Medicare Set Aside Compliance Rules -A History and Analysis
The Medicare Set Aside compliance rules begin with the MSA Memo from CMS. I have been asked numerous times over the last few months on the status of the Workers Comp Medicare Set asides. Many questions centered around what type of claims have to be reported and what are the penalties for not reporting.
2024 Update – The newest guidelines on WCMSAs can be found on this website.
The text below is verbatim from a June 11, 2008 memo provided by CMS to clear up any misunderstandings. You may want to print this post if you do not already have this memo. I will point out a few critical parts of this memo along with some of the facts I have been given on this subject. I will cover a few of the questions I received in my next post.
Office of Financial Management/Financial Services Group
June 11, 2008
I thought I would first add in the statute that the CMS published on MSA’s and then proceed from that point.
Statutory Language for the Medicare Secondary Payer Mandatory Reporting Provisions in
Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(See 42 U.S.C. 1395y(b)(7)&(b)(8))
SEC. 111. MEDICARE SECONDARY PAYOR.
(a) In General- Section 1862(b) of the Social Security Act (42 U.S.C. 1395y(b)) is amended by adding at the end the following new paragraphs:
(7) REQUIRED SUBMISSION OF INFORMATION BY GROUP HEALTH PLANS-
(A) REQUIREMENT- On and after the first day of the first calendar quarter beginning after the date that is 1 year after the date of the enactment of this paragraph, an entity serving as an insurer or third party administrator for a group health plan, as defined in paragraph (1)(A)(v), and, in the case of a group health plan that is self-insured and self-administered, a plan administrator or fiduciary, shall–
(i) secure from the plan sponsor and plan participants such information as the Secretary shall specify for the purpose of identifying situations where the group health plan is or has been a primary plan to the program under this title; and
(ii) submit such information to the Secretary in a form and manner (including frequency) specified by the Secretary.
(B) ENFORCEMENT-
(i) IN GENERAL- An entity, a plan administrator, or a fiduciary described in subparagraph (A) that fails to comply with the requirements under such subparagraph shall be subject to a civil money penalty of $1,000 for each day of noncompliance for each individual for which the information under such subparagraph should have been submitted. The provisions of subsections (e) and (k) of section 1128A shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this title with respect to an individual.
(ii) DEPOSIT OF AMOUNTS COLLECTED- Any amounts collected pursuant to clause (i) shall be deposited in the Federal Hospital Insurance Trust Fund under section 1817.
(C) SHARING OF INFORMATION- Notwithstanding any other provision of law, under terms and conditions established by the Secretary, the Secretary–
(i) shall share information on entitlement under Part A and enrollment under Part B under this title with entities, plan administrators, and fiduciaries described in subparagraph (A);
(ii) may share the entitlement and enrollment information described in clause (i) with entities and persons not described in such clause; and
(D) IMPLEMENTATION- Notwithstanding any other provision of law, the Secretary may implement this paragraph by program instruction or otherwise.
(8) REQUIRED SUBMISSION OF INFORMATION BY OR ON BEHALF OF LIABILITY INSURANCE (INCLUDING SELF-INSURANCE), NO FAULT INSURANCE, AND WORKERS’ COMPENSATION LAWS AND PLANS-
(A) REQUIREMENT- On and after the first day of the first calendar quarter beginning after the date that is 18 months after the date of the enactment of this paragraph, an applicable plan shall–
(i) determine whether a claimant (including an individual whose claim is unresolved) is entitled to benefits under the program under this title on any basis; and
(ii) if the claimant is determined to be so entitled, submit the information described in subparagraph (B) with respect to the claimant to the Secretary in a form and manner (including frequency) specified by the Secretary.
(B) REQUIRED INFORMATION- The information described in this subparagraph is–
(i) the identity of the claimant for which the determination under subparagraph (A) was made; and
(ii) such other information as the Secretary shall specify in order to enable the Secretary to make an appropriate determination concerning coordination of benefits, including any applicable recovery claim.
(C) TIMING- Information shall be submitted under subparagraph (A)(ii) within a time specified by the Secretary after the claim is resolved through a settlement, judgment, award, or other payment (regardless of whether or not there is a determination or admission of liability).
(D) CLAIMANT- For purposes of subparagraph (A), the term `claimant’ includes–
(i) an individual filing a claim directly against the applicable plan; and
(ii) an individual filing a claim against an individual or entity insured or covered by the applicable plan.
(E) ENFORCEMENT-
(i) IN GENERAL- An applicable plan that fails to comply with the requirements under subparagraph (A) with respect to any claimant shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant. The provisions of subsections (e) and (k) of section 1128A shall apply to a civil money penalty under the previous sentence in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). A civil money penalty under this clause shall be in addition to any other penalties prescribed by law and in addition to any Medicare secondary payer claim under this title with respect to an individual.
(ii) DEPOSIT OF AMOUNTS COLLECTED- Any amounts collected pursuant to clause (i) shall be deposited in the Federal Hospital Insurance Trust Fund.
(F) APPLICABLE PLAN- In this paragraph, the term `applicable plan’ means the following laws, plans, or other arrangements, including the fiduciary or administrator for such law, plan, or arrangement:
(i) Liability insurance (including self-insurance).
(ii) No fault insurance.
(iii) Workers’ compensation laws or plans.
(G) SHARING OF INFORMATION- The Secretary may share information collected under this paragraph as necessary for purposes of the proper coordination of benefits.
(H) IMPLEMENTATION- Notwithstanding any other provision of law, the Secretary may implement this paragraph by program instruction or otherwise.’.
(b) Rule of Construction- Nothing in the amendments made by this section shall be construed to limit the authority of the Secretary of Health and Human Services to collect information to carry out Medicare secondary payer provisions under title XVIII of the Social Security Act, including under parts C and D of such title.
(c) Implementation- For purposes of implementing paragraphs (7) and (8) of section 1862(b) of the Social Security Act, as added by subsection (a), to ensure appropriate payments under title XVIII of such Act, the Secretary of Health and Human Services shall provide for the transfer, from the Federal Hospital Insurance Trust Fund established under section 1817 of the Social Security Act (42 U.S.C. 1395i) and the Federal Supplementary Medical Insurance Trust Fund established under section 1841 of such Act (42 U.S.C. 1395t), in such proportions as the Secretary determines appropriate, of $35,000,000 to the Centers for Medicare & Medicaid Services Program Management Account for the period of fiscal years 2008, 2009, and 2010
Workers Comp Medicare Set Aside reporting was required for all Workers Comp claims effective 01/01/2011. My last post was taken from the CMS memo from 2008. I wanted to point out a few areas from the memo that should concern all employers.
If you are not in compliance the fine is “a civil money penalty of $1,000 for each day of noncompliance for each individual for which the information under such subparagraph should have been submitted.”
That is an astounding amount of money even for one file. For instance, one file not reported for six months would result in a fine of $180,000. With the Feds having a budget shortfall, this could be a cash cow for CMS.
One of the other questions we have come across is concerning offshore accounts such as captives and risk retention groups. I have been told by various MSA experts and the CMS that if the claim originated in the US, regardless of where the policy was initiated, the claims that reach the minimum thresholds must be reported to the CMS or be subject to fines. I discussed these minimum thresholds in this post.
The other concern is that the CMS has often said it is the ultimate responsibility of the employer to report the claims. Are you sure that your carrier or TPA has reported your claims timely and accurately? I have often heard that “our carrier or TPA” has that handled.
During our premium audits and reserve reviews, we have noticed some areas on MSAs that were cause for concern. I thought that I would point them out as a way to avoid fines or other problems due to misreporting Medicare Set Asides.
Acknowledgment Letters
If your carrier or TPA is properly reporting claims, you should be receiving a status report from the CMS. We have found that very often during premium and reserve reviews no one has seen any such report, which is really an acknowledgment letter.
If you are not receiving the acknowledgment letters – (from CMS), please contact the Coordination of Benefits (COB) Contractor. Customer Service Representatives are available to provide you with quality service Monday through Friday, from 8:00 a.m. to 8:00 p.m., Eastern Time, except holidays. The COB Contractor’s toll-free number is 1 (800) 999-1118 or TTY/TDD: 1 (800) 318-8782 for the hearing and speech impaired.
As pointed out in my last post, the fines are very steep for non-compliance on reporting. I do not recommend calling your TPA or carrier if you are not receiving the letters, call the CMS directly as noted. The employer has the ultimate responsibility.
Past vs. Future Medicals
One mistake we noticed is there was no differentiation between future or past medical costs and other costs on the Medicare Set Aside submission or noted in the settlement. This a great example from the CMS –
A settlement that does not specifically account for past versus future medical expenses will be considered to be entirely for future medical expenses once Medicare has recovered any conditional payments it made. This means that Medicare will not pay for medical expenses that are otherwise reimbursable under Medicare and are related to the WC case until the entire settlement is exhausted.
Example: A beneficiary is paid $50,000 by a WC carrier, and the parties to the settlement do not specify what the $50,000 is intended to pay for. If there is no CMS-approved Medicare set-aside arrangement, Medicare will consider any amount remaining after recovery of its conditional payments as compensation for future medical expenses.
Medicare Set Aside vs. Offshore Entities
I wanted to cover this topic again as it is not found in any of the CMS examples. If a claim happens on US soil, the settlement is subject to the MSA rules. This has not been specifically addressed by the CMS. I do not think any employer would want to supply the test case for non-compliance in this area.
Having an offshore captive as the workers comp carrier does not exclude a company from US jurisdiction.
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