A new report indicates that federal legislation aimed at simplifying compliance with the Medicare Secondary Payer Act is a good first step, but warns that unresolved questions remain.

The Medicare Secondary Payment Act was enacted in 2007 to save costs by ensuring people on Medicare are not paid twice after an accident.

For example, Medicare in most cases makes the initial payment when someone, whose primary insurance is Medicare, is injured in an auto accident, falls in a store or is injured at work, and is later reimbursed through a settlement with an insurer or other third-party payer.

However, in practice, the law ensuring that Medicare's conditional payments are properly paid back has caused delays in the settlement of workers' compensation and personal-injury cases. The law stated Medicare must be informed of a proposed settlement, and approve it, before final payment is made to the beneficiary as well as Medicare. The Centers for Medicare and Medicaid Services was given 120 days notification of a possible settlement.

In early January, Congress passed a new law, H.R. 1063, the SMART Act, or The Strengthening Medicare and Repaying Taxpayers Act, to help resolve the delays. This law stipulates that Medicare must object to a settlement within 11 days or else the deal can proceed.

The report on the new law, by Belleville, Ill.-based Allsup, says, "For the insurance industry, the SMART Act will resolve ongoing issues related to the Section 111 Reporting requirements in the MSP law, which have caused significant headaches."

However, Aaron Frederickson, an expert in MSP Act compliance who joined Allsup as director, Medicare Secondary Payer Compliance, in February 2013, says that "unresolved questions regarding the statute of limitation related to civil penalties and regulations that have yet to be promulgated will continue to challenge risk managers as they evaluate company-wide policy."

Problems caused by MSP compliance, including the potential for fines and penalties, still constitute a significant potential cost to the industry, according to Frederickson.

Frederickson says the SMART Act will improve the resolution process required by the law and will also create procedural "safe harbors" that will allow the insurance industry and attorneys to concentrate their efforts on resolving cases involving Medicare beneficiaries in an efficient manner.

But although insurers, self-insureds, claimants, plaintiff's lawyers and third-party payers are all involved in the SMART Act, only insurers are subject to $1,000 per-day, per-claim fine for cases not reported correctly to CMS by insurance carriers.

While this maximum penalty will continue to remain in effect, CMS will be given discretion when enforcing these provisions, according to Frederickson. CMS will also be allowed to examine the culpability of the so-called "Responsible Reporting Entities (RRE)," such as insurers, trial lawyers or third-party payers, and any good faith efforts they made to identify a beneficiary.

The final bill also diluted the right of review and appeal for parties that wish to appeal an adverse CMS determination, Frederickson said. As enacted, parties are specifically prohibited from appealing discrepancies in the statement of reimbursement and requesting removal of charges during the protected periods. "Parties wishing to appeal an adverse CMS determination will likely have to go through a more drawn out process similar to the current procedures," Frederickson said in his new paper.

The procedures are also not defined under the current law and will be subject to the administrative rulemaking process, he said.

The issue, although seemingly arcane, is a significant one for property and casualty insurers.

The insurance industry as well as others involved in workers' compensation claims, are already requesting additional changes in the MSP law even though the SMART Act, aimed at correcting problems made in amending the law in 2007, took five years to work its way through Congress.

The latest bill, the Medicare Secondary Payer and Workers' Compensation Settlement Agreements Act of 2013 was introduced May 15 in the House as H.R. 1982.

The new legislation seeks to reform the processes and procedures used by Centers for Medicare and Medicaid Services in its review of workers' compensation settlement agreements.

Special Reports /

Law Addressing MSP Act Flaws Still Needs Some Work: Report

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