Beware – Medicare Increases Enforcement of Medicare Secondary Payer Act

Effective April 4, 2024, the Centers for Medicare and Medicaid Services (CMS) will actively review workers’ compensation claims reaching finality via settlement, judgment, or award.  Why is this a big deal?  For the first time CMS will actually be reviewing all workers’ compensation data received under the Section 111 reporting.  Civil monetary penalties will be issued and action will be taken when Medicare’s interests are not considered in a settlement. 

Section 111 Reporting: A Brief Background  

The Medicare and Medicaid SCHIP Extension (MMSEA) Act of 2007i authorized CMS to prepare regulations related to the reporting of workers’ compensation claims that included instances where the carrier had an Ongoing Responsibility for Medical (ORM) and Total Payment Obligation to Claimant (TPOC).ii  After years of being largely ignored, CMS published Civil Monetary Penalties (CMPs) regulations in the Federal Register on October 11, 2023.iii Under these rules, which went into effect on October 11, 2024, and will be enforced as of October 11, 2025, CMS will issue civil penalties on insurance carriers who fail to report all workers’ compensation settlements properly. 

On February 23, 2024, CMS announced that they would begin to collect information “necessary to assist Medicare in making appropriate determinations concerning coordination of benefits” under the MSP Act “since Medicare should not be a primary payer for future medical services related to a WC injury as specified in … 42 CFR 411.46.  All MSA (Medicare Set-asides) funding for WC settlements shall be reported regardless of whether or not an approval was previously sought from CMS.”  Based on this announcement, all workers’ compensation insurance carriers will report settlement information.  The required information will include, but is not limited to, the following: 

• MSA amount; 

• MSA Period (number of years); 

• Funding Method – lump sum or annuity; 

• Seed Money and annual payments for MSA (annuities only). 

The bottom line is CMS will now have information regarding many, if not all, workers’ compensation settlements.

The Big Picture:  Comply Now with the MSP Act 

This change by CMS represents a significant policy shift.  CMS will know about all workers’ compensation settlements reported through the Section 111 Reporting requirements.  They will use this information to “flag” claims where an MSA was not submitted under the voluntary Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) review process.  In turn, they can identify claims where Medicare remains the primary payer post-settlement and take any of the following steps: 

•  Place an administrative stop on a Medicare beneficiaries’ entitlement to reimbursement for items or services until they are satisfied their interests are considered and Medicare becomes the “secondary payer;” and/or 

• Undertake recovery via direct cause of action and/or subrogation. 

Now is the time for all interested stakeholders – especially insurance carriers, third-party administrators, self-insured employers, and all attorneys (defense and plaintiff) to take note.  Medicare’s interests must be considered in all settlements. 

Conclusions 

Implementing these reporting procedures signals a shift of CMS’s priorities from the review of MSAs, to that of actual enforcement.  Everyone should expect decisive action soon.  Here are some proactive steps to take to avoid problems, penalties, and direct causes of action by CMS: 

• Document your file:  Make sure you have a sufficient paper trail that explains in detail the steps you took to consider Medicare’s interests. 

• Document your settlement agreement:  Now is the time to include the MSA in your settlement agreement.  This is especially vital for settlements that include a $0 allocation or are not submitted to CMS for review and approval – e.g., cases below the workload review threshold.  CMS will target these files for audit. 

• Document your company or firm’s best practices:  Work with a legal compliance professional to create a “best practices” guide for managing Medicare Secondary Payer issues.  Implementing this keeps you off CMS’s radar and mitigates future exposure. 

There needs to be an increased emphasis on compliance.  Everyone will be subject to CMS scrutiny moving forward – insurance carriers, defense attorneys, and attorneys representing injured people.  Now is the time for action.   

Will you be ready?  MSA Source is here to assist you through our approach to passion driven results.