Strengthening Medicare and Repaying Taxpayers Act (“SMART Act”) and Medicare’s Limited Right to Reimbursement of Conditional Payments

On January 20, 2013, the SMART Act was passed into law. The law provides direction to the Centers for Medicare and Medicaid Services (“CMS”) in the way it collects payments Medicare has made related to workers’ compensation, liability, auto and no-fault claims.

Conditional payments are payments made by Medicare where an applicable plan (workers’ compensation, liability, self-insurance, auto and no-fault insurance plan) has not made or cannot reasonably be expected to promptly make payment related to a Medicare covered item or service. Medicare has a direct right of recovery against an applicable plan for conditional payments.

This blog post’s focus is on Medicare’s limitations in obtaining reimbursement for conditional payments. The SMART Act covers much more and we encourage the reader to look at Public Law No: 112-242.

In general, disputing conditional payments has resulted in using the following two strategies:

  1. Obtaining medical records for the date of service for which Medicare is alleging a conditional payment. If unrelated to the work injury, we have had success pulling these alleged related payments off of the conditional payment letter;
  2. Using 42 C.F.R. § 411.47, apportionment of lump-sum compromise settlement of workers’ compensation claim. This involves determining a ratio between the amount a workers’ compensation claim settled for versus its overall exposure and using that ratio in determining the Medicare overpayment after certain deductions (i.e. the amount the parties are responsible for conditional payments made by Medicare).

The SMART Act has clarified and provided another bullet in the conditional payment dispute. A three year statute of limitations applies to actions for recovery brought by the Unites States for reimbursement of conditional payments it has made.

Section 205 of the SMART Act states as follows:

  • In General – Section 1862(b)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395y(b)(2)(B)(iii)) is amended by adding at the end the following new sentence: “An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.”
  • Effective Date – The amendment made by subsection (a) shall apply with respect to actions brought and penalties sought on or after 6 months after the date of enactment of this Act.

Paragraph (8) is the requirement of liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws and plans to identify claimants that are Medicare beneficiaries and submit the identity of the claimant to CMS. Many in the Medicare compliance industry define Paragraph (8) as Section 111 reporting and also the requirement of reporting Total Payment Obligation to Claimant (TPOC) payments.

What is interesting regarding the SMART Act is whether notice of termination of the ongoing reporting medical component (ORM) of Section 111, will qualify as adequate notice to CMS in starting the statute of limitations. The ORM may trigger recovery of Medicare conditional payment1, but whether the courts will qualify the notice that no further payments will be made by the applicable plan (termination of ORM) as sufficient notice for the statute of limitations to run has yet to be determined. Generally, a termination ORM notice will likely be attached to a TPOC payment on the claim and therefore the notice of the TPOC should qualify as adequate notice starting the statute of limitations clock. We are unaware of a district court that has made such a determination, distinction or offered any guidance over the issue of ORM.

Taking this a step further, 42 CFR 411.24 – recovery of conditional payments – states that CMS has a right to initiate recovery as soon as it learns that a payment could be made under an applicable plan. Therefore, if Medicare is on notice by way of an ORM and a conditional payment is made, slipping through Medicare’s Section 111 net, does the statute of limitations period begin at that time?

In United States v. Stricker, 11-14745 (11th Cir. 2013 unpublished), the United States District Court of Appeals found that the statute of limitations began on December 2, 2003, the date the right of action accrued (the date the plaintiff lawyers certified that 97% of the plaintiffs had signed releases). This likely will not be the applicable standard as the 11th circuit ruling used 28 USC § 2415 as its determination of when the statute of limitations began. The SMART Act has supplanted 28 USC § 2415 regarding conditional payments.

However, in looking at 42 USC 1395y(b)(2)(B)(vi):

Notwithstanding any other time limits that may exist for filing a claim under an employer group health plan, the United States may seek to recover conditional payment in accordance with this subparagraph where the request for payment is submitted to the entity required or responsible under this subsection to pay with respect to the item or service (or any portion thereof) under a primary plan within the 3-year period beginning on the date which the item or service was furnished.

What this means is that in the right circumstances Medicare should be barred from filing actions for reimbursement for any dates of service that are older than three years from CMS’ request for payment. For example: applicable plan provides ORM notice on June 1, 2012. The claim settles with a TPOC on April 1, 2016 and applicable plan notifies Medicare the same day of the TPOC. Medicare now sends its first request for payment dated April 15, 2016. Under this circumstance, Medicare should be barred from seeking reimbursement for any date of service that is older than April 15, 2013.

Another aspect of the statute of limitations will be its applicability to Medicare Advantage plans. In Collins v. Wellcare Healthcare Plans, 13-6759 (E.D. La. 12/16/14), the District Court opined that the three year statute of limitations applied to Medicare Advantage plans as the SMART Act statute of limitations applies to all actions brought under the Medicare Secondary Payer act.

As noted in Stricker, the statute of limitations is a mechanism to require prompt presentation of claims and in the conditional payment context, require diligence by CMS. Arguably, Medicare will be on notice that there is an obligation for an applicable plan to make a payment for a Medicare covered service once the ORM box is checked by responsible reporting entities (RRE). The litigation likely will come into play in determining whether the ORM provided adequate information to Medicare of the type of injury or diagnosis related to the ORM notice.

Thus, an applicable plan should have a clear understanding of its responsible reporting entity’s process in reporting ORMs and TPOCs to Medicare as an applicable plan cannot escape a Section 111 violation or reimbursement of conditional payment suit by Medicare2. In the event Medicare files suit for a conditional payment outside their statute of limitations, it will then be the responsibility of the applicable plan or beneficiary to provide their version of when notice was provided to CMS.

The three year statute of limitations became effective with respect to actions brought by CMS on or after 6 months of when the SMART Act was enacted and can be applied to actions filed by CMS after July 10, 2013. We will continue to update our blog as more information regarding these issues is obtained.

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1https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/NGHP-Training-Material/Downloads/Ongoing-Responsibility-for-Medicals-ORM.pdf

242 USC 1395y(b)(2)(B)(iii); 42 USC 1395y(b)(8)

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