when calculating a settlement?
What other improvements can be made to the Medicare Secondary Payer system to ensure Medicare is fully reimbursed for conditional payments in a timely and least burdensome manner?

In testimony supporting the current policies, CMS Director of Financial Management Deborah Taylor said the reporting process has significantly increased the number of non-group health plan cases that have been identified and provided additional recoveries for the Medicare Trust Funds. She said any restrictions on those policies would adversely affect savings.

Several insurance industry representatives spoke of inefficiencies in the current system and the need for changes. "Without knowing what the conditional payment to Medicare will be, the parties cannot reach a decision about an appropriate settlement," said Scott Gilliam, vice president of the Cincinnati Insurance Companies and a member of the Medicare Advocacy Recovery Coalition. Gilliam and other witnesses said many of the challenges could be resolved through passage of H.R. 1063, The Strengthening Medicare and Repaying Taxpayers Act. The bill was introduced in March.

Some committee members suggested holding an additional hearing to continue monitoring the Medicare Secondary Payer program.

Read more at the WorkersComp Forum homepage.

July 25, 2011

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