On July 1, 2009, extensive new requirements under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) became effective and impacts almost every business that pays a settlement or judgment to a personal injury or wrongful death claimant. No longer can a self-insured or insurance carrier satisfy its obligations under the Medicare Secondary Payer Law by requiring the injured party or his attorney (under the terms of a settlement agreement) to deal with Medicare. The MMSEA adds new reporting requirements for liability insurance (including self-insurance), no-fault insurance and worker's compensation to determine whether a claimant is entitled to Medicare benefits and, if so, report information about the payment to Medicare. Failure to comply with the mandatory reporting requirements can result in a civil penalty of $1,000 for each day of noncompliance per claimant.
New Mandatory Requirements
The MMSEA requires businesses paying personal injury settlements or judgments to a claimant to register with the Centers for Medicare & Medicaid Services (CMS) as a "responsible reporting entity" (RRE). RREs are responsible to not only determine the Medicare eligibility status for the claimant/plaintiff, but to report on every case where payment under a settlement, award, judgment or other payment is made that involves a Medicare beneficiary. RREs are ultimately responsible for complying with the reporting process including ensuring the accuracy of all reported information. All RREs were required to electronically register with CMS before September 30, 2009, to demonstrate its intention to comply with this law.
When reporting a claim, the RRE is required to input either a Medicare Health Insurance Claim Number (HICN) or the injured party's Social Security Number (SSN). In addition to the HICN and the SSN, the RRE is required to submit the first six characters of the Medicare beneficiary's last name, his/her date of birth, and gender. Other relevant information may include the nature and extent of the injury or illness, the facts about the incident giving rise to the injury or illness, information sufficient to assess the value of reimbursement and information sufficient to assess the value of future care planning. The present rule requires Medicare to be reimbursed for 100% of the expenses it has incurred related to the injuries that arose from the liability incident unless the Medicare recipient can show an economic hardship.
RREs that missed the deadline of September 30, 2009, to register with CMS can still register online at www.section111.cms.hhs.gov. RREs are required to test their ability to upload data files in early 2010 and to begin making quarterly reports of all payments to Medicare beneficiaries in the second quarter of 2010 for payments made in the first quarter of the year.
It is critical that before any claim/lawsuit is settled, insurers and self-insurers ensure compliance with all aspects of the MMSEA. From the very outset, a claimant's SSN or HICN number must be obtained and reported to CMS. Without this required information, an insurer or self-insurer cannot comply with MMSEA. Without compliance, an insurer or self-insurer should not settle a claim for fear of significant civil penalties. Defense attorneys should modify their discovery practice to ensure that critical information is obtained and reported to the insurer or self-insurer.
Even if the parties to a dispute are able to reach a settlement, distribution of the settlement proceeds should not occur until CMS issues its reimbursement demand letter. Otherwise, the RRE may face penalties and be required to pay the reimbursement amount even if it already has paid the Medicare beneficiary. This regulation is problematic because it forces the RRE to retain the funds to avoid paying the CMS again. Since CMS has no obligation to respond within a particular time period, claims will unquestionably take longer to close.
Every RRE involved in the reporting and claims handling process and every attorney involved in the process of defending personal injury lawsuits must become familiar with the MMSEA mandatory reporting guidelines to ensure compliance.
For helpful links to the current MMSEA requirements and procedures, visit the CMS website. CMS has published a lengthy User Guide, available here.