Medicare Secondary Payer: Will the SMART Act Pass This Year?

Medicare Secondary Payer: Will the SMART Act Pass This Year?

 By Jennifer C. Jordan, Esq.

As the election year heats up, many with Medicare Secondary Payer (MSP) issues are curious as to what the chance the Strengthening Medicare and Repaying Taxpayers Act of 2011 (the SMART Act) has of getting passed during the 112th Congress. As the topic of a legislative session presented at RIMS on Tuesday, April 17, 2011, attendees were honored to hear Congressman Tim Murphy of the 18th District of Pennsylvania personally address that very issue via telephone live from Washington, DC. Congressman Murphy, as one of the few politicians that truly understands the implications of MSP issues in personal injury settlements, has spearheaded this legislation since its original inception as H.R. 4796. As a member of the Energy and Commerce Committee, he was instrumental in arranging the hearing last summer that spurred recent voluntary improvements by the Centers for Medicare and Medicaid Services (CMS).

For those unfamiliar, the SMART Act proposes to improve the process through which CMS seeks Medicare reimbursements from insurance settlements. Because MSP obligations are triggered by operation of law upon settlement, judgment, award or other payment, Medicare is not entitled to reimbursement in liability insurance situations prior to that occurrence and will not provide a reimbursement demand until CMS has been notified of that event. Without knowing the final amount, parties are reluctant to settle claims because they cannot truly evaluate settlement value. Worse, the Medicare reimbursement may exceed the total available insurance and without being able to pre-negotiate a waiver or compromise with CMS, settlement is sometimes impossible. The SMART Act will facilitate a process through which a demand can be obtained prior to settlement, as well as resolve some other MSP issues, such as statute of limitations, appeal and the use of social security numbers.

Congressman Murphy opened his statements by jokingly pointing out the irony of people voluntarily wanting to send the federal government money yet being fundamentally ignored. But the truth of that statement is not humorous to those living with these issues daily. More importantly, it is not funny to individuals who sustained personal injuries and are being told that Medicare’s interests are more important than their own. CMS currently operates under the belief that the MSP entitles Medicare to essentially be made whole regardless of the underlying legal circumstances resulting in the decision to settle rather than go to trial, allowing it to recover up to the full amount of any settlement minus procurement costs, even if that means leaving injured Medicare beneficiaries with nothing. CMS has also been known to garnish Social Security payments to obtain reimbursement directly from its beneficiaries and erroneously deny Medicare benefits for unrelated medical services. Congressman Murphy said it best when he said this behavior “breaks the heart and boggles the mind.”

At the moment, H.R. 1063 has 100 sponsors yet Congressman Murphy stated that it needs 190 before they are able to progress to a mark up. The other issue it is dependent upon is scoring by the Congressional Budget Office (CBO). The bill must prove to have no negative impact on the budget, yet CMS will not speculate as to how much it will cost or recover on behalf of Medicare, therefore the bill will be subject to dynamic scoring and CBO will forecast what effect reactions to the policy are expected to have on the budget. Congressman Murphy alluded to a RAND report which apparently demonstrated that an exclusion of claims that settle for under $5,000 will still result in 90% of Medicare recoveries yet only use 43% of resources needed to obtain the reimbursements, therefore it seems plausible for the CBO to find a positive impact. If the additional sponsors are obtained and the bill scores, the goal is to push it before the August recess. If that doesn’t happen, Dave Farber of Patton Boggs feels strongly that legislation will pass when Congress resumes before the election and the SMART Act has a good shot given that it is good for the budget, big and small business, Medicare beneficiaries and the Medicare trust fund. If it does not get passed prior to the election, there will be one last shot when Congress returns for the lame duck session, but after that, it is expected that a new bill will need to be drafted and the entire will process start over next year. 

Now while the panel acknowledged that this legislation does not solve all of the MSP problems faced by the P&C industry (i.e., Medicare Set-Asides), it is a start. It has bi-partisan attention in both the House and Senate, meaning that our voices are being heard. The Congressman and the panel all encouraged attendees to reach out to their representatives to help secure the remaining sponsors needed. A list of the current sponsors can be found at: http://thomas.loc.gov/cgi-bin/bdquery/z?d112:HR01063:@@@P.

Robert Cartwright, loss prevention manager of Bridgestone and director of the Delaware Valley Chapter of RIMS, also told attendees of the ways in which RIMS recognizes the significance of MSP problems among its membership and supports the bill. Beyond its financial support, Risk PAC also strives to educate congressional candidates and lawmakers about the practice of risk management and our unique concerns and interests. For more information about Risk PAC and what you can do to support the SMART Act through RIMS, visit their website at: http://www.rims.org/externalaffairs/RISKPAC/Pages/default.aspx.

The RIMS session concluded with a very poignant statement by co-presenter Roy Franco. Simply stated, Mr. Franco acknowledged that the right thing to do is to pay back Medicare, but “that needs to be done in a way that makes sense and works well.” Because our industry has not been successful in getting CMS to recognize this concept voluntarily, legislative remedies are our best hope for a permanent solution. So in following the session’s constant theme, you are encouraged to call your congressman and help obtain the support needed for the SMART Act and hopefully start the ball rolling for MSP compliance improvements overall.

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