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Required reading: Medicare is calling on insurers to enforce a stack of new regulations--or face fines.

Medicare's new mandatory reporting requirements, combined with Medicare's statutory recovery rights, are one of the highest-level regulatory risks to face insurance companies in decades. Personal injury claims involving Medicare beneficiaries now pose risks of significant penalties, liabilities and costs for insurance carriers, including self-insured entities.

While many insurance carriers are aware of the new Medicare Section 111 mandatory reporting requirements, much misinformation and confusion exists about what constitutes Medicare "compliance." Many carriers believe compliance begins and ends with Section 111 reporting. Section 111 may have stolen the compliance spotlight, but many carriers are either unaware or ill-prepared for the impact on claims when Medicare's reporting and recovery regulations begin to work in concert.

Currently, about 47 million Americans are Medicare beneficiaries and that number is projected to increase to 80 million by 2030. While Medicare struggles to stem the billions of dollars it loses every year to fraud, it also faces a current unfunded liability of trillions of dollars. As a result, Medicare faces a dire financial situation, with projections that it will be insolvent by 2024.

In light of these funding challenges, Medicare is taking steps to plug leaks in its system that drain resources, including ensuring that it does not pay claims for which another entity may be responsible. Consequently, insurance carriers now must alter the way claims are managed and settled because of two key components: Section 111 reporting and increased enforcement of Medicare's recovery rights trader the Medicare Secondary Payer statute, or MSP for short.

Through these two programs, Medicare requires insurance carriers to identify and report claims and settlements that involve Medicare beneficiaries. Medicare then uses that reported information to initiate its recovery rights to collect money from the parties involved in those claims and settlements.

Vital Section 111 Facts

Insurance carriers, called Responsible Reporting Entities need to immediately identify claims involving Medicare beneficiaries or claimants who could become Medicare beneficiaries, and properly manage and report those claims, ha order to report under Section 111, RREs must gather all mandated data elements-up to 130-plus items--on each claimant.

Some key data elements that RREs must collect are the claimant's name, date of birth, gender, Social Security number or health insurance claim number. However, nothing in the law requires claimants to divulge their personal information to the RRE. RREs that have third-party administrators facilitating the reporting must remember that the ultimate liability and obligation of reporting falls on the RRE, not the TPA.

If the TPA fails to properly report on behalf of the RRE, the RRE will incur the $1,000 per-day per-claim penalty, not the TPA. Only the RRE has a duty to report under Section 111--not the Medicare beneficiary and not the attorneys.

Reporting Dates and Obligations

Section 111 reporting carries different dates and obligations for general liability carriers, workers' compensation and no-fault carriers. Beginning Oct. 1, 2011, general liability claims that result in a settlement, judgment, award or other payment must be reported during the first quarter of 2012. Medicare defines these settlements, judgments, awards or other payments as Total Payment Obligation to Claimants.

Currently there are reporting thresholds for TPOC situations. General liability claims involving TPOC amounts of $5,000 or less during 2011 and 2012 are not reportable. TPOC amounts of $2,000 or less during 2013 are not reportable. TPOC amounts of $600 or less during 2014 are not reportable, and no threshold applies beginning in 2015.

Medicare defines the TPOC date as the date the settlement was signed; if court approval is required, then the later date of either the court approval or the date the settlement was signed would apply. So, if a claim settled several months ago, but the settlement documents were not actually signed until Oct. 1, 2011, or after, that claim would be reportable if over the threshold amount.

On Sept. 29, Medicare announced an "optional" revised implementation timeline relating to TPOC thresholds. TPOCs on or after Oct. 1 that exceed $100,000 must be reported in the quarter beginning Jan. 1, 2012. TPOCs over $50,000, where the TPOC date is on or after April 1, 2012, must be reported in the quarter beginning July 1, 2012. TPOCs over $25,000, where the TPOC date is on or after July 1, 2012, must be reported in the quarter beginning Oct. 1, 2012.

All TPOCs over the minimum threshold, where the TPOC date is on or after Oct. 1, 2012, must be reported in the quarter beginning Jan. 1, 2013. This announcement did not change any other Section 111 implementation dates.

For workers' compensation and no-fault carriers, Section 111 reporting began Jan. 1, 2011. Those RREs must report when they assume responsibility for ongoing medicals and must report again when they terminate that responsibility. These claims are referred to as Ongoing Responsibility for Medicals. ORM claims that were open or reopened as of Jan. 1, 2010, must be reported beginning the first quarter of 2011.

RREs must recognize that their liability for Medicare recovery issues may begin as soon as the claim occurs. The recovery provisions of the MSP require parties to consider and protect Medicare's financial interests. Depending on the nature of the injury and the type of claim, the past and/or future interests of Medicare may need to be addressed and accounted for.

Medicare's past interests are in the form of conditional payments (or so-called "liens").A conditional payment is a payment made by Medicare for medical treatment on behalf of the Medicare beneficiary when another party should be the primary payer. When a carrier pays money to settle a claim, it becomes the primary payer; once a settlement occurs, Medicare's recovery rights are triggered.

Medicare can seek recovery of its lien from any party that makes or receives a payment as a result of a settlement involving a Medicare beneficiary. However, Medicare will not disclose to the parties the final lien amounts until after the settlement occurs.

The carrier, providers, physicians, attorneys and the Medicare beneficiary carry a potential obligation to reimburse Medicare. Medicare can seek double damages plus interest from parties who fail to properly protect Medicare's interests.

Key Points

* What's New: Medicare's newly implemented reporting requirements have ratcheted up the risk of noncompliance for carriers.

* What's the Issue: Medicare is under pressure to improve its recovery rate and avoid improper payments on claims.

* What's Ahead: With federal budgets under fire, carriers can expect an increased focus on reporting requirements and stiffer enforcement of penalties for noncompliance.

Seven Action Steps to Avoid Compliance Problems

1. Follow the three key elements that must be present in a claim before Medicare's reporting and recovery regulations are triggered. If any one of the three elements is missing, then Medicare's regulations will not be triggered. The three key elements are:

* Claimant is a Medicare beneficiary.

* The claim involves personal injury.

* Money changes hands (i.e., settlement, judgment, policy pays out, etc.).

Note: There is a minor exception to the first element. If the claimant is not a Medicare beneficiary at the time of settlement, but there is a "reasonable expectation" that he or she will become a Medicare beneficiary within 30 months of settlement, then establishing an MSA may be appropriate in workers' compensation claims.

2. Ensure settlements can proceed as planned by recognizing that RREs, Medicare beneficiaries and attorneys all carry an obligation to reimburse Medicare--and they must work together to anticipate and resolve past and future Medicare interests.

3. RREs must remember that they can be compliant with Section 111 reporting obligations without being compliant with their MSP recovery obligations, and vice versa. Although reporting obligations are separate and distinct from recovery obligations, nonetheless they are inseparable because Medicare will use the information collected under reporting to initiate and enhance its recovery efforts.

4. Don't wait for a crisis. Begin auditing pending claims and settlements now to identify claimants who are Medicare beneficiaries in order to ensure proper compliance and resolution of any issues involving conditional payments, MSAs and Section 111 reportings.

5. Establish screening procedures for new claims to identify claimants who are or who could become Medicare beneficiaries.

6. Plan for slow resolution and turnaround time from Medicare--up to six months or more to determine and resolve Medicare lien issues--before a claim can be properly settled. Note: There is no expedited process.

7. Liability carriers: Don't be lulled into a false sense that no one has to worry about Medicare until Jan. 1, 2012. The recovery obligations and risks are at play right now and the Section 111 obligations began Oct. 1.

Contributor Kendell Gracey is executive vice president and chief legal counsel for Medicare compliance specialist Flagship Services Group Inc. in Englewood, Colo. He can be reached at kgracey@flagshipsgi. com.
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Title Annotation:Health/Employee Benefits: Medicare Regulations
Author:Gracey, Kendell
Publication:Best's Review
Date:Nov 1, 2011
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