New MSP Reform Bill Proposed in Congress - The SMART Act (H.R. 1063) Proposes New Amendments To the Medicare Secondary Payer Statute

New MSP Reform Bill Proposed in Congress - The SMART Act (H.R. 1063) Proposes New Amendments To the Medicare Secondary Payer Statute

   By: Mark Popolizio, Esquire

On March 14, 2011, the Strengthening Medicare and Repaying Taxpayers Act of 2011 (SMART Act) (H.R. 1063) was introduced in the U.S. House of Representatives by Tim Murphy (R-PA) and Ronald Kind (DWI).

This legislation proposes major amendments to the Medicare Secondary Payer Statute (MSP).[Fn1] The SMART Act modifies and replaces the reform proposals contained in the Medicare Secondary Payer Enhancement Act (H.R. 4796) which was introduced last year in Congress. H.R. 4796 generated considerable bipartisan interest having secured 35 cosponsors prior to the close of the 111th Congress in December 2010.

The SMART Act targets specific components of MSP compliance relating to Section 111 of the Medicare, Medicaid and SCHIP Extension Act, Medicare conditional payments and other important aspects of the MSP.

A copy of the SMART Act can be obtained at http://www.nqbp.com/docs/uploads/SMART_Act.pdf.

The SMART Act is largely credited to the efforts of the Medicare Advocacy Recovery Coalition (MARC) (www.marccoalition.com) which also spearheaded the reform efforts under H.R. 4796 last year. MARC is a national industry group dedicated to addressing various MSP compliance issues in the non-group health plan (NGHP) claims context. This group is comprised of a broad range of interests and sectors across the claims industry.

It is important to remember that the SMART Act is proposed legislation. As such, the proposals discussed below have not been enacted into law as of this time. As with every bill introduced in Congress, it is unknown whether or not the SMART Act will be formally passed and enacted into law. Likewise, it is important to remember that the bill's current provisions could be modified as the bill moves through the legislative process. Thus, the reader will need to monitor the status and progress of this bill to stay abreast of all pertinent developments.

The reader may keep track of the progress of the SMART Act at http://www.govtrack.us/congress/bill.xpd?bill=h112-1063.

Through this article, the author highlights the following main MSP reform proposals as contained in the SMART Act:

Proposal #1

The SMART Act Would Enable the Parties to Determine CMS' Reimbursable Conditional Payment Amount PRIOR to a Settlement, Judgment, Award, or Other Payment

The SMART Act would allow the parties to obtain a "statement of reimbursement amount" from the Centers for Medicare and Medicaid Services (CMS) enabling them to determine the exact reimbursable conditional payment amount prior to a settlement, judgment, award or other payment6

This proposal takes aim at a major and recurring problem facing the claims industry - the inability to determine the conditional payment amount that needs to be repaid prior to settling a claim. To appreciate the significance of this proposal, a brief review of conditional payments and CMS' process relating thereto is in order.

Medicare Conditional Payments - Brief Overview

Medicare conditional payments can be defined as payments made by Medicare for accident related medical treatment for which another payer is responsible as determined and defined under the MSP.[Fn2]

There are several manners in which conditional payments can arise in the claims context. The most typical way for conditional payments to arise relates to cases where the primary payer denies the claim and does not pay for medical services. Conversely, a primary payer may accept responsibility to provide accident related medical treatment (such as a compensable workers' compensation claim or no-fault claim), but the medical provider mistakenly submits the bills to Medicare for payment instead of to the primary payer. In these instances, if the claimant is a Medicare beneficiary, Medicare very typically steps in and pays for the claimant's accident related treatment with said payments "conditioned upon reimbursement" to Medicare.[Fn3]

Medicare has a statutory right for conditional payment reimbursement under the MSP.[Fn4] CMS has wide latitude in terms of the parties it may pursue for conditional payment reimbursement, and how it may do so. CMS has a direct action against "any and all entities that are or were required or responsible to make payment"[Fn5] and any entity that "receives" a primary payment, including a beneficiary, provider, supplier, physician, attorney, state agency, or private insurer.[Fn6] CMS may seek double damages against primary payers in certain situations.[Fn7] Medicare also has a subrogation right, as well as rights of joinder and intervention.[Fn8]

The Problem - Obtaining CMS' Reimbursable Conditional Payment Amount

Obtaining conditional payment information can be a time consuming and cumbersome process involving multiple steps and various CMS recovery contractors. In general, this process is initiated by notifying the Coordination of Benefits Contractor (COBC) and providing this contractor with certain identifying information related to the claimant and claim. Reporting to COBC is made via phone, mail or fax.[Fn9] Once COBC is placed on notice, it in turn notifies another contractor, the Medicare Secondary Payer Recovery Contractor (MSPRC). The MSPRC then issues a Rights and Responsibilities Letter to the parties advising of Medicare's reimbursement rights.

The MSPRC states that within 65 days of the date of the Rights and Responsibilities Letter a Conditional Payment Letter (CPL) will be issued. The CPL is a significant document as it provides the parties with an initial listing of CMS' alleged conditional payment amount related to the claim. Typical information contained in a CPL includes, but is not limited to, provider information, diagnosis/ICD codes, service dates, total charges, claimed conditional payment amount. Since conditional payments can continue to accrue as the case progresses, it is often necessary to request updated conditional payment information at subsequent points during the claim in order to properly assess potential exposure.[Fn10]

Under CMS' current process, the parties generally cannot obtain the exact reimbursable conditional payment amount until after the claim settles and the executed settlement agreement is sent to CMS' contractor, the Medicare Secondary Payer Recovery Contractor (MSPRC).

At that point, the MSRPC will issue CMS' "final demand" reflecting the conditional payment amount that needs to be repaid. CMS typically demands full reimbursement of the claimed amount within 60 days. If this amount is not paid within 60 days, interest is then assessed on the underlying amount. If the claimed amount is not paid within 120 days, the matter could be referred to the United States Department of Treasury for further collection action.

The inability to determine the reimbursable conditional payment amount prior to settlement often causes a host of practical problems. In this regard, under the current process the parties are essentially forced to settle the claim upon only an interim estimate of CMS' conditional payment amount. Since additional conditional payments could have accrued since the last CPL was received by the parties, there is potential "bounce" in the conditional payment amount. This potential increase could occur because additional medical treatment may have been rendered after the date the last CPL was obtained. Furthermore, this could occur since medical providers are allowed up to 12 months from the date of service[Fn11] to submit their bills to Medicare for payment and, as such, there could very well have been additional conditional payment amounts that had not yet hit Medicare's system at the time CMS' interim estimates were obtained.

Accounting for these contingencies raise additional practical challenges. For instance, issues are raised in terms of how best to ensure the availability of funds to pay off any additional conditional payment amounts contained in CMS' "final demand," especially in  light of the fact that CMS has the right under the MSP to pursue any of the parties to the settlement. Compounding the problem further is the fact that it can take several months for the parties to receive the actual "final" conditional payment amount from the MSPRC.[Fn12]

How Would the SMART Act Change the Current Process?

The SMART Act would allow the parties to obtain the exact reimbursable conditional payment amount payable to Medicare prior to a settlement, judgment, award, or other payment.

The SMART Act proposes the following process:

Parties Can Request a "Statement of Reimbursement Amount" -

The parties would be able to request a "statement of reimbursement amount" from CMS at any time starting 120 days prior to the reasonably expected date of a settlement, judgment, award, or other payment. The proposed legislation states as follows:

(I) Request For Conditional Payment Statement -

[T]he claimant or applicable plan may at any time beginning 120 days before the reasonably expected date of a settlement, judgment, award, or other payment, notify the Secretary that a payment is reasonably expected, and request from the Secretary in accordance with regulations a statement of the conditional payment reimbursement amount (in this clause referred to as a 'statement of reimbursement amount') for any payments subject to reimbursement required under clause (ii). A claimant or applicable plan may request a statement under this subclause only once with respect to such settlement, judgment, award, or other payment.[Fn13]

CMS Would Then Have Specific Timelines to Respond -

Within 65 days of receipt of this request, CMS would be required to issue the statement of reimbursement amount. If CMS provides this statement within the 65 day period, this "shall constitute the conditional payment subject to recovery."[Fn14]

If Medicare failed to provide this statement within the 65 day time frame, it would be given an opportunity to "cure" its failure to respond after receiving an additional notice from the parties. CMS would then be required to issue the statement "within 30 days of the date of such additional notice."[Fn15]

If Medicare still failed to provide the statement within the 30 day "cure" period, its conditional payment claim would essentially be waived unless it could demonstrate "exceptional circumstances" which is to be defined per the proposed act "in a manner so that not more than 1 percent of the repayment obligations under this subclause would qualify as exceptional circumstances."[Fn16]

If, on the other hand, the expected settlement, judgment, award or other payment does not occur, or is no longer expected to occur, within 120 days of the date of the original date of the request for the statement of reimbursement, CMS would need to be notified. In this instance, CMS would then be exempt "from any obligation under subclause (II) with respect to a statement of reimbursement amount relating to such settlement judgment, award, or other payment related to the notice."[Fn17]

The SMART Act's proposals to obtain the reimbursable conditional payment amount replace and simplify the dual track system first proposed in H.R. 4796.[Fn18] In addition, the SMART Act eliminates the $30 "user fee" proposed under H.R. 4796 in relation to obtaining CMS' reimbursable conditional payment amount.

Proposal #2

The SMART Act Would Extend Appeal Rights to Challenge MSP Claims

The SMART Act proposes extended appeal rights to challenge MSP claims through the administrative appeals process and into the federal court system as follows:

Right of Appeal. - [CMS] shall promulgate regulations establishing a right of appeal and appeals process, with respect to any determination under this subsection for a payment made under this title for an item or service under a primary plan, under which the applicable plan involved, or an attorney, agent or third party administrator on behalf of such applicable plan, may appeal such determination.[Fn19]

As proposed, this appeal right would include "review through an administrative law judge and administrative review board, and access to judicial review in the district court of the United States."[Fn20] CMS would be required to carry out the appeals procedures "in a manner similar to the appeals procedure under regulations for hearing procedures respecting notices of determinations of nonconformance of group health plans under this section."[Fn21]

One area where this particular proposal would likely have significant (and welcomed) application concerns challenges to Medicare conditional payment claims.

Under CMS' current process, if a claimant or primary payer believes CMS' conditional payment claim is incorrect, inaccurate or otherwise includes inappropriate claims, it can submit a request to the MSPRC for removal of those claims. If the MSPRC agrees to remove the requested claims this usually extinguishes the issue.

However, problems could arise in situations where the MSRPC refuses to remove the requested claims. This then raises the issue of what additional recourses a party may have to challenge CMS' claim. Under the current process, the claimant may appeal the claim through an established administrative appeals process and may ultimately file an action in federal court.[Fn22] However, CMS takes the position that when a conditional payment recovery demand letter is issued to a primary payer identifying said primary payer as the debtor, the primary payer has no formal administrative appeal rights under the MSP.[Fn23]

The SMART Act would level the playing field in this instance by permitting the primary payer (and others) to appeal CMS' claim through the administrative appeals process and, if necessary, into federal court.

Proposal #3

The SMART Act Would Modify Section 111's Strict Penalty Provision

Section 111 of the Medicare, Medicaid and SCHIP Act of 2007 (Section 111 or MMSEA) is Medicare's new electronic "notice and reporting" law.[Fn24]

Under Section 111, certain parties known as Responsible Reporting Entities (RREs) are required to determine a claimant's Medicare beneficiary status. If the claimant is a Medicare beneficiary and the claim meets one of CMS' Section 111 "reporting triggers," the RRE must then report the claim electronically to CMS (with all required information and data) in accordance with the agency's specific reporting mandates.

The penalty for non-compliance with Section 111 is steep: $1,000 per day, per claim. In pertinent part, Section 111's penalty provision as currently contained in the MMSEA states as follows:

(B) ENFORCEMENT-

(i) IN GENERAL- An entity, a plan administrator, or a fiduciary described in subparagraph (A) that fails to comply with the requirements under such subparagraph shall be subject to a civil money penalty of $1,000 for each day of noncompliance for each individual for which the information under such subparagraph should have been submitted. (Emphasis Added).[Fn25]

Use of the word shall has generated concern in the claims industry as this word in the context of legal statutory interpretation is generally interpreted to mean "must" - which would result in the mandatory and automatic application of Section 111's penalty -- without due consideration being afforded to potential mitigating factors, such as a RRE which acts diligently and in good faith, but for circumstances beyond its control, simply cannot comply with, or perhaps even determine, its Section 111 reporting obligations. This concern only deepens in light of what many view as underlying statutory deficiencies and the remaining questions pertaining to several aspects of CMS' reporting mandates which have not yet been adequately addressed or explained by the agency.

In recognition of these concerns, the SMART Act would amend Section 111's penalty provision by (a) making the Section 111 penalty discretionary in application and amount and (b) limiting the "severity" of the penalty to specific factors.

Specifically, the SMART Act would strike the "shall be subject to" language and replace it with "may be subject to a civil money penalty of up to $1,000 for each day of noncompliance." Furthermore, the act proposes that "the severity of each such penalty shall be based on the knowing, willful, and repeated nature of the violation.[Fn26] (Emphasis Added).

Proposal #4

The SMART Act Would Require CMS to Establish Section 111 "Safe Harbors"

The SMART Act would require CMS to work with the industry in devising Section 111 "safe harbors" protecting the RRE from potential Section 111 liability, including the creation of a specific safe harbor for situations where the RRE makes a "good faith effort" to determine a claimant's Medicare beneficiary status but is unable to do so.

The SMART Act proposes the following:

Not later than 60 days after the enactment of this subparagraph, the Secretary shall publish a notice in the Federal Register soliciting proposals ... for the specification of practices for which sanctions will not be imposed [under Section 111], including for good faith efforts to identify a beneficiary pursuant to this paragraph under an applicable entity responsible for reporting information, under which this paragraph will be deemed to have complied with this paragraph and will not be subject to such sanctions. [After an applicable solicitation and comment period, CMS would then be required to issue and publish specific Section 111 "safe harbors"][Fn27]

The SMART Act's requirement that a safe harbor be created with respect to RREs "good faith efforts" to determine a claimant's Medicare beneficiary status strikes directly at an issue that has concerned the industry from day one of CMS' implementation of Section 111. To better appreciate the significance of this particular proposal some background is in order.

Under Section 111, RREs are statutorily required to determine a claimant's Medicare status. The actual statutory text of Section 111 provides that RREs shall "determine whether a claimant (including an individual whose claim is unresolved) is entitled to benefits under the [Medicare] program under this title on any basis."[Fn28]

However, the statute does not provide a specific process or system for RREs to determine a claimant's Medicare status. Furthermore, the statute is devoid of an express provision requiring a claimant (or his/her counsel) to provide RREs with the necessary information to make this determination and does not otherwise contain a provision requiring the claimant (or his/her counsel) to cooperate.

In light of the statutory silence on this core compliance requirement, CMS introduced a Query Process system to assist RREs in determining a claimant's Medicare status. However, to use this system the RRE is required to submit the claimant's social security number or Medicare health identification number.

The need to obtain the claimant's social security or health identification number has caused issues for RREs, especially in the liability context where liability RREs (unlike their workers' compensation counterparts) do not typically have access to this information. There is significant concern that claimants will be reluctant to provide, or may outright refuse to provide, this information due to privacy reasons and concerns that same may be used for other discovery purposes. In fact, cases have already started to surface where the claimant has refused to provide the RRE with their social security number and other identifying information needed to determine Medicare status.[Fn29]

In the absence of a specific statutory mandate requiring the claimant to provide this information, and with CMS refusing to recognize any safe harbors in these situations, RREs could be left in the very troublesome position where it is difficult, or impossible, to determine a claimant's Medicare status, although it is required to do so. This situation takes on an even more ominous tone given that Section 111's significant penalty would all the while still be hanging over the RRE's head --- despite the RRE's genuine and diligent efforts to determine its reporting obligations.

Thus, for these reasons the SMART Act's proposed revisions will likely be well received by the industry. From a more global perspective, these revisions would seemingly comport with notions of overall fair play and justice.

Proposal #5

The SMART Act Would Eliminate the Required Use of SSN's and HICN's For MSP Purposes

As discussed under Proposal #4, there are legitimate concerns that RREs will encounter significant problems in obtaining a claimant's social security number for a number of reasons. Furthermore, RREs may be reluctant themselves to have access to this information as part of its claim files and records.

Accordingly, the SMART Act proposes that CMS would be required to "modify the reporting requirements ... so that an applicable plan in complying with such requirements is permitted but not required to access or report to [CMS] beneficiary social security account numbers or health identification claims numbers.[Fn30]

Proposal #6

The SMART Act Would Establish a Three (3) Year Statute of Limitation for MSP Claims

The applicable statute of limitations governing MSP claims remains alarmingly unclear and confusing. In the recent case of U.S. v. Stricker, the court noted that the MSP is "convoluted and complex" and "a model of un-clarity" as the court in that case struggled to determine and apply the appropriate statute of limitations regarding the MSP claim before it.[Fn31]

The SMART Act would clarify this issue by establishing a three (3) year statute of limitations for MSP claims as follows:

An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to [Section 111] relating to such payment owed.[Fn32]

In addition, the SMART Act proposes the following limitations in relation to Section 111:

A civil money penalty may not be imposed under this clause with respect to failure to submit required information unless service of notice of intention to impose the penalty is provided not later than 3 years after the date by which the information was required to be submitted.[Fn33]

Proposal #7

The SMART Act Would Require CMS to Establish an Annual MSP Compliance Threshold Exemption Amount

The current version of the MSP does not contain a standard "nuisance value" or "small settlement" compliance exception.[Fn34] While CMS has established minimal monetary exceptions regarding the reporting of certain settlements, judgments, awards, and other payments under Section 111, these exemptions are quite limited and temporary.[Fn35] Furthermore, CMS has continually stressed that the potential applicability of these minor Section 111 reporting exceptions does not excuse the parties from addressing other MSP compliance obligations outside of Section 111.

The absence of an established MSP compliance threshold exemption raises legitimate questions regarding the breaking point at which it becomes economically infeasible and counterproductive for CMS to expend the time, administrative resources and taxpayer money to pursue MSP recovery. On this point, MARC has compiled several examples where CMS focused the full weight of its collection efforts on very small recovery claims, including one case where CMS ultimately demanded conditional payment reimbursement for $1.59.[Fn36]

In the claims context, this issue continues to cause frustration and delay in finalizing settlements, and imposes additional administrative costs for primary payers. This is particularly relevant in regard to smaller settlements where distribution of the settlement proceeds to the claimant, and the primary payer's ability to close its file, are routinely delayed by having to address MSP issues and waiting for CMS to provide necessary information.

To address this situation, the SMART Act would require that CMS establish an annual MSP threshold exemption amount below which MSP compliance would not be necessary.

In particular, CMS' Chief Actuary would be responsible for calculating the threshold exemption amount each year by November 15th in accordance with specific parameters set forth in the act. In addition, CMS would be required to publish this figure, along with certain information as to how same was derived including "a summary of the methodology used by [the] Chief Actuary in computing the threshold amount and such average cost of collection."[Fn37]

The SMART Act's proposal of a yearly MSP threshold exemption amount replaces the flat $5,000 monetary threshold exemption proposed last year in H.R. 4796.

Conclusion

As the foregoing illustrates, the SMART Act advances several proposals aimed at reforming key aspects of the MSP, substantively and procedurally. In many regards, the SMART Act can be viewed as a serious and reasoned effort toward making MSP compliance more reasonable, equitable and practical, while still respecting the important underlying objectives of the MSP.

In closing, as noted above, whether the SMART Act is ultimately enacted into law in its present form, or passed in a modified version, is simply unknown at this time. Along these lines, the reader will need to follow the progress of this bill as it proceeds through Congress. Those interested in learning more about the SMART Act and the legislative efforts related thereto should contact MARC directly.

About the Author

Mark Popolizio, Esquire is the Vice President of MSP Compliance & Customer Relations for NuQuest/Bridge Pointe. Prior to joining NuQuest, Mark practiced workers' compensation and liability legal defense for 10 years. During this time, he developed a national Medicare practice which included Medicare Set-Asides and Medicare Compliance. Mark also served as Vice President of the National Alliance of Medicare Set-Aside Professionals (NAMSAP) from 2006-2008 and remains active with NAMSAP concentrating on educational and legislative matters.

Mark is active on the national MSA/Medicare educational and training circuit. He is a regularly featured speaker on MSA/Medicare issues before carriers/TPAs, state bar associations and industry specific organizations. Mark has also published numerous articles on MSA/Medicare compliance issues. Mark can be reached at 786-457- 4393 or via e-mail at mpopolizio@nqbp.com.

End Notes

1. The Medicare Secondary Payer Statute (MSP) is codified at 42 U.S.C. § 1395y, et. seq. In addition, pertinent MSP provisions are contained in Subparts B, C and D of Title 42 of the Code of Federal Regulations (42 C.F.R. §§ 411.20 through 411.50, et. seq.)

2. See., 42 C.F.R. § 411.21.

3. 42 U.S.C. § 1395y (b)(2)(A)(ii). This section, in pertinent part, provides that Medicare will not make payment for medical services if "payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability policy or plan (including selfinsurance) or under no-fault." However, Medicare may make "conditional payment" for medical treatment if a primary plan "has not made or cannot reasonably be expected to make payment" with such payment "conditioned on reimbursement to the appropriate Trust Fund ... ." 42 U.S.C. § 1395y (b)(2)(B)(i), 42 C.F.R. §§ 411.21 and 411.52.

4. 42 U.S.C. § 1395y (b)(2)(B)(ii). This section, in pertinent part, provides as follows:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.

A primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means. (Emphasis Added).

In addition, a settlement or contractual obligation demonstrates "responsibility" under the MSP. See, 42 C.F.R. § 411.22(a)(3).

5. 42 U.S.C. § 1395y (b)(2)(B)(iii).

6. 42 U.S.C. § 1395y (b)(2)(B)(iii) and 42 C.F.R. § 411.24(g).

7. 42 U.S.C. § 1395y (b)(2)(B)(iii) and 42 C.F.R. § 411.24(c)(2).

The recent case of U.S. v. Stricker, CV-09-PT-2423-E, 2010 U.S. Dist. LEXIS 106981 (U.S.D.C. Northern District of Alabama) (September 30, 2010) illustrates Medicare's broad enforcement rights. In Stricker, the government sued the plaintiff law firms, the defendant corporations and their insurance carriers involved in a 2003 liability settlement for their alleged failure to protect Medicare's interests regarding conditional payments. As part of this action, Medicare claimed double damages against the primary payers (insurers and corporations). While this action was ultimately dismissed on the unrelated and technical grounds of the statute of limitations; Stricker nonetheless underscores the need for all parties to ensure that conditional payments are being addressed, and dispels the erroneous belief that conditional payments are solely the claimant's (plaintiff's) problem.

8. See, 42 C.F.R. § 411.26.

9. It is important to note that this is a separate and independent reporting process from the electronic reporting mandates under Section 111 of the Medicare, Medicaid and SCHIP Extension Act.

10. Medicare beneficiaries can also view conditional payment information on line through the site MyMedicare.gov which may serve as an additional tool to assist the parties in obtaining conditional payment information. However, from accounts received by the author, there may be questions regarding the accuracy and relatedness of the information posted by CMS in certain situations.

11. E-Mail correspondence received by NuQuest/Bridge Pointe from CMS dated March 16, 2011. In this correspondence, CMS states: "With the passage of health care reform, Medicare claims must be filed within one calendar year following the year in which the services are provided (date of service). The 27 month rule is no longer in effect."

12. The reader may wish to review an interesting article highlighting this problem entitled Medicare Won't Let Clients Repay Government Lawyers Say. This article may be obtained from the MARC website: www.marccoalition.com, select "Press Room."

13. SMART Act (H.R. 1063) § 2 (vii) (I) (p.2-3).

14. SMART Act (H.R. 1063) § 2 (vii) (II) (aa) (p.3).

15. SMART Act (H.R. 1063) § 2 (vii) (II) (bb) (p.3-5).

16. SMART Act (H.R. 1063) § 2 (vii) (II) (bb) (p.3-5). This section states:

If the Secretary fails to provide a statement of reimbursement amount within 30 days of the date of such additional notice the claimant, applicable plan, and an entity that receives payment from an applicable plan shall not be liable for and shall not be obligated to make payment subject to this section for any item or service related to the request unless the Secretary demonstrates in accordance with regulations) that the failure was justified due to exceptional circumstances (as defined in such regulations). Such regulations shall define exceptional circumstances in a manner so that not more than 1 percent of the repayment obligations under this sub clause would qualify as exceptional circumstances.

17. SMART Act (H.R. 1063) § 2 (vii) (III) (p.5).

18. H.R. 4796 proposed two alternate methods to obtain and calculate CMS' conditional payment amount referred to as the "final demand" method and "good faith" method.

In general, under the "final demand" method, it was proposed that the parties could request CMS' final conditional payment amount at any time "beginning 120 days prior to the reasonably expected date of such settlement, judgment, award or other payment." CMS would then have 60 days to provide this figure. If CMS failed to provide this figure within the 60 day period, its claim was waived.

Under the "good faith" method, it was proposed that during the 90 day period preceding the "reasonably expected date of a settlement, judgment, award or other payment" the parties could calculate "in good faith" the amount of conditional payment reimbursement using certain billing data and other information. The parties would then tender the calculated amount to CMS in satisfaction of their conditional payment obligation. CMS would have 75 days to accept or reject the tendered payment.

As noted, the SMART Act now replaces this dual track system with a single and simplified process as outlined above. If the reader is interested in reviewing the prior reform proposals contained in H.R. 4796, please contact the author for his article entitled The Medicare Secondary Payer Enhancement Act of 2010 (H.R. 4796) Proposes Amendments to the Medicare Secondary Payer Statute (Settlement News - April 2010).

19. SMART Act (H.R. 1063) § 2 (viii) (p.6-7).

20. SMART Act (H.R. 1063) § 2 (viii) (p.6-7).

21. SMART Act (H.R. 1063) § 2 (viii) (p.6-7). 

22. See e.g., 42 C.F.R. § 405.900. Claimants also have other potential methods to request a reduction of the conditional payment claim not available to primary payers, including, but not necessarily limited to, "economic hardship," "equity and good conscience," and for reasons "beyond the fault of the claimant." See e.g., 42 U.S.C. § 1395y(b)(2) (B)(v); 42 U.S.C. § 1395gg, 42 U.S.C. § 404(b), 31 U.S.C. § 3711 and 20 C.F.R. § 404.506. This is not an exhaustive list of all possible recourses to request a reduction of the conditional payment claim as this particular issue is beyond the scope of this article. As such, to fully examine this area the reader needs to review the United States Codes, Code of Federal Regulations, case law decisions and any CMS policy statements. The reader may also wish to consult MSPRC's website www.MSPRC.info.

23. See, e.g., October 6, 2008 letter from CMS to NuQuest/Bridge Pointe, citing 42 C.F.R. § 405.926.

24. The MMSEA is codified at 42 U.S.C. § 1395y(b)(7) and (8). Subsection (7) concerns group health plans. Subsection (8) concerns liability insurance (including self insurance), no-fault insurance and workers' compensation which are commonly referred to by CMS as non-Group Health Plans (non-GHP or NGHP).

25. 42 U.S.C. § 1395y(b)(8)(E). This section further states:

The provisions of subsections (e) and (k) of section 1128A shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this title with respect to an individual.

26. SMART Act (H.R. 1063) § 4 (1) (p. 10-11).

27. SMART Act (H.R. 1063) § 4 (2) (p. 11-12).

28. 42 U.S.C. § 1395y(b)(8)(A).

29. See, Seger v. Tank Connection, LLC , No. 8:08CV 75, 2010 U.S. Dist. LEXIS 49013, at *4 (D. Neb. April 22, 2010), Hackley v. Garofano, et. al., No. CV 095031940S, 2010 Conn. Super. LEXIS 1669, *2 (Conn. Super. Ct. July 1, 2010), and Smith v. Sound Breeze of Groton Condominium Association, No. KNLCV095012261S, 2011 Conn. Super. LEXIS 194 at *3 (Conn. Super. Ct. February 3, 2011).

30. SMART Act (H.R. 1063) § 5 (p.12).

31. U.S. v. Stricker, CV-09-PT-2423-E, 2010 U.S. Dist. LEXIS 106981 (U.S.D.C. Northern District of Alabama) (September 30, 2010), at p. 8 (citations omitted). The court in Stricker noted that the MSP was "silent as to a deadline for filing a claim for recovery." Stricker at p. 11. In that case, the parties agreed to apply the statute of limitations contained under the Federal Claims Collection Act.

32. SMART Act (H.R. 1063) § 6 (a) (1) (p.12-13).

33. SMART Act (H.R. 1063) § 6 (a) (2) (p.12-13).

34. Currently, under 42 U.S.C. § 1395y (b)(2)(B)(v) Medicare may "waive (in whole or in part)" an individual claim if the Secretary determines that the waiver is in the best interests of the program. However, the prospect of securing a waiver under the current system is based purely on an individualized and ad hoc basis. This process does not provide the parties with an efficient, timely or consistent method to address and determine their potential MSP obligations in relation to smaller claims and settlements.

35. Full examination of Section 111 reporting and CMS' various reporting exceptions related thereto is beyond the scope of this article. However, in general, under Section 111 one of CMS' reporting triggers is referred to as TPOC (Total Payment Obligation to the Claimant).

Reporting under TPOC is required upon claim resolution (or partial resolution) via a settlement, judgment, award or other payment. CMS has established certain TPOC "interim monetary reporting exemptions" below which Section 111 TPOC reports are not required. At the time this article was drafted, TPOC reporting under Section 111 is exempted regarding liability (except no-fault) and workers' compensation TPOCs as follows: TPOCs prior to 1/1/13 of $0-$5,000; TPOCs from 1/1/13 to 12/31/13 of $0 to $2,000; and TPOCs from 1/1/14 to 12/31/14 of $0 to $600.

36. If the reader is interested in learning about these instances, contact the MARC coalition, www.marccoalition.com.

37. SMART Act (H.R. 1063) § 3 (a) (2) (9) (p.10).

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