Medicare has been in the news lately with the Speaker of the House, Paul Ryan, renewing a push to change the nature of the traditional, fee-for-service Medicare system. To understand the potential impact of a change a review of the background of Medicare is appropriate.
Medicare is a Federal health insurance program that was enacted by the United States in 1965. Generally, an individual may become entitled to Medicare benefits if they have appropriately paid into the program and are age 65 or older, entitled to Social Security Disability benefits for 30 months or longer, or those with End Stage Renal Disease. There are four parts to Medicare: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage Plans) and Part D (prescription drug coverage). Coverage under Parts A and B is considered “original Medicare.”
Concern about Medicare’s solvency has been longstanding. This concern drove the enactment of the Medicare Secondary Payer Act (MSP) in 1980. The Act specifically states that Medicare may not make a payment with respect to any item or service to the extent that “payment has been made or can reasonably be expected to be made under a workers compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” The exception to this is when a non-group health plan (NGHP) has not made or cannot reasonably be expected to make payment with respect to an item or service. The MSP provisions also make Medicare a secondary payer in certain situations involving group health plans.
To prevent the depletion of the Medicare trust fund, any payment made by Medicare is conditioned upon the reimbursement of the payment to the Medicare trust fund. CMS’ Coordination of Benefits and Recovery Contractor (COBC), oversees the conditional payment recovery efforts of the Benefits Coordination and Recovery Center (BCRC) and the Commercial Repayment Center (CRC). According to CMS’ December 5, 2011 Memo, Medicare Part C and D plans have the same right to recover as Medicare Part A and B plans. Emerging case law in various circuits also provides Part C plans with a private cause of action under the MSP in order to enforce their reimbursement right. Although Part D prescription plans are also secondary payers, their reimbursement efforts to date have been negligible. This may however be impacted by legislation that was recently introduced to the House of Representatives in September of 2016. The Secondary Payer Advancement, Rationalization and Clarification Act (SPARC Act) seeks to improve and simplify the coordination of benefits between Medicare’s Part D drug plans and primary payers under the MSP statute.
Parties settling a workers’ compensation or liability claim may include a future medical allocation or Medicare Set-Aside (MSA) in their settlement in order to prevent a cost shift of these future injury related medical expenses to Medicare. This allocation reduces the probability of Medicare making future conditional payments in the claim. The MSA includes projections for treatment that is covered by Medicare Parts A and B and prescriptions covered by Part D. Injury related treatment that may be covered by Part C may be allocated in a separate non Medicare covered treatment fund associated with the settlement.
Parties to a settlement have the option of seeking review of the MSA proposal from CMS if CMS’ internal workload review threshold is met. The review process is a voluntary process. To date, Medicare Advantage Plans have not actively pursued reimbursement for post settlement injury related payments made in a claim. CMS’ ongoing commitment to the voluntary review of the MSA proposals is reflected in their most recent November 23, 2016 Draft Request for Proposal for the Workers Compensation Review Contractor. The contract will cover a 12-month base period with four one-year options. CMS expects the award date to occur during the Third Quarter of FY2017. The current Statement of Work also seeks a contractor that shall be ready to implement a process similar to what currently exists in the WCMSA process to evaluate MSAs for “other applicable NGHP insurances.”
Enforcement of the MSP provisions has resulted in significant savings to Medicare. According to CMS, approximately $8.5 billion dollars were saved in Fiscal Year 2015. These savings were facilitated by the various databases that collect MSP beneficiary information for the BCRC.
Despite these savings, the Social Security and Medicare Boards of Trustees 2016 Report Summary indicates that the Medicare Hospital Insurance Trust Fund (HI) that covers Medicare Part A is projected to be depleted in 2028. The Supplementary Medical Insurance Trust Fund (SMI) that consists of Medicare Part B and Part D, however, is expected to remain adequately financed into the indefinite future due to its financing from general revenues and beneficiary premiums. The projected costs for the SMI are expected to grow due to the aging population and increasing health care costs. The Trustees continue to urge for action to remedy this expected deficit.
Speaker of the House, Ryan, proposed a new approach to Medicare, known as “premium support,” in 2011 when it was included in a budget blueprint. It will be considered again in 2017. As envisioned, a beneficiary would be allocated a fixed contribution by the government that may be used to buy health insurance from either a private insurer or from the traditional fee-for-service Medicare program. The introduction of competition is expected to result in savings for Medicare. Current increased beneficiary enrollment in Medicare’s Part C Medicare Advantage Plans is also cited as evidence of the popularity of these plans. Opponents, however, are concerned that the premium support program would privatize Medicare and essentially result in regular fee-for-service Medicare, with an open ended commitment to pay for medical services, only being available to the more affluent beneficiary. The proposed privatization is controversial and likely to result in prolonged political discussion. Whether this occurs during the administration’s move to reform the Affordable Care Act or afterwards remains to be seen.
In the event that a portion of Medicare Part A and B coverage will come from private insurers, private insurers would be expected to take a more proactive approach in asserting their secondary payer status. The MSP provisions, CMS’ December 5, 2011 Memo, case law and existing CMS’ Workers Compensation Review Contractor arrangement all provide the framework for the MAP insurers to expand their role in both recovering payments made in connection with settlements and in denying future payments for injury related care. Failure to do so would be the equivalent of “not looking a gift horse in the mouth.” As with any reform, our industry should remain flexible and open to new opportunities that will present themselves.