CMS Retains its $750 "Low Dollar" Threshold for 2021

The Centers for Medicare and Medicaid Services (CMS) has released its 2021 low dollar threshold via a new alert. CMS is required to publish an annual low dollar threshold amount according to Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012. In general, under this section, CMS is required to publish an annual single threshold amount below which Section 111 reporting and conditional payment recovery is inapplicable for certain settlements, judgments, awards, or other payments, along with supporting information on how CMS calculated this threshold. In this new alert, CMS announced that it is retaining its current $750 low dollar threshold in 2021 as more fully described below.

CMS’s $750 low dollar threshold

CMS’s alert, entitled 2021 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards or Other Payments, outlines the applicability, criteria, and limitations of its “low dollar” threshold as follows:

Beginning January 1, 2021, the threshold for physical trauma-based liability insurance settlements will remain at $750. CMS will maintain the $750 threshold for no-fault insurance and workers’ compensation settlements, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibility for medicals.

This means that entities are not required to report, and CMS will not seek recovery on settlements, as outlined above. Please note that the liability insurance (including self-insurance) threshold does not apply to settlements for alleged ingestion, implantation, or exposure cases.

CMS’s calculation/methodology

In conjunction with this new alert, CMS released a separate computation breakdown document outlining how it arrived at its decision to keep the low dollar threshold at $750 for 2021.

For those interested in taking a deeper dive into CMS’s methodology, CMS states as follows as part of its computation breakdown:

CMS outlines its calculation analysis as follows:

CMS estimated the average cost of collection for Non-Group Health Plan (NGHP) cases (which includes liability insurance (including self-insurance), no-fault insurance, and workers’ compensation) as approximately $318 per case. This cost of collection was based on the amount paid (invoices) to our Benefits Coordination and Recovery Contractors for work related to identifying and recovering NGHP conditional payments. CMS relied on data between August 2019 and July 2020. The total dollar amount paid to CMS’ contractors was divided by the number of final NGHP demand letters issued during the aforementioned date range.

To determine settlement thresholds, CMS compared the estimated cost of collection per NGHP case of approximately $318 to the average liability insurance demand amount per settlement range. We then did the same comparison of the estimated cost of collection to the average no- fault insurance and workers’ compensation demand amounts per settlement range.

From this analysis, CMS then concluded as follows:

Based on this information, CMS determined that it will maintain a $750 threshold for 2021 so that physical trauma-based settlements of $750 or less do not need to be reported and Medicare’s conditional payment amount for these settlements does not need to be repaid. For liability insurance the calculated cost of collection of $318 most closely aligns with and without exceeding, the average highlighted demand amount of $392.49 for settlements of over $500 to $750.

For no-fault and workers’ compensation insurance settlements, CMS will maintain the current threshold of $750, where the no-fault insurer or workers’ compensation carrier does not otherwise have ongoing responsibility for medicals. Although the cost of collection of $318, most closely aligns with the average demand amounts of $368.37 and $329.45 respectively for settlements of $300 to $500, the limited number of demands within this range represents a minor amount of missed potential recoveries. For 2020, these missed recoveries would have totaled $16,552.90 (35 cases at $472.94) for no-fault insurance, and $6,332.76 (14 cases at $452.34) workers’ compensation settlements. The cost for CMS to alter supporting systems, program documentation, and to perform outreach to external stakeholders for a reduction to a $500 threshold for these insurance types would far exceed potential recoveries for settlements in this range.

By Mark Popolizio

Courtesy of ISO Claims Partners Blog

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