On February 18, 2014, CMS issued two Alerts regarding the threshold amount under which the Medicare Secondary Payer Recovery Contractor (MSPRC) would not pursue its right to recover unpaid conditional payments. In addition, CMS modified the Mandatory Insurer Reporting obligations for cases settling under $1000.
Section 202 of the Strengthening Medicare and Repaying Taxpayers (SMART) Act charged CMS with the duty to calculate and publish a single threshold amount for settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) no later than November 15 of each year. Cases meeting the threshold would not be subject to conditional payment recovery efforts by Medicare. The calculation was to be reviewed by the Comptroller of the United States before it was published.
Previously, CMS had established a $300 settlement threshold for reimbursement of conditional payments. The $300 reporting threshold and conditional payment reimbursement process began in August 2011.
For 2012, CMS determined that its average cost of collection per Non Group Health Plan case was approximately $335. This figure was expected to be similar in 2013 and 2014. CMS then analyzed the settlement amount range closest to its $335 cost of collection, which was found to be cases more than $750 and equal to or less than $1000.
Accordingly, trauma-based settlements, judgments or awards totaling $1,000 or less are exempt from conditional payment reimbursement.
The second Alert of the same date clarified the first Alert regarding reporting under Section 111 of the Medicare, Medicaid and SCHIP Extension Act. Effective immediately, settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents (excluding ingestion, implantation and exposure) are not reportable under the Mandatory Insurer Reporting scheme. The MSP User Guide will be amended to reflect the reporting threshold change when it is updated.
There are several questions raised by the Alert. Perhaps most important is whether CMS has altered its Mandatory Insurer Reporting system to incorporate the change in the requirements. At present, Mandatory Insurer Reporting requirements obligate Responsible Reporting Entities to report all settlements, judgments and awards arising from liability insurance (including self-insurance) for physical based trauma incidents in cases whose value exceeds $2000. As of January, 2015, the threshold was scheduled to drop from $2000 to $300.
Gould & Lamb expects that CMS will publish clarification of its Alerts along with technical guidance regarding the changes. Gould & Lamb will continue to monitor developments on these important issues and will apprise you of their practical implications on your Medicare compliance program.