Medicare Secondary Payer Comes Of Age: An Industry Insider’s View
LexisNexis Workers' Compensation Law Community
By Jennifer C. Jordan, Esq.
2011 stands to be a pivotal year for Medicare Secondary Payer because after significant delays in the implementation of the Medicare, Medicaid & SCHIP Extension Act of 2007 (“MMSEA”), the Centers for Medicare and Medicaid Services (“CMS”) will finally be given the data necessary to recover years' worth of mistaken payments and shift a good portion of its Medicare benefit obligations to the private sector.
A History of Government's Failed Efforts at MSP Enforcement
A historical look at early MSP enforcement reveals years of frustrated efforts by the federal government in overcoming poorly written law. The MSP was written without a notice requirement so that CMS could be placed on notice of a settlement and thus be aware of its recovery right, and what little requirement that was included in the regulations provided no penalty for failure to comply. Then, even in cases where the government became aware of recovery opportunities, it lost several suits in federal court primarily due to technicalities, such as the definition of a self-insured.
The final straw for early failed efforts of MSP enforcement came in the form of a GAO study released to Congress in March 2001, pointing out millions in erroneous Social Security Disability Insurance (“SSDI”) payments made by the Social Security Administration (“SSA”) that were not off-set appropriately because of simultaneous workers' compensation benefits. The reason given was mainly because the federal government was not on notice of the dual eligibility. Both SSA and the Health Care Finance Administration (“HCFA”), the agency name that was changed two months later to CMS in a public relations effort to prove to the public that improvements were made to its program, were asked to respond since these same individuals would automatically become entitled to Medicare after 24 months of receiving SSDI benefits, and in turn receive Medicare covered treatment that should have been provided by workers' compensation. The response from both the SSA and HCFA (now CMS) was that absent some “mandatory insurer reporting” of the insurance claim data, they would continue to be unable to administer their programs according to guidelines. Thus, the seeds of the MMSEA Section 111 reporting requirement were planted, and the “Patel Memo” was released by CMS just a few months later.
What I Saw At The Revolution
I was working in the structured settlement industry at the time the Patel Memo was published by CMS and was fascinated by the way that the need for WCMSAs was unquestioned and wholeheartedly embraced by many in the workers' compensation industry. Sadly, I find that I am a sucker for obscure federal laws that sit on the books forever with little enforcement (someday I also want to write about the Perishable Agricultural Commodities Act of 1930). In an effort to better understand the MSP, I read and reread the statute, regulations and the few cases I could find, after which I kind of gave up, accepted the contents of the Patel Memo as true and went along with the flow like everyone else.
The two MSA vendors first to market were soon overwhelmed, and sometimes took months to return an MSA proposal that ultimately would require another year to obtain CMS' approval. Structured settlement commissions are generally not paid until all required documents are submitted to the life insurance company and a policy issued, and in workers' compensation that includes the order approving the settlement. After the Patel Memo, that included the CMS approval letter in many states. Because not too many people want to wait around for two years to get paid, we started creating the MSA reports ourselves. Once we figured out that CMS was basically creating policy on the fly, structured settlements were backburnered for MSAs and there was no looking back.
In April 2003, the second CMS memo was released and that nagging feeling returned. The first question addressed in the memo stated that the MSP statute was its authority for conducting its review. As best I could tell, using every tool my legal education ever provided, the MSP statute did not say that and the contents of these memos were nothing more than some instructions for internal practices at CMS that did not confer any mandatory requirements on anyone. It was when I started providing continuing education and returned to the statute and regulations to prepare my presentation materials, that I really started to realize something was amiss.
First, I noticed that the wording of the statute had changed. Where it was once riddled with references to “third party payers,” the statute now read of “primary payers.” I consulted my original research and found that the statute did in fact change, and it had done so in December of 2003 without so much as a memo from CMS. Passed as a “technical amendment” to the MSP and veiled by the hype associated with the creation of the Medicare Part D prescription drug plan, the Medicare Modernization Act (“MMA”) made significant changes to the MSP, primarily with regard to whom CMS could seek recovery. It broadened the definition of self-insured to include not only non-registered plans, but those who just lacked insurance for any reason. It expanded recovery rights to not just anyone who was originally responsible for payment or could have made payment, but anyone in receipt of payment from the settlement. And this was done without so much as a hint to the legal or insurance communities that it significantly affected, as evidenced by the total lack of lobbying.
I honestly do not even feel that Congress had a clue as to what it had done. There is no evidence of anything but prescription drug discussion in the Congressional Record. Then I found the Congressional Research Service (“CRS”) Summary explaining the contents of the legislation to the members of Congress who passed it two months prior, and finally found confirmation that Congressional intent inferred by the courts in some of the MSP cases is tenuous at best.
And so continued the peculiar method of memoranda-based policy implementation by CMS, as did the covert legislative modifications further strengthening Medicare's position as secondary payer. When the MMSEA was signed into law in 2007, the insurance industry again cried outrage over the implementation of such a costly and burdensome requirement upon it, yet once again there was no lobbying effort or objection raised during the legislative process, because they did not see it coming.
A Near Miss in President Obama's Original Health Reform Bill
Although burned twice, there was fortunately someone on the lookout as a third near miss was included in President Obama's original health reform bill. Prior to submission to the House Ways and Means Committee in July 2009, Republicans managed to block a provision in the bill that would have turned the MSP into a qui tam statute and effectively create Medicare bounty hunters. This would have taken the standing requirement for the private cause of action out of the mix and permit anyone with a hint that Medicare was owed money to bring suit on behalf of the federal government for double damages, from which they would have been entitled to retain anything beyond what Medicare was owed for their troubles.
The Evolution of the WCMSA Review Program
In addition to the disillusioning research results, I have also personally observed a decade of CMS' interpretation of the MSP and the entire evolution of the WCMSA review program that has grown more and more aggressive as the years passed and its policies went unchallenged. Although the one lawsuit filed against CMS ultimately went nowhere, we did get from its pleadings an admission by CMS that its review program is in fact voluntary and not required by the MSP or any other legal authority. However, because I still have clients who continue to insist that CMS approval is required, the need for education continues.
When the state in which I am licensed to practice law decided to become the first to require, under state law, approval by the voluntary, subjective and unappealable federal WCMSA review program as a prerequisite to obtaining approval of a state workers' compensation settlement, I decided that it was time to take MSP education to the next level and seek a national audience with a well respected source, and LexisNexis was willing to provide that forum.
A New Resource to Help You Take Control of Insurance Settlements
The Complete Guide to Medicare Secondary Payer Compliance, of which I am Editor-in-Chief, is an invaluable resource to help you achieve MSP compliance and take control of your insurance settlements.
This book represents the tireless efforts of a great number of extremely talented individuals. I want to thank my editor, Robin Kobayashi, for recognizing the need for such a treatise and providing me with as many resources as possible to complete this project. Among these resources was a great group of contributing authors who I thank for taking the time out of their busy schedules to provide us with much of the data within. I feel fortunate to work in an industry where competitors can come together in such a manner to work in furtherance of a common cause.
This publication would not be possible without the support of my coworkers at MEDVAL who absorbed a great deal of my workload so that I could devote time to this project, as well as my law clerk Brian Ritter who will be a welcome addition at any law firm when he graduates next spring as he already knows more about MSP compliance than most practicing attorneys. And finally, I want to thank my much neglected family, without whose love, tolerance and understanding I could not have completed such a massive undertaking.
Disclaimer: WorkersCompensation.com publishes independently generated writings from a variety of workers' compensation industry stakeholders. The opinions expressed are solely those of the author and do not necessarily reflect those of WorkersCompensation.com.