The Centers for Medicare and Medicaid Services (CMS) has released its 2021 low dollar threshold via a new alert. CMS is required to publish an annual low dollar threshold amount according to Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012. In general, under this section, CMS is required to publish an annual single threshold amount below which Section 111 reporting and conditional payment recovery is inapplicable for certain settlements, judgments, awards, or other payments, along with supporting information on how CMS calculated this threshold. In this new alert, CMS announced that it is retaining its current $750 low dollar threshold in 2021 as more fully described below.
CMS’s $750 low dollar threshold
CMS’s alert, entitled 2021 Recovery Thresholds for Certain Liability Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards or Other Payments, outlines the applicability, criteria, and limitations of its “low dollar” threshold as follows:
Beginning January 1, 2021, 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 responsibility 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.
In conjunction with this new alert, CMS released a separate computation breakdown document outlining how it arrived at its decision to keep the low dollar threshold at $750 for 2021.
For those interested in taking a deeper dive into CMS’s methodology, CMS states as follows as part of its computation breakdown:
CMS outlines its calculation analysis as follows:
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 $318 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 2019 and July 2020. The total dollar amount paid to CMS’ contractors was divided by the number of final NGHP demand letters issued during the aforementioned date range.
To determine settlement thresholds, CMS compared the estimated cost of collection per NGHP case of approximately $318 to the average liability insurance demand amount per settlement range. We then did the same comparison of the estimated cost of collection to the average no- fault insurance and workers’ compensation demand amounts per settlement range.
From this analysis, CMS then concluded as follows:
Based on this information, CMS determined that it will maintain a $750 threshold for 2021 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 the calculated cost of collection of $318 most closely aligns with and without exceeding, the average highlighted demand amount of $392.49 for settlements of over $500 to $750.
For no-fault and workers’ compensation insurance settlements, CMS will maintain the current threshold of $750, where the no-fault insurer or workers’ compensation carrier does not otherwise have ongoing responsibility for medicals. Although the cost of collection of $318, most closely aligns with the average demand amounts of $368.37 and $329.45 respectively for settlements of $300 to $500, the limited number of demands within this range represents a minor amount of missed potential recoveries. For 2020, these missed recoveries would have totaled $16,552.90 (35 cases at $472.94) for no-fault insurance, and $6,332.76 (14 cases at $452.34) workers’ compensation settlements. The cost for CMS to alter supporting systems, program documentation, and to perform outreach to external stakeholders for a reduction to a $500 threshold for these insurance types would far exceed potential recoveries for settlements in this range.
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 Section 202 of the SMART Act is codified at 42 U.S.C. 1395y(b)(9).
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 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
(1) In general
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. At the time of calculating, but before publishing, the single threshold amount for 2014, the Secretary shall inform, and seek review of, the Comptroller General of the United States with regard to such amount.
The Secretary shall include, as part of such publication for a year--
(1) 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; and
(2) a summary of the methodology and data used by the Secretary in computing such threshold amount and such cost of collection.
(C) Exclusion of ongoing expenses
For purposes of this paragraph and with respect to a settlement, judgment, award, or other payment not otherwise addressed in clause (ii) of paragraph (2)(B) that includes ongoing responsibility for medical payments (excluding settlements, judgments, awards, or other payments made by a workers’ compensation law or plan or no fault insurance), the amount utilized for calculation of the threshold described in subparagraph (A) shall include only the cumulative value of the medical payments made under this subchapter.
(D) Report to Congress
Not later than November 15 before each year, the Secretary shall submit to the Congress a report on the single threshold amount for settlements, judgments, awards, or other payments for conditional payment obligations arising from liability insurance (including self-insurance) and alleged incidents described in subparagraph (A) for that year and on the establishment and application of similar thresholds for such payments for conditional payment obligations arising from worker compensation cases and from no fault insurance cases subject to this section for the year. For each such report, the Secretary shall--
(1) calculate the threshold amount by using the methodology applicable to certain liability claims described in subparagraph (B); and
(2) include a summary of the methodology and data used in calculating each threshold amount and the amount of estimated savings under this subchapter achieved by the Secretary implementing each such threshold.
 See n.2 above.