Increased Penalties are Coming for Incorrect Medicare Secondary Payer Reporting

The federal agency that oversees Medicare is seeking to ramp up enforcement of its reporting requirements, and workers’ compensation stakeholders need to dot their Is and cross their Ts. The Centers for Medicare and Medicaid Services (CMS) has issued a proposed regulation that specifies how and when it will impose financial penalties. Anyone affected has little time to submit comments before the final rule is issued.

This new regulation will require an increased reliance and partnership with your Medicare Set-Aside vendor relationship.

A Brief History of the Medicare Secondary Payer Act

What began 13 years ago as a way to further Medicare’s efforts to ensure it did not pay for medical care that should be covered by another payer– like workers’ compensation – has led us to this proposal.

In 2007, Section 111 of the Medicare, Medicaid, and SCHIP Extension Act expanded the Medicare Secondary Payer Act. Among other things, it added requirements for non-group health plans – workers’ compensation, no-fault, and liability (what CMS calls Responsible Reporting Entities, or RREs) – to electronically submit information about claims involving Medicare beneficiaries to CMS. The information must be reported quarterly and must include acceptance and termination of ongoing responsibility for medical – if any – and total payment obligation to the injured worker, a settlement, judgment award, or other payment. . The data they provided would then be used to coordinate benefits and identify conditional payment reimbursements.

The statute initially included a mandatory penalty – called a Civil Monetary Penalty (CMP) – of $1,000 per day, per injured worker, for noncompliance with reporting. That was changed several years later when the SMART ACT of 2012 was passed. That law modified the language to indicate that CMPs up to $1,000 per day per injured worker could be imposed.

The SMART ACT required CMS to issue regulations prior to imposing the penalties. However, no regulations were implemented and, therefore, no CMP has been issued since CMS began accepting the reports as of January 2011. But the proposed rule issued in February changes all that.

The Proposed Rules for CMS Penalties

The proposed rules spell out exactly how and when CMS may impose penalties, some of which seem more aggressive than the current language. The situations where penalties may be generated include:

• Responsible reporting entities (RREs) fail to register and report at all. The proposed rule says Section 111 information must be reported within one year of the date a settlement or other payment obligation was established. The proposal says failure to do so will incur a CMP of up to $1,000 per day, per individual, with a maximum penalty of $365,000 per individual, per year.
• RREs submit the required information, but in a manner that exceeds the error tolerance thresholds set by the Secretary of Health and Human Services in 4 out of 8 consecutive reporting periods.
• RREs contradict the information they previously reported when CMS tries to recover its payments from them. In this scenario, the RRE would be subject to a Civil Monetary Penalty (CMP) based on the number of days that the entity failed to appropriately report updates to beneficiary records. The penalty would be up to $1,000 per day, per individual up to a maximum of $365,000.

This situation is causing consternation among affected stakeholders. As stated by Dan Anders from Tower MSA, “the penalty could be much more than the offense seems to warrant. Thousands of dollars in penalties could be assessed for what amounts to a conditional payment demand of $2,000. It was thought the SMART Act changes allowing for more discretion would reduce the $1,000-per-day-per-claimant penalty under these scenarios. However, this proposal leaves little room for forgiveness of the inevitable errors which occur with reporting large amounts of data.”

As of right now, CMS says it does not have systems in place to monitor the times that entities contradict their reported data. However, the agency said it is implementing monitoring systems to assess future reporting violations.

The agency outlined several scenarios where entities would not be penalized, including

• An entity reports information within one year of the date of settlement
• A reporting entity’s submission complies with the reporting error thresholds
• An entity is unable to obtain required reporting information from Medicare beneficiaries and documents its good faith efforts to obtain the information. To fulfill this, the entity must certify that the individual has not responded or provided the information; has documented to reflect its efforts to obtain the information, and maintains records of its good faith efforts that it can produce as evidence for a period of 5 years.

Other Stipulations of CMS Requirements

CMS said it would evaluate compliance-based only on files submitted after the final rule has been implemented. Also, it will apply the 5-year statute of limitations from the date it identifies noncompliance.

CMS said it expects to communicate with the RRE informally through a “pre-notice process” to allow the RRE a chance to present mitigating evidence, within 30 calendar days before the CMP is assessed.

Also, parties subject to CMPs would receive formal written notice and would be able to request a hearing with an administrative law judge within 60 days of receipt. The entity may appeal the ALJ’s decision to the Departmental Appeals Board within 30 calendar days. The DAB’s decision is binding 60 calendar days after service of its decision, unless there is a petition for judicial review.

CMS has given stakeholders a 60-day comment period on the final rule, which ends April 20. It’s expected a final rule will be issued before the end of the year.

The Bottom Line of Medicare Secondary Payer Reporting

Failure to accurately report acceptance and termination of medical, correct diagnosis codes or claim settlements involving Medicare beneficiary claimants, may result in big fines. Most claims systems have fields where this information is inputted and transmitted either directly to Medicare or through a reporting agent, typically an MSA vendor. It is imperative claims professionals provide accurate and timely information which matches the current status of the claim to avoid these significant penalties.

It is our recommendation to leverage a strong MSA vendor partnership to navigate these changes at CMS.

Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center.

Contact: [email protected].

Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/

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