A SPARC of Hope

SPARC Act aims to provide clarity on Medicare Part D lien recovery rights

September 20, 2017 Photo

Part D plans provide for a Medicare beneficiary’s prescription drugs. It is often misunderstood that traditional Medicare does not provide prescription coverage directly, and that a beneficiary must enroll in a Part D plan to receive Part D benefits. Roughly three out of four Medicare beneficiaries currently are enrolled in a Part D plan, according to the Kaiser Family Foundation.

The Medicare Secondary Payer Act (MSP) is a federal law that amended the Social Security Act in the 1980s to make Medicare a secondary payer when a primary plan is available (primary plans include workers compensation, no-fault, and liability insurance). The MSP applies to self-insured entities and insurance carriers alike.

While the MSP has made recovery for traditional Medicare conditional payments (Medicare liens) rather straightforward, recovery rights for Part D plans and Medicare Advantage Plans (MAPs) have not been clear. MAPs are provided through private insurance plans that are similar to Part D plans; however, MAPs provide for Medicare Parts A and B benefits as they would otherwise be covered under traditional Medicare.

Case law initiated throughout the country has become scattered when determining whether MAPs and Part D have the same recovery rights as traditional Medicare (a federal right to double damages for unreimbursed payments) or whether they simply have a contractual, state law lien right for reimbursement. Currently, due to case law out of the 3rd and 11th Circuit Courts, MAPs in Florida, Alabama, Georgia, New Jersey, Pennsylvania, and Delaware have the right to bring a double damages private cause of action under the MSP for unreimbursed MAP payments. These jurisdictions would likely follow the guidance and decisions with regard to MAPs and would apply this logic to Part D reimbursements.

The remaining jurisdictions in the country have not tackled this issue; as a result, primary plans are without clarity on reimbursement obligations for MAPs and Part D plans. Furthermore, the Centers for Medicare & Medicaid Services (CMS) does not provide MAP and Part D lien information/enrollment to primary plans, which can make settlement with a Medicare beneficiary difficult for a primary plan that may not have MAP/Part D enrollment or lien information at the time of settlement.

When Congress created the Part D program in 2003 as part of the Medicare Modernization Act (MMA), it failed to address secondary payer issues beyond simply stating that Part D Prescription Drug Plans’ secondary payer rights were “in the same manner” as Medicare Advantage (Part C) Plans’ secondary payer rights. CMS’ Prescription Drug Benefit Manual adds little direction or guidance to Part D plans’ obligations under the MSP. In fact, it only states, “The MMA extended MSP laws applicable to Medicare Advantage [MA] organizations to Part D sponsors. Accordingly, Part D sponsors will have the same responsibilities under MSP laws as do MA plans….”

The limited guidance appears to create a process where Part D plans pay for a beneficiary’s prescription drugs, but then later must seek reimbursement for those payments. This process is inefficient and costly to enforce. Furthermore, pursuit of secondary payer recovery for Part D often costs more than can be recovered, and thus is a waste of government and Part D plan resources.

Finally, even though Section 111 of the Medicare Medicaid SCHIP Extension Act requires payers who settle claims with Medicare beneficiaries to report those settlements to Medicare, this process is not linked to Part D plans. That means the data about a settlement is not shared with Part D plans, leaving such plans with no opportunity to identify a recovery or coordination of benefits opportunity at the time but instead only long after the case is resolved.

SPARC Act Solution

In attempt to solve these issues, The Medicare Advocacy Recovery Coalition (MARC), a national coalition advocating for the improvement of the MSP programs, is backing legislation similar to the SMART Act, which was signed into law January 2013 as part of the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 and helped improve the processes for Medicare secondary payer recovery and reporting under Parts A and B for all stakeholders.

Currently in the 115th Congress, the Secondary Payer Advancement, Rationalization, and Clarification Act (SPARC) Act, HR 1122, is sponsored by Congressmen Tim Murphy (R-PA) and Ron Kind (D-WI). It would make clear who is responsible for prescription drug costs and when they must be reimbursed. It also would clarify when that responsibility begins, how a prescription drug plan (PDP) can recover for past payments, and when and how CMS must share data to help facilitate the secondary payer recovery process.

The SPARC Act, designed to augment the SMART Act, would clarify, streamline, and bring cost-saving efficiency to the relationships between Medicare beneficiaries, entities settling claims with beneficiaries, and the Part D plans providing medications to beneficiaries. The SPARC Act has been referred to the House Energy and Commerce Committee and the Committee on Ways and Means. It has four additional bipartisan co-sponsors. It embodies four specific virtues of good government.

It promotes fiscally responsible recovery efforts. The bill would limit Medicare plans’ claims to only those where the potential recovery might exceed the cost of collection. The SPARC Act would permit the PDPs to waive recovery altogether in the best interests of the program. This provision is virtually identical to the waiver rights allowed the federal government under 42 U.S.C. §1395(y)(b)(2)(B)(v), or the Part A/B statute. PDP recovery costs would no longer be considered “administrative costs,” meaning that the PDP could not include those costs in its annual bid amount, and would not be subsidized by the federal government for those costs. This would not only save beneficiaries and the federal government money on PDP costs, but also would give the PDPs flexibility to only pursue those claims where the recovery would exceed the cost of collection.

It’s transparent. The SPARC Act would require CMS to provide plans with timely access to settlement data so that they can speedily assert any claims for recovery at the time of settlement. SPARC would require CMS—within 15 days of receipt of notice from a beneficiary or other potentially responsible party of a claim, settlement, judgment or award—to pass that information to the relevant PDP covering the affected beneficiary in a form useful to the PDP so the PDP can coordinate benefits. As a corollary, the bill would require a PDP to instruct the pharmacy or other entity providing prescription drugs to bill the entity that has reported to CMS that it has an ongoing responsibility to pay for medical benefits, thus avoiding the situation where the PDP pays those benefits, then chases a recovery.

It builds on expedited repayment procedures created by the SMART Act, now found in the Social Security Act Section 1862(b)(2)(vii). Provisions of the SPARC Act would require Medicare to, within 10 days, notify the relevant PDP of an existing request for expedited repayment through the CMS website, and would require the PDP to provide any prescription drug claims for which it seeks recovery to the Secretary for the Secretary to include in the final recovery statement to settling parties. This would allow for the settling parties to have pertinent conditional payment information at the ready before settlement. In the event the settling parties use the expedited repayment process, CMS can collect prescription drug costs included on the final statement and must remit those payments to the relevant PDP. Using the SMART Act portal would allow beneficiaries and settling parties to repay more dollars to PDPs sooner, and with finality.

It would promote access to care and claim finality. The SPARC Act would promote beneficiary access to timely and appropriate care, particularly in the area of prescription drugs related to a non-group health insured event. Most often, it is at the intersection of insured claims and the ongoing medical and pharmacy needs of a Medicare beneficiary that collisions can happen. PDP plans or pharmacies can be unaware of the existence of an insured claim. Treatment, services, or prescriptions can be held up, and at the end of a claims process, resolutions can be suspended without finality. None of these results is favorable in our industry. The SPARC Act represents workable rules developed by the multiple stakeholders affected by medical liability settlements: employers, insurers, healthcare providers, and, above all, beneficiaries.

We believe the SPARC Act will continue to garner bipartisan support, as the SMART Act did in 2012. SPARC, if enacted, would provide commonsense reforms to improve healthcare outcomes for Medicare Part D beneficiaries, insurance carriers, and PDPs.

About The Authors
Multiple Contributors
Heather Sanderson

Heather Sanderson, Esq., is chief executive officer of Sanderson Firm PLLC.heather@sandersoncomp.com

Gregory McKenna

Gregory McKenna is senior vice president, external affairs, at Gallagher Bassett and is chair of the Medicare Advocacy Recovery Coalition. He can be reached at  gregory_mckenna@gbtpa.com

Sponsored Content
Daily Claims News
  Powered by Claims Pages
Community Events
No community events