CMS retains its $750 “Low Dollar” threshold for 2020

December 2, 2019 / 4 min read

The Centers for Medicare and Medicaid Services (CMS) has released its low dollar recovery threshold for 2020 via a new alert. CMS is generally required to publish an annual low dollar threshold amount according to Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012.[1] In this alert, CMS announced it is retaining its current $750 low dollar threshold in 2020 as more fully described below.

CMS’s $750 low dollar threshold

CMS’s alert, entitled 2020 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards or Other Payments, outlines the parameters of its “low dollar” threshold as follows:

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Beginning January 1, 2020, the threshold for physical trauma-based liability insurance settlements will remain at $750. CMS will maintain the $750 threshold for no-fault insurance and workers’ compensation settlements, where the no-fault insurer or workers’ compensation entity does not otherwise have ongoing responsibly for medicals. This means that entities are not required to report, and CMS will not seek recovery on settlements, as outlined above. Please note that the liability insurance (including self-insurance) threshold does not apply to settlements for alleged ingestion, implantation or exposure cases.

CMS’s calculation/methodology

In conjunction with this new alert, CMS also released a computation breakdown outlining how it arrived at its decision to keep the low dollar threshold at $750 for 2020.

For those interested in taking a deeper dive into CMS’s methodology, the following is from CMS’s computation breakdown document:

CMS outlines its calculation analysis as follows:

The CMS estimated the average cost of collection for Non-Group Health Plan (NGHP) cases (which includes liability insurance (including self-insurance), no-fault insurance, and workers’ compensation) as approximately $351 per case. This cost of collection was based on the amount paid (invoices) to our Benefits Coordination and Recovery Contractors for work related to identifying and recovering NGHP conditional payments. CMS relied on data between August 2018 and July 2019. The total dollar amount paid to CMS’ contractors was divided by the number of final NGHP demand letters issued during the aforementioned date range.

From this analysis, CMS then concluded as follows:

Based on this information, CMS determined that it should maintain a $750 threshold for 2020 so that physical trauma-based settlements of $750 or less do not need to be reported and Medicare’s conditional payment amount for these settlements does not need to be repaid. For liability insurance and workers’ compensation settlements, the calculated cost of collection of $351 most closely aligns, without exceeding, to the average demand amounts of $425.49 and $500.15 respectively for settlements of over $500 to $750.

For no-fault insurance settlements, CMS will maintain the current threshold of $750, where the no-fault insurer does not otherwise have ongoing responsibly for medicals. Although the cost of collection of $351, most closely aligns with the average demand for settlements of $300 to $500, the limited number of demands for no-fault within this range represents a minimal amount of missed potential recoveries. For 2019, these missed recoveries would have totaled $19,995 (40 no-fault cases at $499.89). The cost for CMS and primary plans to alter supporting systems, documentation and to perform outreach for a reduction to a $500 threshold for this insurance type would far exceed potential recoveries for settlements in this range.

Please do not hesitate to contact the author if you have any questions about this matter at mpopolizio@iso.com.

[1] Section 202 of the SMART Act is codified at 42 U.S.C. 1395y(b)(9)(A)and (B). In pertinent part, this section states:

(A) In general

Clause (ii) of paragraph (2)(B) and any reporting required by paragraph (8) shall not apply with respect to any settlement, judgment, award, or other payment by an applicable plan arising from liability insurance (including self-insurance) and from alleged physical trauma-based incidents (excluding alleged ingestion, implantation, or exposure cases) constituting a total payment obligation to a claimant of not more than the single threshold amount calculated by the Secretary under subparagraph (B) for the year involved.

(B) Annual computation of threshold

Not later than November 15 before each year, the Secretary shall calculate and publish a single threshold amount for settlements, judgments, awards, or other payments for obligations arising from liability insurance (including self-insurance) and for alleged physical trauma-based incidents (excluding alleged ingestion, implantation, or exposure cases) subject to this section for that year. The annual single threshold amount for a year shall be set such that the estimated average amount to be credited to the Medicare trust funds of collections of conditional payments from such settlements, judgments, awards, or other payments arising from liability insurance (including self-insurance) and for such alleged incidents subject to this section shall equal the estimated cost of collection incurred by the United States (including payments made to contractors) for a conditional payment arising from liability insurance (including self-insurance) and for such alleged incidents subject to this section for the year.