New Penalty of $1,000 Per Day Per Claimant—Have We Got Your Attention?

New Penalty of $1,000 Per Day Per Claimant—Have We Got Your Attention?

Have you heard about the new S-CHIP law (P.L. 110-173)?  Sort of hidden in sec. 111(8) are new provisions for reporting to the government when your client’s case concludes.  This goes into effect on July 1, 2009.  The new provision is an addition to the Medicare Secondary Payer law, 42 USC 1395y.  For liability cases, this is a sea change—for workers compensation litigants, not so much.

  To listen for free to my podcast on changes to Medicare Secondary Payer law, click here.

Sorry to say, nothing really changes the current procedures of MSA companies creating and submitting set-aside analyses to the Centers for Medicare and Medicaid Services for approval.  Many people on both the claimant and employer sides of the equation have not realized that this is an optional step.  In fact, currently there is no downstream enforcement of the set-aside provisions.  It was the threat that the government had the ability to enforce that kept everyone awake at night.

Tom Bosserman of CMS’ San Francisco office has repeatedly said that “CMS is the Blanche Dubois of government agencies; we rely on the kindness of strangers.”  What he meant is that if the parties don’t report their settlement to CMS, they don’t know about it.  With the new S-CHIP law, that era is over.

Now primary payers (that’s the employer’s insurance company or self-insured entity) must report settlements, judgments, awards and payments that conclude a case to the government within a time period yet to be announced.  They must report electronically through a central clearinghouse yet to be announced.

The statute does specify the penalty to the primary payer for not reporting.  It’s $1,000 per day per claimant, a sum large enough to get anyone’s notice.

Once this gets going, CMS will have a database of social security numbers (same as Medicare i.d. number) for Medicare beneficiaries who have received a payment for their claimant.  When that beneficiary seeks out treatment for the affected body part 2, 3, 5, or 10 years after the case is over, the Medicare i.d. shown in the medical provider’s bill can be matched up to  the case conclusion database.  Medicare may pay the doctor or hospital on a conditional basis, but Medicare can investigate whether it should only be the secondary payer for this bill.  In other words, did the settlement cover this post-case conclusion expense?  If it did, Medicare will want reimbursement, unless the MSA has been properly exhausted.

Medicare’s likely questions:  Was there a Medicare Set-Aside?  How much of those funds are left?  And here’s the big one:  Were the MSA funds expended only for claim-related Medicare-eligible expenses? 

If there’s a trip-up on any of these answers, the biggest risk to the claimant is a demand for reimbursement or, worse, loss of Medicare benefits. 

Who else can Medicare look to?  Under 42 CFR 411.24(g), they have a right of action to recover from anyone who received the primary payment.  That’s the claimant, the healthcare provider and the attorney who took a contingency fee out of the primary payment.  Under 42 CFR 411.24(i), if none of those folks makes Medicare whole, “the primary payer musts reimburse Medicare even though it has already reimbursed the [Medicare] beneficiary or other party.”

So what do you do about it?  Probably what you’re already doing.  Make sure to include a good-faith Medicare Set-Aside allocation in your documents.   It’s a good idea to set it up as a structured settlement to reduce the cost. Whether to get CMS approval of the set-aside remains a business decision, but after S-CHIP we have a much better idea how CMS will handle downstream enforcement.

Pity the poor liability attorneys for whom this MSA business is all new.