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The Medicare Secondary Payer Act (MSP) as set forth in Section 42 USC 1395y(b) has created a black hole of potential financial liability for the business, legal, and medical communities. Essentially, the MSP allows the Centers for Medicare and Medicaid Services (CMS) an absolute right to obtain reimbursement from any or all entities that are, or were, required to make payment on behalf of a Medicare beneficiary or potential beneficiary. Those entities include any insurer, self-insurer, third-party administrator, employer, large group plan, or party who receives payment from these entities, including lawyers and health-care providers.

The penalties, in addition to the amounts owed as claimed by CMS, can include double the recovery amounts sought, plus fines of $1,000 per day for each non-compliance of each individual. The burden is on the entity for determining whether the beneficiary is eligible for or receiving Medicare benefits. Furthermore, the entity must obtain approval from CMS in order to be released from any liability for reimbursement to CMS for payment of benefits to the beneficiary.

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