COB and MSPRC will become BCRC

As previously announced, effective February 1, 2014, the Centers for Medicare and Medicaid Services (CMS) is reorganizing its structure.  The activities of the Coordinator of Benefits (COB) for Group Health and non-Group Health will be combined with the recovery activities currently handled by the Medicare Secondary Payer Recovery Contractor (MSPRC).  The former COB and MSPRC will be consolidated within the new Benefits Coordination & Recovery Center, BCRC.  Ostensibly, this reorganization will provide "improved customer service for stakeholders," provide "consolidated and streamlined data collection and recovery operations," and provide "value-added efficiencies and enhanced resource utilization."  We look forward to working with this new center and exploring the benefits of this restructuring.  We will keep you apprised of any further developments worth noting.

MSP Recovery Audit Contractor Duties and Recovery Efforts

In 2012 CMS selected CGI Federal, Inc. as the Medicare Secondary Payer Recovery Audit Contractor, "MSP RAC".  (Interestingly, CGI Federal is the same contractor responsible for the rather unsuccessful rollout of HealthCare.gov.)   The MSP RAC's focus is on the recovery of MSP debts from group health plans.  The Government Accountability Office has described the role of the MSP RAC as follows: “CMS seeks the services of a Medicare Secondary Payer (MSP) Recovery Audit Contractor (RAC) to identify and recover overpayments stemming from instances where Medicare made payment under Medicare Parts A or B as the primary insurer, but a GHP had primary payment responsibility.”  The MSP RAC’s contract involves an optional task for the recovery of Non-GHP debts in situations where a Non-GHP RRE has ongoing responsibility for medicals.

There is no indication that the MSP RAC will have involvement in Section 111 or assessing reporting penalties.  The statute authorizing CMS's use of RACs, 42 U.S.C. § 1395ddd(h), provides for the use of RACs "for the purpose of identifying underpayments and overpayments and recouping overpayments under this subchapter with respect to all services for which payment is made under this subchapter."  The statute makes no mention of Section 111 reporting penalties and does not provide that CMS may use RACs to assess Section 111 reporting penalties.

If you have any questions regarding the MSP RAC or Section 111 reporting penalties, please let us know.  As we previously reported, CMS recently issued an Advance Notice of Proposed Rulemaking soliciting comments on the situations in which Section 111 reporting penalties may be imposed.  There is no indication that CMS is ready to begin assessing Section 111 reporting penalties at this time, as CMS has not yet issued rules specifying when reporting penalties may be imposed.

Medicaid Entitled to Full Recovery: Ahlborn Decision by United States Supreme Court No Longer Good Law

On December 26, 2013, the Bipartisan Budget Act (H.J. Res. 59) was enacted into law. Several provisions of the Budget Act modify the secondary payer rights of Medicaid.  According to a December 27, 2013, bulletin published by the Centers for Medicare and Medicaid Services, the Act changes third-party liability law to affirm that Medicaid is a payer of last resort.  The new law allows states to recover full Medicaid costs from the entire amount of a liability settlement.  Previously, states could only recover Medicaid costs from the portion of a settlement designated for medical expenses.  The new law will also allow states to place liens against the liability settlements of Medicaid beneficiaries.
The Budget Act negates the effect of the previous United States Supreme Court case of Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), which limited Medicaid’s recovery to the medical portion of a personal injury settlement.  The new law provides Medicaid with a similar right to recovery in liability cases as that held by Medicare and it takes effect as of October 1, 2014.
What this means is that, as of the effective date of the new law, whenever liability cases are settled with Medicaid beneficiaries, care should be taken to ensure that any Medicaid lien is satisfied.  We will continue to monitor this area of the law and keep you informed of any and all new developments.

Court Finds MSA Provision Unenforceable Under Terms of Settlement

In Ramos v. Becco Contractors, Inc., No. 111367, 2013 Okla. Civ. App. LEXIS 105 (Okla. November 21, 2013), an injured worker who did not speak English settled a claim with his employer.  The settlement included a Medicare Set-aside (MSA), which would only be paid once CMS approval was obtained. Upon submission of the MSA to CMS, the parties discovered that the claimant was not Medicare eligible and thus, the Defendant refused to issue the MSA funds to the Claimant.  The number reported by the Claimant as his Social Security number (SSN) was, in fact, only a taxpayer identification number.

The Claimant argued that he did not intentionally misrepresent his Medicare eligibility but, given his lack of sophistication and education, he did not appreciate the difference between his nine-digit taxpayer identification number, which later became his SSN, and the requirements for Medicare eligibility.  The Court agreed that the Claimant’s misrepresentation of his SSN was not intentional.  Ultimately, however, the Court held that the MSA provision of the settlement was unenforceable based upon the terms of the settlement.  The parties had agreed that the MSA would not be paid without CMS’ approval and CMS approval was not obtained. 

If the claimant’s public benefits status had been verified prior to settlement, the parties could have avoided the confusion over the Claimant’s SSN and Medicare eligibility as well as the subsequent litigation concerning the MSA provision.  In order to avoid issues such as those in Ramos, parties should verify a claimant’s public benefits status prior to reaching a settlement agreement.  Doing so will enable parties to correctly evaluate the need for a Medicare Set-aside and determine whether CMS approval is warranted.

CMS Issues Proposed Rule Regarding Applicable Plans’ Rights Of Appeal

CMS has issued a proposed rule implementing the aspects of the SMART Act that require the establishment of appeal rights for 'applicable plans' (liability insurance (including self-insurance), no-fault insurance, and workers' compensation law or plans) when Medicare pursues recovery of conditional payments against those entities. The proposed rule, which can be found at , enunciates the appeal process that will be available to applicable plans. Basically, the proposed process parallels the rights of appeal already available to beneficiaries. Because the debts involved are based upon the same conditional payments that would be at issue if recovery were directed toward the beneficiary, CMS believes that "it is appropriate to utilize the same multilevel appeal process for applicable plans" that a beneficiary currently has available.

Under the proposed rule, applicable plans will be entitled to appeal initial determinations by retooling the existing regulations (currently found in 42 CFR 405.900 - 405.946) as follows:

· the "Basis and Scope" section will be amended to reference the SMART Act provision that requires this appeals process;

· the "Definitions" section will now include 'applicable plan' and define it as liability insurance (including self-insurance), no-fault insurance, or a workers' compensation law or plan;

· Section 405.906 will be amended so that applicable plans will be provided notice when Medicare is seeking recovery from that plan. Note that being courtesy copied on a demand does not provide plans with appeal rights; appeal rights are only available if Medicare chooses to pursue the plan as a debtor. Also note that if the plan is named as a debtor (i.e., Medicare is pursuing recovery directly from the plan), the beneficiary will not be a party to any appeal the plan pursues.

· the "Appointed Representatives" section will be amended to allow the appointed representative of a plan to remain a valid representative for the duration of any appeal (unless the appointment is specifically revoked by the plan).

· the "Notice of initial determination" section will be amended to include specifications for the content of an initial determination when this finding is sent to an applicable plan. Specifically, the notice must include the reasons for the determination, the procedures for obtaining additional information regarding the basis of this decision, and how to request a redetermination if the plan is dissatisfied with the initial determination.

· the section "Actions that are initial determinations" will be amended to specify that a determination by Medicare this it has a recovery claim when pursuing recovery directly from a plan is an 'initial determination.' By doing so, CMS is identifying the event that triggers the appeals process (as the appeal process can only begin when there has been an initial determination). Along those same lines, the section "Actions that are not initial determinations" will be amended to note that Medicare's decision as to who it will pursue (between the beneficiary, the plan, the provider, etc.) is not an initial decision, nor is the finding that an employer 'facilitates' a group health plan;

· the proposed rule also adds a new section, "Notice to the beneficiary of an applicable plan's request for a redetermination," through which the beneficiary will receive notice of a plan's intent to appeal Medicare's attempts at direct recovery.

As an aside, CMS notes that an appeal process for Workers' Compensation Medicare Set-aside determinations is being considered and will be addressed separately. We look forward to this issue's further development, and will keep you apprised of any supplemental publications on these issues.

Comments on the proposed rule regarding applicable plans' appeal rights are welcomed and will be considered by CMS if received prior to 5 p.m. on February 25, 2104. We will be considering whether to submit our own comments to this proposed rule in the coming weeks. If you are interested in submitting comments as well, and would like our assistance in this process, please let us know.

CMS Restructures COB and MSPRC in an Effort to Streamline Operations

In an effort to provide improved customer service and consolidate and streamline data and recovery operations, CMS is restructuring the Coordination of Benefits (COB) and the Medicare Secondary Payer Recover Contractor (MSPRC) activities. Effective February 1, 2014, the new Benefits Coordination & Recovery Center (BCRC) will begin handling COB activities for both Group Health Plans and Non-Group Health Plans (liability insurance [including self-insurance], no-fault insurance, and workers’ compensation laws or plans).  The BCRC will also handle Recovery activities for Non-Group Health Plans.  Additional information regarding the restructuring can be found at www.CMS.gov.

Cymbalta Goes Generic

Cymbalta is one of the most commonly prescribed and costly drugs for chronic pain and/or depression and it is often included in Medicare set aside (MSA) allocation reports.  Fortunately, the patent for Cymbalta expired in early December and the generic form, duloxetine hydrochloride,  is now available.  The generic pricing has resulted in a significant decrease in cost, which in turn should result in reductions of MSA drug costs when Cymbalta has been prescribed.    Depending on the dosage, there can be a savings of $1.55 to $1.75 per pill, and when calculated over a claimants’ lifetime there will be a substantial savings in the medication costs. Please be aware that this applies to any existing MSAs so this pricing change may warrant a revision in the report.

CMS Solicits Comments on Imposing Penalties for Noncompliance with Section 111 Reporting Requirements

CMS recently issued an Advanced Notice of Proposed Rule Making (ANPRM) in which it solicits comments for practices in which civil monetary penalties may or may not be imposed for failure to comply with Section 111 reporting requirements. Specifically, CMS is requesting comments and proposals:

• to define “noncompliance” in the context of the phrase “. . . for each day of noncompliance with respect to each claimant . . . “ in sections 1862(b)(7) or (b)(8) of the Act- 42 U.S.C. 1395y(b)(7)(B) and (8)(E); 
• on mechanisms and criteria to evaluate whether and when CMS would impose civil monetary penalties; 
• for methods to determine the dollar amount of the civil monetary penalty that would be levied each day of noncompliance; and 
• to devise a method(s) and criteria to determine which actions would constitute “good faith effort(s)” to identify a Medicare beneficiary for Section 111 reporting purposes. 

All interested parties, including insurers, third party administrators for Group Health Plans, and any other applicable plan, should submit comments as doing so will shape the application of monetary penalties for failure to comply with Section 111. Comments must be provided no later than February 10, 2014.