A little history about Medicare. Medicare was enacted in 1966 for the purpose of providing government sponsored medical benefits for people meeting certain eligibility requirements and is funded through payroll deductions. Eligibility for Medicare falls into three categories – people who are 65 and older, people with end-stage renal disease, and people who have received Social Security Disability benefits for 24 months.
Medicare benefits are provided in four parts – A, B, C and D.
- Part A: This coverage is usually premium free for inpatient care in hospitals and skilled nursing facilities.
- Part B: On the other hand, Part B coverage is usually with a premium and is for outpatient care, doctor’s visits, diagnostic testing and some therapies.
- Part C: Part C allows for PPO and HMO Medicare Advantage Plans which are run by private companies with Medicare’s approval.
- Part D: Finally, the newest provision of Medicare, Part D which was initiated in 2006, allows private companies to provide prescription drug coverage with most people paying a premium.
In 1981 the Medicare Secondary Payer Act (MSP) was established in order to protect the long-term viability of the Medicare Trust Fund. The MSP Act precludes Medicare payment for services to the extent that payment has been made or can reasonably be expected to be made under liability insurance (including self-insurance), no-fault insurance or a workers’ compensation plan. These are what Medicare calls primary insurers or primary plans. The MSP Act requires these primary plans to pay before Medicare which is secondary.
Given that Medicare is secondary, any claims involving Medicare beneficiaries or those with a reasonable expectation of Medicare eligibility must consider Medicare’s interest. The MSP Act puts the primary payers on notice that they have the responsibility to pay for medical treatment arising under their claims, not Medicare.
The organization that enforces these Medicare requirements is the Centers for Medicare and Medicaid Services (CMS). Prior to Oct. 5, 2015, the Benefits Coordination & Recovery Center (BCRC) handled recovery payments for any conditional payments that were made where an applicable plan is identi fied as a debtor (workers’ compensation, liability and no-fault claims). Beginning Oct. 5, 2015, the Commercial Repayment Center (CRC) took over recovery payments on all new cases where an applicable plan is identi- fied as a debtor.
The MSP Act requires that the primary plan make payments before Medicare. How is this enforced? It comes down to three areas of compliance. First, the consideration of future medical (MSA). Second, the resolution of any Medicare lien (Conditional Payment). And third, the reporting of Medicare eligible claimants.
How can the MSP Act be complied with such that the burden of future medical is not shifted to Medicare after a case settles? The initial concern was with workers’ compensation cases as they were seen as the most guilty for shifting the burden of future medical to Medicare. The solution was a MSA which was developed to address MSP status in the settlement of cases. A workers’ compensation settlement was to include sufficient funds to reasonably cover the plaintiff ’s future medical treatment that is causally related or potentially causally related to the accident and that otherwise would be covered by Medicare.
For example, say a workers’ compensation case settles but the treating physician has determined that the claimant will need a knee replacement in the future. An MSA will appropriate a reasonable amount to cover that knee replacement so that Medicare will not get stuck with the bill down the road.
There is no law or regulation that officially establishes MSAs, but over time it became the method for addressing Medicare’s interests in the settlement of cases. Then, in 2001, Medicare advised that they would begin reviewing workers’ compensation MSAs to determine whether they were appropriate. If not, Medicare would increase the amount that needed to be set aside. Over time it has become a more formalized process.
In regard to liability and/or no-fault cases, there is no formal review process at this time. However, on Feb. 3, 2017, CMS updated its manual to reflect that as of Oct. 1, 2017, The CMS Common Working File will reflect the existence of liability and no-fault MSAs in their system. This clearly indicates that CMS expects parties to address future medical issues in their liability and no-fault settlements.