Keeping Up With Conditional Payment Obligations

Effective strategies for Medicare conditional-payment recovery cost containment

January 18, 2020 Photo

Compliance with the Medicare Secondary Payer Act (MSP) in a workers compensation, general liability, or no-fault settlement requires a multi-faceted approach to satisfy three pillars—past, present, and future—of protecting Medicare’s interest. These three pillars can be broken down simply when parties are nearing the end of settlement negotiations with Medicare beneficiaries.

Protecting Medicare’s past interests involves reimbursing Medicare for medical payments it made related to the claim prior to settlement, also known as conditional payments.

Regarding present obligations at the time of the claim/settlement, responsible reporting entities (RREs)—typically the workers compensation, general liability, or no-fault plan/carrier—must submit certain required claim/settlement information via Medicare, Medicaid, and SCHIP Extension Act (MMSEA) Section 111 Reporting to Medicare to facilitate the coordination of benefits and recovery of conditional payments as it relates to that Medicare beneficiary’s claim.

Obligations to protect Medicare’s future interests involve allocating a portion of the settlement funds for the Medicare beneficiary’s future medical care. This is to avoid shifting the future burden of accident-related medical expenses to the Medicare Trust Fund. This is known as a Medicare Set-Aside (MSA), and is more frequently incorporated into workers compensation settlements (however, general liability and no-fault claims will also soon have to consider an MSA, or other protection of Medicare’s future interests, as Medicare is currently developing a proposed rule for this purpose).

For now, let’s focus primarily on the past aspect of MSP compliance in terms of how to best navigate Medicare’s current conditional payment recovery processes, and strategies for doing so to effectuate cost-effective outcomes in Medicare claims.

Conditional Payments Not Reimbursed

Arguably, reimbursement of Medicare’s conditional payments is the riskiest pillar of MSP compliance, as Medicare has the right to file an action for double damages in federal court seeking recovery of unreimbursed conditional payments. Further, Medicare may pursue recovery from any party to the settlement, including the “primary plan” (the workers compensation, general liability, or no-fault plan/carrier), even if the primary plan has already paid settlement funds to the Medicare beneficiary. This could cause the primary plan to potentially have to pay the amount of settlement twice.

Department of Treasury actions are also common when Medicare has not been reimbursed. The Treasury may take an offset and/or garnish either the beneficiary’s Social Security benefits or a primary plan’s federal tax refund.

Earlier this year, in fact, the United States filed an action in the U.S District Court for the Middle District of Pennsylvania against a plaintiff’s attorney, Medicare beneficiary plaintiff, and “primary plan” for reimbursement of conditional payments. The U.S. asserted that it no longer had to reduce its claim for attorneys’ fees due to the fact that it had to file litigation to recover its conditional payments. The case is ongoing and is currently proceeding to trial for a decision on the attorneys’-fee matter, but the litigation demonstrates that the U.S./Medicare is currently pursuing litigation, and all legal remedies available if it has to resort to litigation, to recover its conditional payments.

Ensure Validity of Conditional Payments

While Medicare may have a right to recover double damages for unreimbursed conditional payments, its ability to recover conditional payments is not without limits. Beginning in 2014, after passage of the SMART Act of 2013, CMS is required to calculate an annual threshold under which it does not require MMSEA Section 111 Reporting or require conditional payment reimbursement. This threshold initiative ensures that Medicare does not spend more federal dollars on its recovery processes than it collects.

As of 2019, the threshold is $750, meaning that if your workers compensation, liability, or no-fault settlement is $750 or less, Medicare may not pursue recovery of conditional payments. As this threshold is calculated each November, it is important to stay abreast of the current threshold.

Additionally, the SMART Act imposed upon CMS, for the first time, a statute of limitations for recovery. CMS’ ability to recover conditional payments is capped at three years after notice of a settlement, judgment, award, or other payment. Since demands for recovery are automatic, and CMS issues conditional-payment recovery letters in both below-threshold and beyond-statute-of-limitation scenarios, it is incumbent upon the primary plan to dispute the conditional payment as being below threshold/outside of statute of limitations.

Further, the maximum amount of collection for conditional payments is capped at the total settlement amount minus any procurement costs, even if Medicare has made medical payments beyond the amount of the settlement. CMS is well known for including conditional-payment recovery charges that may be unrelated to the injury in question and not legally compensable under the workers compensation, general liability, or no-fault policy. These charges should be disputed, and typically Medicare will remove unrelated charges upon request with adequate support to justify their removal.

Lastly, Medicare may not recover conditional payments for treatment that would not otherwise be compensable under state law or the policy in question.

Conditional-Payment Recovery Contractors

Currently, there are two contractors that conduct conditional-payment recoveries: the Benefits Coordination & Recovery Center (BCRC), and the Commercial Repayment Center (CRC).

In 2015, the CMS engaged the CRC for the first time to recover conditional payments prior to a settlement, judgment, or award. Only workers compensation and no-fault entities are impacted by this new contractor, as general liability claims continue to be handled by the BCRC.

In workers compensation and no-fault claims, the CRC issues conditional-payment notices (CPNs) when a recovery amount is owed. The RRE must respond to the CPN within 30 days. If the RRE does not respond within the allowed timeframe, a demand will issue and a debt will be established to the government by the RRE. This is a departure from CMS’ practices prior to 2015 where it sought conditional payment recovery only after a settlement, judgment, or award. The updated process increases conditional-payment exposure for primary plans during the life of a claim.

The CPN is triggered only by the RRE’s responsibility to pay medicals, as the CRC requires no settlement or resolution of the case. The CRC will look to recover for the period from the date of injury to the present, unless an ongoing responsibility for medicals (ORM) termination date is entered. To reduce exposure, RREs must be vigilant in populating ORM termination dates. This ensures that the Medicare Trust Fund does not over-collect. Demand letters accrue interest from the letter date unless payment is made within 60 days.

In general liability claims, the BCRC continues to issue conditional-payment letters (CPLs) and final demands when the claim is self-reported to the BCRC or when there is a report of settlement via MMSEA Section 111 Reporting. CPLs are different from CPNs in that CPLs will not require a due date for response, and a demand will not issue until a settlement occurs. Understanding the differences and recovery practices between both contractors—BCRC and CRC—and which entity to look to when resolving conditional payments, is critical to ensure that claims for recovery by Medicare are resolved.

Just recently, in August 2019, the CRC announced that it had a backlog of approximately $4 billion of conditional-payment recoveries that it had not yet recovered, which amounted to roughly 338,000 conditional-payment-recovery leads. The CRC suggested that RREs update their Section 111 data so that, when these CPLs issue, it will result in accurate claims for recovery.

Further, the CRC announced that workers compensation/no-fault RREs can now request a “pre-CPN” worksheet, which lists the outstanding leads for the backlogged claims. The pre-CPN worksheet does not contain actual debts, but rather affords the RRE/primary plan an opportunity to properly adjust the debt through the normal dispute and appeals process, and, when ready, request a CPN. This process should allow both the CRC and RREs the opportunity to systematically reduce the backlog on CRC’s side, as well as reduce contingent liabilities for workers compensation and no-fault carriers on their Medicare claims.

The Medicare conditional-payment landscape is ever-changing, and ensuring that conditional payments are proactively disputed and timely reimbursed is more important than ever to ensure cost containment in Medicare claims.

About The Authors
Heather Sanderson

Heather Sanderson, Esq., is chief executive officer of Sanderson Firm PLLC.

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