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Understanding CMS regulations: navigating Medicare secondary payer reporting requirements
10/30/23
The Centers for Medicare & Medicaid Services (CMS) have finalized regulations that shed light on how it will handle civil money penalties for violations of the Medicare Secondary Payer (MSP) reporting requirements. The new rule applies to both group health plans as well as liability insurance (including self-insurance), no-fault insurance, and workers’ compensation (collectively referred to as non-group health plans).
Under the MSP provisions of the Social Security Act, Medicare is prohibited from making payments if group health plans or non-group health plans are reasonably expected to cover the costs. Conditional payments may be made by Medicare in situations where these primary plans have not made timely payments. Medicare is then entitled to reimbursement for these conditional payments.
In February 2020, CMS proposed a rule entitled ‘‘Medicare Secondary Payer and Certain Civil Money Penalties’’ to address violations and establish penalty calculations. In response to criticism concerning fairness, CMS revised the final rule, which will go into effect on December 11, 2023, with applicability starting from October 10, 2024.
The final rule clarifies the basis penalties as well as the amount:
1. Basis for Penalties
Penalties will only be imposed for untimely reporting of required information. Responsible reporting entities must make a report within one year. The proposed rule initially included penalties for inaccurate or contradictory reporting, but that is not included in the final rule.
2. Audit Selection
CMS had initially planned to monitor all submissions for compliance, but it has changed its approach. Instead, in an attempt to streamline the auditing process and ensure fairness, CMS will randomly select and audit 250 submissions each calendar quarter (1000 per year). A proportionate number of group health plan and non-group health plan records will be selected based on the number of submissions for each type of plan that quarter.
3. Amount
Group health plan responsible reporting entities that fail to submit required information on time may face penalties of $1,000 per day of noncompliance. For non-group health plan responsible reporting entities, such as liability insurers, penalties will be applied based on a tiered approach, depending on the number of days the required reporting was delayed. The penalty amounts, adjusted annually for inflation, are outlined as follows:
- $250 for each calendar day of noncompliance, where the record was reported 1 year or more, but less than 2 years after, the required reporting date;
- $500 for each calendar day of noncompliance, where the record was reported 2 years or more, but less than 3 years after, the required reporting date; or
- $1,000 for each calendar day of noncompliance, where the record was reported 3 years or more after the required reporting date.
The total penalty for any single instance of noncompliance by a non-group health plan responsible reporting entity will not exceed $365,000 (adjusted annually for inflation).
4. Good Faith Efforts
Non-group health plan responsible reporting entities may avoid penalties if they can show they were unable to comply because the claimant refused to provide the necessary reporting information. In order to qualify they make a total of three attempts to obtain the required information. These attempts must include at least two written attempts by mail or electronic mail, with the third attempt allowed to be made via telephone or another reasonable method. If the individual or their attorney makes it clear they will not provide the necessary information no further attempts are required.
Understanding and adhering to the new CMS regulations is crucial for group health plans as well as liability and worker’s compensation insurers. Responsible reporting entities can mitigate the risk of penalties by familiarizing themselves with the final regulations and ensuring timely and accurate reporting.
For additional information or questions, please contact Cathi Carson-Freymann at catherine.carson-freymann@fmglaw.com or your local FMG attorney.
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