The 1980 revisions have, themselves, undergone changes over theyears, but the following provision of the Medicare Secondary Payerstatute has been in existence in substantially the same form sinceDecember 1980:

Payment under [Medicare] may not be made . . . with respect toany item or service to the extent that. . .
(ii) payment has been made or can reasonably be expected to be madeunder a workmen's compensation law or plan of the United Statesor a State or under an automobile or liability insurance policy orplan (including a self-insured plan) or under no faultinsurance.

CMS interprets this language as providing that any settlementthat closes out future medical expenses in a claim against aprimary payer represents a situation in which "payment has beenmade" for an item or service otherwise covered by Medicare,precluding future Medicare coverage for those items or servicesuntil the payment has been exhausted on future medical expensesrelated to the injury. This provision of the Secondary PayerStatute gave rise to the use of the first Medicare Set-AsideArrangement (MSA) in a workers' compensation settlement in 1995.This same provision also forms the basis for statements fromseveral representatives of CMS over the past four years thatMedicare's interests as secondary payer must be reasonablyconsidered in liability settlements, just as they must be inworkers' compensation settlements. As a result, the use of MSAs inliability settlements is becoming more and more common.

New Deadline Set
The 2007 amendment tothe Secondary Payer Statute, contained in Section 111 of the MMSEA,adds 42 U.S.C. ?1395y(b)(8), which imposes strict informationreporting requirements on liability insurance plans, no-faultinsurance plans and workers' compensation plans, (includingself-insurance), referred to collectively by the Centers forMedicare and Medicaid Services (CMS) as Required Reporting Entitiesor RREs.

According to MMSEA Section 111, RREs have the responsibilityto:

1. Determine whether a plaintiff/claimant is entitled toMedicare benefits on any basis; and

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2. Upon settlement of a Medicare beneficiary's claim, submit allinformation required by CMS with respect to the claimant toCMS.

While MMSEA Section 111 became effective on July 1, 2009, actualreporting under MMSEA Section 111 has been delayed until April 1,2010, with regard to claims involving existing Medicarebeneficiaries where there is a settlement, judgment or award on orafter Jan. 1, 2010.

At that time, RREs will be required to submit requiredinformation on a quarterly basis. Penalties for non-compliance arestiff -- $1,000 per claimant for each day that the RRE is out ofcompliance. This penalty is in addition to any Medicare SecondaryPayer claim for which the plan, as primary payer, may beliable.

The information that RREs will be required to submit isstrikingly similar to the information currently required forsubmission and CMS review of MSAs in connection with workers'compensation settlements. This is a fairly clear indication thatCMS intends to gather information to identify situations in whichMedicare is a secondary payer and ensure that Medicare's interestsas the secondary payer are reasonably considered in workers'compensation and liability settlements.

As a result, RREs are already instituting internal proceduresfor compliance with the new reporting laws, including proceduresfor determining the Medicare status of every claimant, collectingidentifying information on all claimants when their claims areopened, and complying with the actual reporting requirements forclaims that settle. RREs are also taking steps to ensure that, asprimary payers, they reasonably consider Medicare's interests underthe Secondary Payer Statute in any settlement involving a Medicarebeneficiary.

A great deal of misinformation exists regarding the effects ofMMSEA Section 111 on the use of MSAs in liability settlements. Somehave stated that MMSEA Section 111 requires MSAs in liabilitysettlements, effective July 1, 2009. Others have stated that MMSEASection 111 says nothing about MSAs in liability settlements and,therefore, MSAs are not needed in liability settlements. Bothstatements are incorrect. The Secondary Payer provisions that giverise to the use of MSAs in liability and workers' compensationsettlements have existed for over 28 years. The new Secondary Payerprovisions in Section 111 of the MMSEA provide a powerful tool bywhich CMS can now better enforce its existing rights as secondarypayer.

Glenn W. Simpson, BS, MBA, JD, CPCU, is a vicepresident-operations at MGU Specialty Risk Services. He may becontacted at [email protected].John J. Campbell, JD, CELA, MSCC, is the founder and principalattorney of the Law Offices of John J. Campbell, P.C. He may becontacted at [email protected].Paul J. Masterson, AB, JD, is a vice president-operations at MGUSpecialty Risk Services. He may be contacted at [email protected].Ro Baltayan, CRC, CVE, CCM, CLCP, MSCC, is co-founder and developerof Medicare Allocations Inc., and is its principal MSA allocator.She may be contacted at [email protected].