Centers for Medicare & Medicaid Services announces annual recovery thresholds for certain liability insurance, no-fault insurance and workers’ compensation payments

To fulfill the requirements of Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012, Centers for Medicare & Medicaid Services (CMS) is required annually to review all of the costs related to collecting data and determining the amount of Medicare’s recovery claim, otherwise known as conditional payments. As of September 26, 2016, and for the remainder of 2016, CMS has announced its recovery and reporting thresholds.

CMS determined that it will maintain the current single threshold for physical trauma-based liability insurance settlements, where settlements of $1000 or less do not need to be reported and Medicare’s conditional payment amount related to these cases does not need to be repaid.

CMS also evaluated available data related to no-fault insurance and workers’ compensation settlements. Based on this data, CMS determined that it will establish a new threshold for no-fault insurance and workers’ compensation settlements. For FY 2016, settlements of $750 or less for no-fault insurance and workers’ compensation do not need to be reported and Medicare’s conditional payment amount related to these cases do not need to be repaid if the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibly for medicals (ORM) that has been accepted and/or reported via Section 111 mandatory insurer reporting (MIR).

BACKGROUND

The Medicare Secondary Payer (MSP) provisions of the Social Security Act prohibit Medicare from making payment where payment has been made or can reasonably be expected to be made by a primary plan. If payment has not been made, or cannot reasonably be expected to be made promptly by a primary plan, Medicare may pay conditionally, with the expectation that the conditional payments would be reimbursed, once primary payment responsibility is demonstrated.

The primary plan, such as liability insurance, no-fault insurance or workers’ compensation, often demonstrates primary payment responsibility through a settlement, judgment, award or other payment (hereinafter, “settlement”). Accordingly, Medicare is obligated by statute to recover conditional payments it made for medical care related to the settlement. Medicare’s recovery is limited to the amount of the settlement less any attorney fees or costs the beneficiary incurred to obtain the settlement.

Medicare beneficiaries, their attorneys and primary plans report settlements to Medicare. Reporting is required so Medicare is able to determine if it made any conditional payments related to that settlement. Once reported, Medicare calculates its conditional payment amount, reduces that amount for attorney fees and costs, then issues a demand letter requiring reimbursement.

Medicare incurs costs to perform these activities. These costs include, for example, compiling related claims, calculating conditional payments, applying reductions, sending demands and providing customer service. In addition to the CMS costs associated with pursuing recovery, Medicare does not usually recover the full amount of the conditional payments. For example, there may be reductions to the demand to account for procurement costs (attorney fees and costs) or for full or partial waiver of recovery if certain criteria are met. Implementing a threshold facilitates CMS’ efficient use of its resources.

COST OF COLLECTION

The 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 $421 per case. This cost of collection was based on the amount paid (invoices) to the Benefits Coordination and Recovery Contractors for work related to identifying and recovering NGHP conditional payments. CMS relied on data from fiscal year 2015. The total dollar amount paid to CMS’ contractors was divided by the number of final NGHP demand letters issued during the aforementioned date range. The average cost of collection per case was calculated to be approximately $421.

To determine settlement thresholds, CMS compared the estimated cost of collection per NGHP case of approximately $421 to the average liability insurance demand amount per settlement range. The CMS Office of Financial Management did the same comparison of the estimated cost of collection to the average no-fault insurance and workers’ compensation demand amounts per settlement range.

CONCLUSION

Based on this information, CMS determined it will maintain the existing $1000 threshold. As such, physical trauma-based liability insurance settlements of $1000 or less do not need to be reported to CMS via Section 111 mandatory insurer reporting (MIR). In addition, Medicare’s conditional payment amount for these settlements does not need to be repaid.

For workers’ compensation and no-fault insurance settlements, CMS has established a threshold of $750, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibly for medicals (ORM).

However, if a conditional payment demand is received for a claim falling below the threshold, the letter must not be ignored but instead acted upon by informing the recovery contractor of the settlement amount and date and checking to be sure accurate amounts, dates and ORM were not inadvertently reported via Section 111 mandatory insurer reporting (MIR).

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