By Dorothy E. Kelly and James E. Burnham
Nearly four years after legislation mandating that property/casualty insurers participate in an automated exchange of settlement and medical claims data, the Centers for Medicare & Medicaid Services (CMS) at last is poised to implement mandatory insurer reporting. The provision requiring this exchange was enacted in December 2007 as Section 111 of the Medicare, Medicaid & SCHIP Extension Act. Commonly referred to as "Section 111," the provision has prompted insurers to alter claims-handling protocols and invest in technology to facilitate compliance with the law.
Section 111 provides Medicare with all the data needed to enforce compliance not only with Section 111 but also with the Medicare Secondary Payer (MSP) statute — a law requiring that Medicare not pay for medical treatment when another primary payer is available. As the dust settles on the reporting issues, the key question remains: How will CMS use the data to enforce the MSP?
CMS implemented Section 111 reporting in stages. Workers' compensation and no-fault claims began reporting in January 2011. Beginning in January 2012, CMS will require that all liability settlements involving Medicare beneficiaries also be reported. CMS will interpret the data using three primary methods: civil money penalties, coordination of benefits, and recovery.
Civil Money Penalties
For each unreported claim, a Section 111 Responsible Reporting Entity "shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant." Thus, the consequences for missed reporting events can be severe.
To date, Medicare has published no guidance surrounding the applicability of civil money penalties. In the absence of official guidelines, insurers can expect that Medicare will enact penalties in two ways: penalizing insurers who have not taken the necessary steps to report claims and penalizing insurers who have reported inaccurately. A single unreported claim can conceivably cost a reporting entity $365,000 in just one year. A claim that is reported and rejected because of insufficient or missing data could be subject to the same penalties as a claim that was never submitted.
|It is expected that Medicare will examine the data not only to evaluate the MSP compliance of beneficiaries, insurers, and the industry but also to establish compliance procedures that maximize Medicare's recovery while minimizing the effect on the community involved.|
Given the availability of potentially staggering penalties, enforcement of the statutory reporting requirement could yield dramatic results. Still, insurers need to pay attention to the way Medicare will actually use the data — in addition to how it will enforce the requirement.
Coordination of Benefits
Section 111 data includes all the information to enable Medicare to determine the circumstances under which it should pay for a beneficiary's medical treatment. In workers' compensation and no-fault claims, an insurer pays for treatment immediately following an accident. Section 111 data allows Medicare to identify such situations and to prevent payments from being made while still ensuring continuity of coverage for Medicare beneficiaries.
Section 111 requires insurers to provide necessary ICD-9 medical diagnosis codes to allow Medicare to coordinate benefits. In the absence of medical bills, this has presented a challenge for some insurers, particularly in casualty lines, in selecting the most accurate ICD-9 code. To further complicate matters, Medicare has eliminated particular ICD-9 codes from Section 111 reporting because they do not assist Medicare in either coordinating benefits or recovering mistaken payments. The rejection of otherwise valid ICD-9 codes is a major source of erroneous reporting and a potential compliance problem for reporting entities. In addition, misreported ICD-9 codes have been known to complicate a Medicare beneficiary's ability to obtain Medicare coverage — even in circumstances where Medicare is clearly primary.
In addition to reporting, MSP compliance involves recovery of payments made by Medicare and setting aside funds for future medical treatment. Section 111 provides Medicare with a view into the recovery of past payments (Conditional Payments) and the future medical component (Medicare Set Asides).
When Medicare pays for treatment that could be attributed to a liable third party, its payment is conditioned upon later reimbursement to Medicare. The MSP allows Medicare to seek recovery from the beneficiary, his attorney, providers, insurers, and self-insureds. Until Section 111, Medicare relied on voluntary notification of primary payments, that is, settlements. Section 111 requires insurers to provide this information, exponentially increasing the volume of Medicare's recoveries.
Post-settlement, Medicare established policies to demonstrate compliance with the MSP. For Medicare beneficiaries who are workers' compensation claimants with settlements of more than $25,000, Medicare recommends obtaining a Medicare Set Aside and submitting a proposal for Medicare's review and approval. Where individuals have a "reasonable expectation" of Medicare enrollment within 30 months, Medicare will review and approve set-aside proposals where the total settlement exceeds $250,000. Section 111's data flow will allow Medicare to effectively determine compliance with its voluntary review process.
Streamlining the Process
According to testimony provided by Medicare's CFO, Deborah Taylor, in a Congressional hearing on the MSP recovery process, there are more than 413,000 open MSP recovery claims.
Many inefficiencies exist in the MSP recovery process, not the least of which is the way Medicare attempts recovery in even the smallest of cases. A recent study by the RAND Corporation argued that Medicare could achieve significant savings for both insurers and the government by adopting a permanent minimum threshold for recovery. The study estimated that a permanent $5,000 Section 111 reporting threshold would reduce the total number of reported claims by 43 percent while only reducing recovery to Medicare by 2.4 percent.
Given the volume of open claims, the inefficiency of the recovery process, and the need to recover more dollars, Section 111 data presents a tremendous opportunity for Medicare to appropriately apply reasonable standards to the entire recovery process. It is expected that Medicare will examine the data not only to evaluate the MSP compliance of beneficiaries, insurers, and the industry but also to establish compliance procedures that maximize Medicare's recovery while minimizing the effect on the community involved.
Dorothy E. Kelly is the chief executive officer of Crowe Paradis Services Corporation. James E. Burnham is the director of client technology at Crowe Paradis Services Corporation.