Tag Archives: MARC

Summary of Final Rule: Conditional Payment Appeals Process for Applicable Plans

On February 27, 2015, CMS published in the Federal Register the SMART Act Appeal Final Rule which can be located at 80 Fed. Reg. 10611. The rule can be found here and will go into effect on April 28, 2015. CMS had previously issued the Proposed Rule on this very topic on December 27, 2013. Materially, the Final Rule is effectively the same as the Proposed Rule without substantive change. While some greater strides toward more operational efficiencies could have been made in finalizing the Final Rule, Helios applauds CMS finalizing this proponent of the SMART Act within two years of the law’s enactment.

What the Final Rule does: The Final Rule puts into place a conditional payment appeals process for “applicable plans.” An applicable plan means liability insurance (including self-insurance), no-fault insurance, or a workers’ compensation law or plan. Prior to implementation of this Final Rule, applicable plans had no appeal rights with regard to conditional payment demands from Medicare. With this final rule in place, applicable plans can now appeal final conditional payment demands issued by Medicare if the applicable plan disputes the amount or liability owed.

How the Appeals Process will work: Applicable plans’ appeal rights are the same process that beneficiaries, providers and others must use to dispute a conditional payment demand. It is a four-level appeals process which requires that the applicable plan exhaust its rights in the following order: (1) reconsideration of a claim by the CMS contractor; (2) evaluation of the claim by a Qualified Independent Contractor (QIC); (3) adjudication of the dispute by an Administrative Law Judge (ALJ); (4) and lastly a review of the ALJ decision by the Department Appeals Board’s Medicare Appeals Council. It has been noted that this current four-level appeals process can take up to four years to pursue. It was requested that CMS simplify this appeals process and skip the first two levels; however, CMS declined this suggestion.

What is Not Subject to Appeal: Through the rulemaking process, industry stakeholders requested that CMS allow applicable plans to appeal issues other than the conditional payment amount. In particular, it was requested that CMS allow the applicable plan to dispute who or which entity that CMS would pursue an MSP recovery from. CMS declined this request, citing its authority within the MSP to recover from the beneficiary, the primary payer or any other entity receiving proceeds from the payment by the primary plan. Stakeholders also requested that an applicable plan be able to appeal an initial conditional payment demand, even if the final amount of the repayment was not yet available in a Final Demand letter. CMS also declined this request; Applicable Plans may only appeal from Final Demands.

Who May Appeal: It was requested that either the applicable plan or the beneficiary be able to appeal where the identified debtor is either the applicable plan or the beneficiary. CMS declined this request and has stated that the Final Rule makes appeal rights available to the identified debtor, not potential identified debtors. Therefore, applicable plans may only appeal under this process if they are the identified debtor in the Final Demand letter. Additionally, beneficiaries may only appeal under previously existing conditional payment processes if the beneficiary is the identified debtor in the Final Demand Letter.

Commenters also had requested that applicable plans be able to appoint third parties/agents as representatives in the appeals process. CMS contends that applicable plans already have this right, and further specified that the party appointing a representative must include the beneficiary’s Medicare health insurance claim number (HICN) on the appointment of representation.

Notice of Appeal: It was also requested that either the applicable plan should be copied on a recovery demand with the beneficiary as the identified debtor; or all potential debtors should be copied on all actions (that is, recovery demands, appeal requests, all notices or decisions). CMS declined this request citing that additional notice would not be necessary since only the identified debtor can appeal the Final Demand. Additionally, it would cause “an increase in administrative costs and would cause confusion in many instances, particularly where beneficiaries would receive copies of demands issued to applicable plans.”

Medicare Advantage Plan Conditional Payment Appeals: Commenters requested that the proposed rule be revised to include appeal rights for applicable plans when a Medicare Part C organization or Part D plan pursues an MSP based recovery from the applicable plan. CMS stated that the request was outside the scope of the rule and that the SMART Act provision for applicable plan appeals amended only the MSP provisions for Medicare Part A and Part B.

MSA Appeals: It was requested that the proposed rule should address appeals related to the determination of WCMSA amounts for future medicals. CMS stated that this issue is outside of the scope of the rule and that this particular issue would be addressed separately. As an aside, if CMS does create an appeals process for MSAs, it would likely be created outside of the legislative process which could allow for the appeals process to be implemented more quickly.

In summary, the Final Rule provides a much needed conditional payment appeals process for Applicable Plans. While the four-level appeals process may be rumored to be slow, Applicable Plans now have the same rights of appeal that previously only existed for others in the Medicare program. The SMART Act is continuing to steadily create a more efficient process and reform the MSP system.

CMS to Extend Deadline for Reporting SSNs?

Pursuant to section 204 of the SMART Act, within 18 months of the enactment of the SMART Act (which is July 10, 2014), CMS was required to modify MMSEA Section 111 Reporting Requirements so that an RRE was no longer required to report social security numbers (SSNs) or health insurance  claim numbers (HICNs).  However, within section 204, CMS was provided with the ability to extend this deadline for 1 year periods if the Secretary notifies Congress that without the extension, it would threaten patient privacy or the integrity of the Medicare Secondary Payer (MSP) program.

Now that July 10th has came and CMS has not implemented this change, it is expected that CMS will soon file for the 1 year extension; however, we remain hopeful that CMS will soon implement this provision of the SMART Act.

In the meantime, RREs that are unable to obtain a beneficiary’s SSN have a few options to remain compliant. CMS has provided the industry with a method to document and demonstrate good faith efforts to obtain SSNs from Medicare beneficiaries through the use of a form that has model language created by CMS to request the information required for reporting under MMSEA Section 111. This document can be found here.

Additionally, there is case law precedent in which a carrier refused to tender a settlement due to the beneficiary not providing their SSN (See Seger v. Tank Connection, LLC and Hackley v. Garofano). In these cases, the courts sided with the RREs and required the beneficiaries to provide their SSN so that the RRE could be in compliance with the MMSEA and not subject to fines.

Therefore, if needed, RREs can document their good faith efforts to obtain SSNs and/or bring the matter to court if the beneficiary refuses to provide their SSN. We will keep our subscribers updated on any developments on the SMART Act and any filings by CMS with respect to this particular provision.

Government Shutdown and Impact to MSP and CMS

As of 2:30 P.M. EST this afternoon, the U.S. Senate has rejected the latest House “Continuing Resolution” needed to fund federal government operations beyond the end of the fiscal year, set to end tonight, September 30th at midnight.  Therefore, it appears very likely that the Government will shut down, at least for several days, starting tomorrow, October 1st.  

Most relevant to CMS and MSP operations, PMSI has learned through the MARC Coalition that although the shutdown will result in many CMS staff being furloughed, it will NOT result in termination of operations at the MSPRC. 

More specifically, CMS has indicated that all Coordination of Benefits/MSP contractors will be operating under normal hours, and that CMS does not expect any announcement to be posted.  It is presumed that the MSPRC and COBC are operating using FY13 funding. Thus, while the CMS staff may not be at work tomorrow, the contractors will continue normal operations.

PMSI will continue to follow the shutdown and will keep suscribers notified of any significant changes relevant to CMS and the MSP.

The SMART Act Simplified: What do I need to know and how will it impact my claims handling?

The SMART Act reforms certain aspects of the MSP and the MMSEA. While the SMART Act does not directly broach how to protect Medicare’s interests with regard to any future medical component, it does directly reform components of the conditional payment reimbursement process and MIR under the MMSEA.

Conditional payments are allowed under the MSP when the primary payer does not make payment promptly. However, Medicare makes the payment “conditioned” upon reimbursement by the primary payer. Essentially, these are payments made by Medicare that the primary payer is responsible for, and as a result, Medicare is owed the right to reimbursement. If Medicare conditional payments are not reimbursed, Medicare has the right to sue for double damages. Due to this priority right to recover, Medicare conditional payments are sometimes referred to as a “super lien.”

Under the MMSEA, liability insurance (including self-insurance), no-fault insurance, and workers’ compensation insurance or plans are required to report the assumption of ongoing responsibility for medical treatment as well as settlements, judgments, and awards with Medicare beneficiaries. A graduated scale for the requirement to report these claims has been implemented based on the settlement amount. The purpose behind MIR is to enable the CMS to have visibility into settlements occurring with Medicare beneficiaries as well as a record of cases where ongoing responsibility exists, which is important for proper coordination of benefits. Awareness of these requirements is important since there is the potential for a $1000 per day/per claim penalty for the failure to report.

Note that President Obama signed the SMART Act into law on January 10, 2013; therefore, when the “enactment date” is referred to, it shall mean the aforementioned date.  The SMART Act was passed attached to Medicare IVIG access bill in H.R. 1845. For a full copy of H.R. 1845, please click here.

The following section will address some of the issues that the SMART Act seeks to resolve with regard to conditional payments and MIR. The SMART Act can be broken down into 5 major components. While addressing each component, we will also answer frequently asked questions for each topic.

1)      New Conditional Payment Resolution Process

Parties entering settlements with Medicare beneficiaries have been all too familiar with long wait times when trying to finalize conditional payment amounts with CMS, as well as being unable to receive a final demand until after settlement.

There is good news on the horizon. In 9 months from the SMART Act’s enactment date (on or about October 10, 2013), CMS will be implementing a new process to provide a final conditional payment amount prior to settlement. It will be available online, and there will be stricter timelines for when CMS must provide the demand amount.

This is how it will work: anytime 120 days prior to a settlement, judgment, or award, you notify CMS of your expected settlement date and amount. During this time, conditional payment information will be available on a “website.” Payments made by CMS must be posted to the website no later than 15 days from the payment date.

Within 65 days from the time CMS receives notice, a “statement of reimbursement amount” will be available for download- which can be considered the final demand, as long as you are in the “protected period.”  The “protected period” means 65 days after CMS has received notice of your settlement, judgment, or award; however, CMS can extend the 65 day period for a an additional 30 days only under exceptional circumstances, and exceptional circumstances cannot be more than 1 percent of cases. CMS will provide this in a format where the final demand is time and date stamped and settlement must occur within 3 business days of downloading the statement or it will no longer be valid as a final demand.

If you want to dispute the conditional payment amount, you should provide CMS with a proposed resolution amount along with an explanation of the reason for the adjustment. CMS then has an 11 business day window in which they can do the following in response to the proposed resolution:

a)      Not respond within 11 days of the proposed resolution. In that case, the proposed resolution is deemed accepted by CMS.

b)      CMS can respond within 11 business days and state that they disagree with the proposed resolution.

c)      Another option is for CMS to respond within the 11 business day period and propose an “alternate discrepancy resolution.”

In addition to the dispute process just described, CMS will also need to promulgate regulations around creating a formal appeals process.


Q. Which website is being referred to? Is it the current MSPRC portal?

A. The SMART Act does not specify if this website will be an enhanced version of the current MSPRC portal, or if it will be a new website. However, it does state that the website will be a form of “successor technology.” We are hopeful that the website will provide more enhanced functionality than the current MSPRC portal, which has some limitations, such as requiring you to have a case number before being able to use the portal for a particular case.

Q. What is considered official notification to CMS of a settlement, judgment, or award under this section? 

A. How notice is to be made under this section is not clear. Currently, CMS is notified of settlements through calls to the COBC, as well as through MIR under the MMSEA. Therefore, it is not clear if either or both of these types of notifications will suffice as “adequate notice.” The SMART Act also does not specify if a separate notification will need to be made through this website.

Q. Isn’t requiring settlement to occur within 3 business days of downloading the final demand a bit fast? 

A. Yes, it is fast. However, it does seem that if the parties do not end up settling within 3 business days, that they can simply re-download a new time and dated stamped “statement of reimbursement amount” when settlement is about to occur.

Q. What is the “alternate discrepancy resolution” that CMS can propose if they do not agree with your proposed dispute on the conditional payment amount?

A. The SMART Act does not describe this at all. One could guess that this will be an informal, non-binding method to resolve the dispute. If the parties cannot agree, then the new appeals process will likely provide a different avenue and a more formal administrative appeal if you are not satisfied with the result during the informal dispute process.

2)      Threshold for Exemption from Conditional Payment Reimbursement and Reporting

Finding it frustrating to deal with conditional payments and MIR on nominal, nuisance value cases that you just want to close out quickly? Not only has the industry been voicing this concern, but CMS has also been under scrutiny for conditional payment collections on these cases. It has come to light that in some cases, it actually costs more for CMS to recover a conditional payment than the amount they paid “conditionally.”

The SMART Act requires the DHHS to calculate and publish a single threshold amount for settlements, judgments, awards, or other payments in which they will not seek reimbursement of conditional payments and you will not have any MIR obligations. They will publish this amount by November 15th each year, and this will begin in the year 2014. The threshold amount will be the amount where CMS can demonstrate that their costs of recovering the conditional payments equal the collections.


Q. Does this threshold also apply to MSAs or to the consideration of Medicare’s interests in regard to future medicals? 

A. No, it only applies to conditional payments and MIR.

Q. What will the threshold be? Do any thresholds currently exist for conditional payments?

A. Currently, liability settlements under $300 are exempted from reimbursement of conditional payments to CMS. It is unclear what the new threshold will be; however, many have commented that this threshold is much too low.

3)      Discretionary Fines for noncompliance with MIR

The threat of a $1000 per day/per claim fine for noncompliance can be pretty scary when one error in a quarterly report can result in a $90,000 penalty! It also seemed rather arbitrary that the fine was mandatory and there were no formal rules/guidelines as to when CMS could and could not impose fines.

The SMART Act strikes the portion of the MMSEA law that states that a RRE “shall be subject. . .” In its place, the language now says “may be subject.” This replacement language essentially makes fines for noncompliance with MIR discretionary instead of mandatory.

But first, within 60 days of the enactment date of the SMART Act, CMS must solicit comments from the industry in the Federal Register which practices should be considered an event subject to sanctions. After considering the public comments, we will see some finalized rules regarding which practices by an RRE would be subject to sanctions.


Q. What will the industry consider to be practices that are subject to sanctions? Will the main standard be “good faith” efforts on behalf of the RRE?

A. The commentary from the industry as to what actions should be subject to sanctions will certainly be interesting. One would think that CMS would carve out an exception to being sanctioned if the RRE could document good faith efforts to report the claim(s). Additionally, CMS may implement some more specific practices that would be subject to sanctions. For example, CMS has repeatedly stated that sending bad data with errors is not considered compliance. If an RRE was notified by CMS that the data contained errors, and over a period of time it is demonstrated that the RRE did not attempt to correct the data, that may be a practice subject to sanctions.

Q. CMS recently announced its plans to audit group health plans (GHPs) for compliance with MIR. Are non group health plans (NGHPs) next to be audited? Has CMS ever issued fines? 

A. To our knowledge, CMS has not yet issued any fines for noncompliance with MIR for NGHPs. However, CMS recently rolled out a work plan to audit GHPs for compliance with MIR in 2013. It would seem that NGHPs will likely be audited next and that parties not in compliance would be subject to fines. Therefore, fines are likely to be issued in the near future.

 4)      Use of SSNs/HICNs in MIR

Many RREs, particularly those that deal with liability claims, have voiced concern over the difficulty to obtain a Medicare beneficiary’s SSN. Without an SSN, an RRE cannot report the case under MIR. The SMART Act makes reporting SSNs optional.

However, it is very important to note that CMS has been given an extended period of time to implement this. They have 18 months after the enactment date to publish rules to implement this, and they can file extensions for up to 1 year if certain criteria are met.


Q. How will CMS be able to identify beneficiaries without these identifiers?  

A. It has been estimated that CMS will need to come up with some kind of new unique identifier and likely overhaul current systems to implement this.  

Q. Since this may take a few years to be implemented, what can RREs do in the meantime while SSNs are still required to be reported in those situations where it is unable to obtain a beneficiary’s SSN?  

A. CMS has provided the industry with a method to document and demonstrate good faith efforts to obtain SSNs. Additionally, there has been some recent case law where a carrier refused to tender a settlement due to the beneficiary not providing their SSN. In those cases, the courts sided with the RREs and required the beneficiaries to provide their SSN so that the RRE could be in compliance with the MMSEA and not subject to fines. If needed, RREs can document their good faith efforts to obtain SSNs and/or bring the matter to court if the beneficiary refuses to provide their SSN.

5)      New Statute of Limitations for Conditional Payments

Previously, the statute of limitations for CMS to recover conditional payments was unclear. The SMART Act provides that if CMS is given notice of the settlement, judgment, award or other payment, then they may not seek recovery of that conditional payment any later than 3 years after notice is given. This is scheduled to take effect 6 months after the SMART Act’s enactment date.


Q. Isn’t a final demand from CMS “final?” Why would you be concerned with a statute of limitations if you reimbursed a final demand from CMS?  

A. Technically, the term “final demand” is a misnomer. CMS still has the right to discover, research and recover conditional payments owed even after a final demand is paid. This new statute of limitations will give a clear timeline of when CMS can recover conditional payments as long as you notify CMS of your settlement, judgment, or award. Now, 3 years after notice is given, you will be in the clear.

PMSI will keep you updated on any developments in regard to the SMART Act. For questions on the SMART Act and how PMSI can assist, please contact Heather Schwartz, Esq., MSCC, CHPE, CLMP, CMSP at Heather.Schwartz@pmsisettlement.com.