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Warning – Medicare Secondary Payer (MSP): Government sends strong message and goes after non-compliance

The Feds get serious about seeking Medicare recoveries

If you are an insurance company or self-insured, and make payments on liability or workers’ compensation claims, be aware that the Federal Government has filed a lawsuit signaling their intent to be aggressive in seeking reimbursement. As reported in Business Insurance, this “case breaks new ground because CMS simultaneously named insurers, settlement beneficiaries and plaintiffs attorneys all in one lawsuit.”  This case should alert all that if you make a payment on an injury claim, and fail to let the Government know about money they should be collecting, they will come after you.

Implications abound for attorneys and insurance companies in this first of its kind lawsuit

The lawsuit, brought in U.S. District Court for the Northern District of Alabama (U.S. v. Stricker, et al), seeks money and injunctive relief as result of a $300 million 2003 settlement of case involving injuries caused by PCB exposure (Abernathy v. Monsanto Co., et al.). The complaint names the defendants in the underlying case, the insurance companies (Travelers and AIG), the actual plaintiffs who received the settlement, and their various attorneys. The government alleged that over 900 of the plaintiffs that received compensation for medical expenses were also Medicare beneficiaries that had received medical payments. As part of the damages, the Government is seeking double the amount of Medicare payments plus interest (see Medicare Lien and Set-Aside Blog).

The crux of the government’s damage claim is to seek double the amount of payments made by Medicare as well as an injunction to force the defendants to reimburse Medicare prior to making any future settlement dollars to the claimants. As required by the Medicare Secondary Payer Act, the government’s complaint also alleges that the insurance providers failed to determine whether any of the settling plaintiffs were Medicare beneficiaries nor did they reimburse Medicare for payments that had been made to those beneficiaries. In addition to the insurance companies, the suit alleges plaintiff’s attorneys received $129 million of the settlement funds for claimants that they knew or should have known were Medicare eligible.

Implications and issues to be concerned about

  • Attorneys (and their Professional E&O Carriers) beware: By naming the attorneys, the Government is clearly signaling that they will be seeking recovery and fines from those that fail to follow the law. A plaintiff’s attorney that fails to make payments to Medicare on behalf of their clients, or fails to properly provide information to the defense, could be significantly exposed.
  • Costs to insurers will go up: The process to establish and update the reporting information will be costly. Those carriers with good claims systems will be ahead of the game and can lower their expenses, however, resources will need to be allocated to maintain the requirements.
  • Older cases may need to be revisited: While many believed that Medicare would only be going after future liability settlements, this case involves a claim that was settled in 2003. It is not clear how this aspect of the case will be resolved, however, it could be exceptionally expensive if carriers or self-insureds have to review closed matters from 7 years back.
  • Indemnity reserves may need to be adjusted: It is possible that plaintiff’s attorneys will be seeking higher amounts in cases where Medicare liens would significantly impact settlement amounts. If this trend takes hold then reserves on existing claims involving bodily injury may need to be adjusted to deal with increased claim exposures.
  • It’s time to get those systems in order: Given the potential risks, it is important to fully understand the rules and requirements established by the recent SCHIP Extension Act of 2007. There has been a push by insurance companies to ensure they are in compliance with these new notification rules, including new procedures and claims system modifications.  Failing to comply could be a costly mistake.

Clearly this case is a warning of things to come!


Some background on the Medicare Secondary Payer Act and New Reporting Requirements

The Medicare Secondary Payer Act has been in place since the early 1980’s. The act allowed Medicare to seek reimbursement for money an insurance company or self insured pays on behalf of a Medicare beneficiary. MSP covers all carriers, self-insureds, no fault insurance, and workers’ compensation insurance.  In the past, Medicare’s ability to track and enforce these claims was limited. With the passage of the SCHIP Extension Act of 2007, Medicare was given new tools to track payments. The passage alone marked the start of new steps to increase enforcement by the Federal Government to collect on the Secondary Payer provisions. As part of the Act, the Responsible Reporting Entity (carrier or self-insured) must advise Medicare when a claim is received involving a Medicare beneficiary recipient. Responsible Reporting Entities now have an ongoing requirement to determine from time to time whether a claimant is a Medicare eligible recipient.

For more extensive information about the Medicare Secondary Payer Act and the new reporting requirements, please look to these valuable links:

What do you think? Join in the conversation. Post your comments, questions, observations, thoughts, suggestions, musings, ideas for future topics, or other feedback. Or email me directly.

Posted in Medicare Secondary Payer, SPOT on Ops.

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  1. uberVU - social comments linked to this post on February 6, 2010

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  2. Important Update: Medicare Secondary Payer changes production date to January 2011 – The Claims SPOT linked to this post on February 18, 2010

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