The Centers for Medicare and Medicaid Services (CMS) recently announced that the planned April 1, 2010 implementation of the Medicare Secondary Payer Mandatory Reporting (MSP) has been pushed back to January 1, 2011. This latest delay in the pending federal reporting requirement enables affected insurers the opportunity to better understand the changes and prepare for implementation, as well as understand potential statutory changes.

The delay only affects those insurers, known as non-group health plan insurers (NGHP) defined in the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) as being an "applicable plan" for liability insurance (including self-insurance), no-fault insurance, and workers' compensation insurance, including the fiduciary or administrator for such law, plan, or arrangement. These are also referred to as the Section 111 requirements, which apply when the injured claimant under the liability policy is a Medicare beneficiary. Generally speaking, the implementation was delayed in response to the industry's need for additional guidance as well as an appreciation of the benefits associated with additional time to test the processing systems by both the CMS and the reporting entities. Despite the delay, CMS indicates that all NGHP Responsible Reporting Entities (RREs) should be registered with the Coordination of Benefits Contractor (COBC) and be currently involved in the testing phase or preparing to commence this phase. Beyond this delay, other activity is taking place in Washington, D.C. that relates to the overall MSP reporting requirements.

Current Activity Related to MSP Requirements

Congress recently introduced the Medicare Secondary Payer Enhancement Act of 2010. Some of the key proposed provisions of H.R. 4796 address changes in the current reporting thresholds, the noncompliance penalties, and the use of social security numbers in the reporting process.

Section 3 of the Act seeks to reduce the reporting burden on the reporting entities by changing the threshold. Medicare recovery would be limited to claims totaling $5,000 or more. CMS would not pursue claims less than that threshold. Increases in this threshold amount with respect to the Consumer Price Index (CPI) are accounted for with planned annual dollar increases based on the percentage increase in the CPI rounded to the nearest multiple of $100 for the year involved.

Section 4 of the Act focuses on mitigating the penalty provisions in 42 USC 1395y that currently specify that entities failing to comply with the reporting requirements "...with respect to any claimant shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant." The suggested replacement penalty provisions not only substitute "may" for "shall" with respect to the $1,000 for each day of noncompliance with respect to each claimant provision, but they also allow for some subjective analysis of the violation, with the specific directive to consider the fine assessment based on the "intentional nature of the violation." Moreover, a "safe harbor" would be created through a federal regulatory process soliciting proposals defining activities or steps that, if undertaken by reporting entities, could result in their being deemed to have complied with the requisite reporting requirements and thus not subject to the enforcement penalties.

Section 5 of the Act provides a response to industry concern expressed by entities, such as insurers and third-party administrators, about potential liability issues surrounding the collection of claimants' personal information, particularly social security numbers. This type of personal information is one set of data that is recognized by CMS for use by reporting entities in a CMS query to determine whether a given claimant is a Medicare beneficiary. That query function can also be used to verify individual's Medicare Health Insurance Claim Number, should it be available, and can be used in lieu of the person's social security number.

Medicare claimants' cooperation in supplying applicable data is required to satisfy the identification of beneficiaries and allowing for reporting entities to comply with the Section 111 requirements. The recently introduced proposal seeks modification of the reporting requirements by the Health and Human Services Secretary. Such revision involves the deletion of the reporting entities' requirement to either access or report beneficiary social security numbers or health identification claim numbers. If adopted, this change would significantly address the potential liability concerns associated with the gathering and reporting of this personal information.

Additional Guidance Available

With the recent updates posted to the CMS site, reporting entities can easily access up-to-date information about the clarification of existing requirements and guidelines and available assistance. Version 3.0 of the Medicare Secondary Payer Reporting User Guide was posted to that site on February 22. In addition, the "Reporting Do's and Don'ts" page provides detailed feedback on various reporting issues and errors that CMS has identified thus far in the process.

Taking advantage of this feedback can help prevent similar issues from happening both in the current testing phase, as well as in the final implementation. Apart from the updated user guide, CMS published three "Alerts" on February 24, with each one targeting specific areas of concern. Specifically, one not only provided information about how NGHP RREs can maintain compliance with the Section 111, but also provided guidance on "avoidance steps" that can be taken by these same entities to reduce the possibility of noncompliance. In addition, recognizing that confusion still exists about "Who Must Report," CMS also provided a second Alert on who and what entity is a Section 111 Responsible Reporting Entity. Finally, CMS promised forthcoming guidance on Section 111 reporting for risk management activity and clinical trials where the sponsor has agreed to pay for items or services related to injuries or complications. The Alert also directed RREs that they do not need to report information related to these activities until the guidance is published by CMS on its website.

The CMS Alerts for NGHP provide guidance that covers a range of topics. For example, on December 29, 2009, CMS addressed the issue of RREs who are actually "Foreign Entities." Defined as "an entity that does not have a U.S. address and/or a U.S. Tax Identification Number (TIN) or Employer Identification Number (EIN)," foreign entities that do not have the requisite identifiers cannot report the required claims information through the established secure website. In order for these entities to comply with the Section 111 reporting requirements, CMS is encouraging them to apply for a U.S. EIN through the available IRS process.

Other Alerts issued in 2009 addressed technical issues such as claim input files or the query process, as well as key information on implementation timelines and model language designed to assist in soliciting identification information from persons to establish Medicare beneficiary status. CMS also continues to hold their Town Hall Teleconferences to provide both technical and policy related information for NGHP reporting entities. Dates and times for these "Q&A" sessions are listed on its website. For those who cannot attend the live teleconferences, CMS makes transcripts available on its website, as well as some audio recording of the events.

Actions To Take Now

The window of opportunity is open to engage the CMS staff to better prepare for the new 2011 deadline, to understand the potential relaxing of the reporting requirements inherent in the pending Medicare Secondary Payer Enhancement Act of 2010, and to gain additional knowledge about this key -- and soon to be implemented -- compliance requirement. There is additional time available for reporting entities to assess their current business practices and technology solutions as they relate to these federal reporting requirements. Advance work and preparation can go a long way toward a successful, and penalty-free, implementation in 2011 and in future years' reporting.

Kathy Donovan is senior compliance counsel for Insurance Compliance Solutions at Wolters Kluwer Financial Services. For more information regarding this article, please contact her at Kathy.Donovan@wolterskluwer.com or at 800.481.1522, ext. 246689.

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