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Medicare Secondary Payer Enhancement Act – Analysis & Potential Impact

Last week, I wrote about the Medicare Secondary Payer Enhancement Act (MSPEA), a bill proposed by two Pennsylvania congressmen.  This bipartisan bill has found the support of MARC, the Medicare Advocacy Recovery Coalition, and perhaps more important, the support of the American Association for Justice.

There is no doubt Medicare reimbursement reform is necessary.  The system is disorganized and extremely overburdened from changes implemented by Section 111 of the MMSEA.  The backlogs have caused Medicare timeframes to double.  But, does the proposed MSPEA help?

Please note that the analysis below includes some personal speculation regarding the MSPEA.  The MSPEA is not the law, it is a proposal.

The Good

An AAJ email sent on April 8, 2010 noted the following benefits of the MSPEA:

AAJ members have frequently reported that the Medicare Secondary Payer Act is riddled with inefficiency. HR 4796, the Medicare Secondary Payer Enhancement Act would correct this problem by requiring the Center for Medicare Services (CMS) to respond to requests for their lien amount within 60 days. Self-funded by a $30 application fee, this bill costs the taxpayers nothing, and it has the broad support of coalitions including the National Retail Federation and Allstate Insurance.

An important caveat to this 60 day timeframe is that the final lien demand can be sent prior to the actual settlement.  The bill proposes that a claimant (the plaintiff) or applicable plan may make request for final demand beginning 120 days prior to the reasonable expected date of such settlement.  The most exciting part of all this?  If Medicare’s contractor (probably the MSPRC) fails to make that demand within 60 days, no one will be held liable or obligated to make payment for Medicare-paid items or services related to the lawsuit.  Essentially, the lien would be involuntarily waived.

What’s more, the speed at which liens will be resolve could improve – nullifying many MMSEA delays.  This proposal, in turn, allows defendants to protect themselves by knowing the final demand at time of settlement.  The defendant can then write two checks, one for the lien, and one for the plaintiff – which seems to be a growing trend.

Next, a minimum settlement threshold will be established.  Cases settled for $5,000 or less will not be subject to the Medicare liens.  This threshold includes situations where a Medicare Set-Aside otherwise would have been needed.

Responsible Reporting Entities will be enthused by the addition of Section Four, which makes the $1,000 fee for reporting noncompliance discretionary based on the intentional nature of each violation.

Even claimant/plaintiff rights will be protected by the MSPEA.  Section Five provides that both Social Security Numbers and Health Identification Claim Numbers will no longer be required for Medicare reporting.

Section Six of the bill provides for a three (3) year statute of limitations on Medicare recoveries.  This section ends the government’s ability to return for more reimbursement well after the settlement and “satisfaction” of Medicare lien.

Lastly, this bill is designed for bipartisan support.  And, it is clearly receiving such support.

The Bad

The MSPEA provides for voluntary calculation and payment of conditional payments.  Within the 90 day period preceding a reasonably expected settlement, the plaintiff will have the option calculate its lien amount.  While this sounds like it will expedite lien resolution, there is one more provision to this section: “the Secretary shall have the right to contest the amount” within 75 days of voluntary reimbursement.  To contest the amount, the MSPRC will issue a final lien demand for the difference.  Then, the plaintiff will either pay that difference, or, pursue appeal.

The appeals process will eventually include the right to step in front of an Administrative Law Judge (ALJ), but, it appears that Medicare can insert additional procedures in advance of the ALJ appeal.  Finally, “[in] any such appeal, the burden of proof shall be on the claimant or applicable plan [a/k/a the appellant] to demonstrate that the reimbursement made to the appropriate Trust fund … was correct.”  This creates the possibility of a mini-trial to prove that certain conditional payments were unrelated to the case.

The MSPEA allows for pre-settlement final demands.  What if your settlement falls through?  This makes the pre-settlement final demand dangerous.  Even if you are able to cancel your final demand request, you are wasting resources (this is especially true if you can conceive a situation where the $30 fee does not actually cover costs).

Along the same lines, the MSPEA creates a penalty for Medicare’s failure to provide a final lien demand.  This is a superb idea.  Currently you are at the MSPRC’s mercy while waiting “approximately 65 days” to receive a Conditional Payment Letter, and “a few weeks” to receive a Final Lien Demand.  However, it is hard to fathom a situation where Congressmen will give up reimbursements to a program that continues to struggle.  Keep in mind just how aggressive the Department of Justice has become where it attempts to recoup Medicare funds.  I like the penalty; I just don’t expect it to be well-received in Washington.

The threshold is similarly a great idea in theory, but, how often do you see a $5,000 case?

Next, the MSPEA removes Social Security Numbers and Health Identification Claim Numbers from the reporting process.  This is good.  It helps to protect patients’ rights and identities.  But, how will the MSPRC and COBC differentiate between Ryan Weiner in Chicago, and Ryan Weiner in Scranton?  This change leaves the MSPRC vulnerable to mistakes when compiling a lien – perhaps even finding payments made for the wrong person.

MSPEA Fall-Out?

This bill is well-supported.  So what happens when it passes?  Might it create more work to resolve your Medicare lien?  Or will it speed up the process to help plaintiffs get their money faster?

The biggest increases in workload will be on the already over-burdened MSPRC.  It will be forced to expand to avoid continuously waiving its reimbursement rights.  But, plaintiffs will worry less, and, potentially get to distribution faster because of pre-settlement final demands.

However, both plaintiffs and defendants may see an increase in the lien resolution process timeline, while voluntary payments are argued back and forth.  As a result, the voluntary payment process may be avoided more often than not.  Most important, the need to review and dispute Conditional Payment Letters to ensure practical and appropriate lien resolution will likely increase.

The MSPA and MMSEA have created miles of red-tape.  Change is needed.  At Lien Resolution Services, we will continue to investigate the MSPEA and provide additional analysis as more information comes to us all.  Please contact us if you require any assistance in Medicare lien resolution, Medicaid lien resolution, or ERISA and private insurance lien resolution.

Ryan J. Weiner
Co-Founder Lien Resolution Services
This Blog/Web Site is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

About Ryan J. Weiner

Co-Founder of Lien Resolution Services, LLC, a national healthcare lien resolution firm. Our goal is to assist in the fair administration and resolution of healthcare liens on personal injury cases. Please visit our website for more information: www.lienresolutionusa.com.

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