As required by section 1862(b) of the Social Security Act, the Centers for Medicare and Medicaid Services (CMS) has reviewed the costs related to collecting Medicare’s conditional payments and compared this to recovery amounts. The full report, released November 15, 2018, is available here. As a result of the computation, the threshold for physical trauma-based liability insurance settlements will remain at $750 in 2019.
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 responsibly for medicals Entities are not required to report, and CMS will not seek recovery, on settlements below $750. Please note that the liability insurance (including self-insurance) threshold does not apply to settlements for alleged ingestion, implantation or exposure cases. Access the full CMS Alert here.
The Medicare Secondary Payer
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 by the primary payer, 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 (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 and issues a demand letter requiring reimbursement.
Medicare spends $297 per case to collect conditional payments on NGHP files
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 $297 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 2017 and July 2018. 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 $297 to the average liability insurance demand amount per settlement range. CMS 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.
The $297 cost of collection is in alignment with settlements in NGHP files
For liability insurance and workers’ compensation settlements, the calculated cost of collection of $297 most closely aligns, without exceeding, to the average demand amounts of $368.40 and $518.18 respectively for settlements of over $500 to $750.
For no-fault insurance settlements, CMS will maintain the current threshold of $750, where the no-fault insurer does not otherwise have ongoing responsibly for medicals. Although the cost of collection of $297, most closely aligns with the average demand for settlements of $300 to $500, the limited number of demands for no-fault within this range represents a minimal amount of missed potential recoveries. For 2018, these missed recoveries would have totaled $16,789 (47 no-fault cases at $357.21). The cost for CMS and primary plans to alter supporting systems, documentation and to perform outreach for a reduction to a $500 threshold for this insurance type would far exceed potential recoveries for settlements in this range.
The full CMS report is accessible here.
Beginning January 1, 2019, primary payers/responsible reporting entities in liability, no-fault and work comp claims will not be required to report, and CMS will not seek recovery, on settlements below $750. And, just as in 2018, the threshold does not apply to settlements for alleged ingestion, implantation or exposure cases. As always, Optum Settlement Solutions mandatory insurer reporting and conditional payment resolution services will incorporate these changes for our clients.
- Centers for Medicare & Medicaid Services. 2019 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards or Other Payments. Accessed November 19, 2018.
- Centers for Medicare & Medicaid Services. Computation of Annual Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards, or Other Payments. Accessed November 19, 2018.