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Q&A with Humana: Medicare Secondary Payer, Conditional Payments, and Medicare Set Asides

Many people understand that the Medicare program provides hospital benefits under Medicare Part A and professional service benefits under Medicare Part B.  They may be less familiar with the Medicare Advantage program (aka MA or Medicare Part C) and Medicare Prescription Drug programs (aka Medicare Part D or PDP).  Medicare Advantage and PDP plans are offered by private companies that have been approved by Medicare, and are another way for beneficiaries to get Medicare benefits.

Medicare Advantage and PDP plans are growing in popularity. More than one-third of all Medicare beneficiaries now receive their benefits through Medicare Advantage plans. Most beneficiaries who continue to get coverage through traditional Medicare obtain drug coverage through a PDP plan.   In its 2019 report, Medicare’s Board of Trustees projected that 40% of all beneficiaries will be enrolled in Medicare Advantage plans by 2026.  Some industry experts think that is a conservative projection.

Medicare Advantage plans typically provide benefits not available under original Medicare like built-in prescription drug coverage, disease prevention and management services and limits on beneficiaries out of pocket expenses.  PDP plans provide a means through which beneficiaries who wish to keep traditional Medicare can obtain coverage for prescription drugs that traditional Medicare doesn’t cover. 

The recovery rights granted by the Medicare Secondary Payer (MSP) statutes are similar for original Medicare, Medicare Advantage and PDP plans.  Under federal regulations (42 CFR § 422.108 and 42 CFR § 423.462), plans have the same recovery rights as original Medicare.  The Centers for Medicare and Medicaid Services (CMS) have repeatedly explained that Medicare Advantage and PDP plans should enforce the MSP rules or face potential penalties. Federal courts have held payers and even some plaintiff attorneys responsible for double-damages in cases where Medicare Advantage plans were not promptly reimbursed.  Therefore, it is becoming more important than ever for the industry to be aware of how these plans are finding out about and tracking settlements and how to best protect injured parties’ Medicare benefits both before and after settlement.

We sought out an expert in the business to help tackle the most common questions we receive and to provide insight into the MSP Act from the perspective of a Medicare Advantage plan.

Brian Bargender is a Consultant for Subrogation, MSP and Other Payer Liability at Humana, one of the country’s largest Medicare Advantage organizations.  In recent years, Humana has been heavily involved in efforts to clarify and enforce the MSP rules that pertain to Medicare Advantage.

Brian has 16 years of experience in leading and improving health benefit subrogation and MSP operations.  He currently acts a bridge between operational units and Humana’s legal team for enforcing subrogation and MSP.  In this role he devotes considerable attention to identifying and monitoring trends that may impact subrogation and MSP recovery efforts, developing new cost avoidance and recovery projects, advising operational leaders and educating other payers regarding subrogation and MSP issues.

We sat down with Brian to find out more about what he’s seeing out in the field, and the implications for all parties involved in a settlement where Medicare’s interests should be taken into consideration.

Krista: Brian, in your experience, what misconceptions have you seen in regards to Medicare Advantage plans recovering conditional payments?

Brian: In spite of direction from CMS and multiple federal court rulings, there remains a misconception that the benefits provided by Medicare Advantage and PDP plans are different from Medicare benefits. Many people mistake Medicare Advantage and PDP for private insurance.   Although insurance companies administer these plans, the benefits they manage are still Medicare benefits.  The Medicare Advantage program was created under Part C of the Medicare statutes to serve as an alternative delivery vehicle for Medicare benefits, but as far as the MSP regulations and CMS are concerned, Medicare Advantage plans have the same rights and responsibilities for MSP enforcement as traditional Medicare contractors.  When PDP was created under Part D of the Medicare statutes, CMS established regulations that put PDP on equal footing with traditional Medicare.  CMS reinforces that policy in section 4.1.3 of the Workers’ Compensation Set-Aside Reference Guide and elsewhere.  Multiple federal courts and state courts have also recognized and accepted this position.

Most Medicare Advantage and PDP plans try to be diligent about meeting the MSP requirements through a combination of avoiding payment when other payers are known or by recovering payment when payers aren’t immediately identified.  When Medicare Advantage plans have not been able to obtain prompt reimbursement, they can pursue recovery of double damages from primary payers under the MSP private cause of action statute 42 U.S.C. § 1395(y)(B)(3)(A).  While this might seem controversial, the 3rd and 11th US circuits have both issued influential rulings that accept this premise and all federal courts that have considered this issue to date have agreed with those rulings.

In addition, Medicare Advantage plans have also won rulings awarding double damages from plaintiff attorneys that failed to cooperate in reimbursing conditional payments.  At least two federal courts have also been asked to rule on whether beneficiaries themselves can be held accountable for double damages when a Medicare Advantage plan hasn’t been reimbursed for conditional payments.

See

In re: Avandia, 685 F.3d 353 (3d Cir. 2012)

Humana Med. Plan, Inc. v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016)

Krista: What are the approaches Medicare Advantage plans are taking to find out about liens and MSAs?

Brian: There are three categories of approach: proactive, reactive and inactive.

Humana and the other large Medicare Advantage plans take the proactive approach.  They generally use data analytics in combination with data obtained from CMS or other sources to screen claims as they come from treatment providers for signs there may be primary payers. We look for claims that are likely to be accident related.  We look for activity that suggests there may be a primary payer. If we identify a primary payer, we avoid duplicating benefits that payer should provide – per CMS’ expectation.   

If we can’t confirm that primary payment is imminent, we may pay the claim and pursue recovery later. If we know workers’ compensation or no fault is covering, or better yet if they have already paid the claim, we are not going to pay for the claim. 

When plans can’t promptly identify a primary payer, the treatment claims are processed and referred for post-payment investigation.  Different plans make use of different approaches to obtain information.  Some do all the work internally but many employ vendors who specialize in health benefit investigation and subrogation.  Information might be obtained via outreach to beneficiaries or primary payers. However, we may also review MSP data that is supplied by CMS or look for accident matches through injury claim data reference services.  When available, some plans also make use of data exchanges with state workers’ compensation agencies, public traffic accident records and court records to identify primary payers and claim settlements.

Other Medicare Advantage plans take a reactive approach.  They may rely upon annual beneficiary surveys or notices as a reminder to beneficiaries of their obligation to cooperate with MSP enforcement.  Instead of screening claims, they may wait for a provider, beneficiary or attorney to contact them and self-report that a primary payer exists. 

The inactive approach is rare but some smaller plans may still use it.  Those plans may not be doing a lot with MSP enforcement at all unless someone contacts them to confirm whether payments have been made for an injury. However, there is a lot of competition among health benefit subrogation recovery vendors that market their services to plans and I think that’s helped plans recognize a need to be more active.

Unfortunately, pharmacy claims generally don’t have any indicators that suggest a medication is related to an injury.  Unless a stand-alone Part D plan (most commonly involved when the beneficiary stays with traditional Medicare for physician and hospital benefits) has been told to watch for specific medications, it will have to pay claims and pursue reimbursement.  A few PDP plans have relied instead on the MSP data that is supplied by CMS to try to identify medications that should be covered by primary payers.

Krista: Do Medicare Advantage plans receive notification in the system of existing MSAs?

Brian: We do receive notice of submitted MSAs, but information comes through a process that’s separate from the system used by original Medicare contractors. Medicare Advantage and PDP plans don’t have direct access to either CMS’s Common Working File (CWF) or to any information held by the Workers’ Compensation Review Contractor related to Medicare Set-Aside Arrangements (MSAs).

CMS shares very limited information about MSAs.  We are given what amounts to a rough outline and directed to get additional information from parties involved in the settlement.  The data relayed by CMS doesn’t tell us about specific treatments that a MSA must cover. Medicare Advantage plans can make some benefit determinations based on diagnosis codes in the data provided by CMS, but stand-alone Part D plans are reliant upon workers’ comp carriers and/or WC MSA administrators to provide additional information about medications that the WC MSA must cover.

Federal regulations 42 CFR § 422.108 and 42 CFR § 423.462 extend Medicare Secondary Payer regulations that apply to original Medicare to apply to both Medicare Advantage and Medicare Prescription Drug plans.  That includes 42 CFR § 411.24(a), an automatic authorization for release of information needed for Medicare Secondary Payer enforcement as soon as claims are field by or on behalf of a Medicare beneficiary.   

Krista: Can Medicare Advantage and PDP plans deny coverage for someone with an MSA post-settlement care?

Brian: Yes, Medicare Advantage and PDP plans are directed by CMS to deny coverage for conditions that should be covered by workers’ compensation, including funds placed in a WC MSA or similar arrangement.  Similar direction is given by CMS to contractors that administer claims processing for original Medicare.  We do our best to comply with that expectation while making sure we don’t disrupt other benefits that members are entitled to receive.

As I’ve mentioned, CMS does not forward most MSA details to Medicare Advantage and PDP plans and instead directs us to get the details we need to make a determination from either the carrier, the MSA administrator or the beneficiary.  After we get the information we’ll administer benefits accordingly and deny claims that the MSA should cover.  If we can’t get full settlement and MSA details, we’ll follow the guidance from CMS and make the best determination that we can with the facts we have.

It’s often the case that carriers and claimant attorneys are slow to provide the information we need.  Guidance from CMS authorizes denial of claims when information needed to enforce MSP rules is not provided. 

As with any denial of Medicare benefits, these types of denials can be appealed through Medicare’s administrative redetermination and appeal process.  In order to obtain the redetermination, they will need to supply the Medicare Advantage or Part D plan with documentation comparable to what they are required to provide to CMS when benefits are denied under Parts A & B and the situation involves an MSA.  If the plan upholds a denial, any further appeals will be handled by CMS contractors and by CMS, using the same process and timeframes they use for original Medicare.

Risks are not limited to beneficiaries.  If benefits are denied because of an MSA, the beneficiary might have some hard questions to ask attorneys and other parties that were involved when the MSA fund was established.

These appeals, just like with traditional Medicare, could take years to figure out.

Krista: What are the potential impacts for someone that misspends their Medicare Set Aside and other settlement funds?

Brian: First, let’s be clear that the determination about whether funds have been spent properly is made entirely by CMS.  Medicare Advantage and PDP plans are supposed to pay secondary to an MSA until CMS confirms that funds have been properly exhausted.  Fund administrators are supposed to report fund exhaustion to CMS and there’s is no mechanism in place for Medicare Advantage and PDP plans to report exhaustion to CMS.

CMS has outlined some general penalties when funds are misused.  Many people know that coverage can be denied for a condition that a WCMSA should cover until the funds are replenished.  What they may not know is that the WCMSA Reference Guide references the possibility that Medicare Advantage coverage could be terminated if MSA funds are misused (§ 4.1.3 “Other Health Coverage).  Instructions given to PDP plans in Chapter 14 § 40.1 the Prescription Drug Benefit Manual section also reference termination of coverage.  I’m not aware of termination rules being enforced yet, but it might become an expectation in the future as CMS refines guidance around MSAs.

Additionally, CMS recently updated their Reference Guide for Workers’ Compensation Medicare Set-Aside Arrangements to include:

“It is highly recommended that settlement recipients consider the use of a professional administrator for their funds.”

I think it’s worth pointing out that misuse of funds can happen even without any intentional effort to ignore the rules.  Some beneficiaries who self-administer funds may be overwhelmed by the responsibility of handling an MSA and may not understand the guidance that CMS provides.  Unfortunately, Medicare Advantage and PDP plans aren’t in a good position to provide them with better guidance.

We’ve also seen cases where treatment providers don’t understand how MSAs work and submit bills to Medicare Advantage or PDP plans even when beneficiaries try to tell them not to.   CMS seems to be concerned by this too and has sent alerts to the provider community.  MSAs are complex subjects.  It’s possible that providers don’t understand them or that beneficiaries aren’t familiar with the terminology or comfortable enough to speak with their providers to make sure that the MSA is billed.

Krista: Do you expect this process to change or expand in the future?

Brian: Yes. By now many of your readers may be aware that the government has provided an advanced notice that new MSA rules and regulation could be coming as soon as October 2019.  It’s possible that updated direction from CMS to Medicare Advantage and PDP plans will follow and some movement in that direction may have already begun.

In August 2018 CMS began providing additional data that plans can use to investigate and coordinate benefits with WCMSAs.  In October 2018 CMS updated direction to plans regarding when conditional prescription drug payments must be recovered.  Reimbursement can no longer be obtained from pharmacies and must be obtained only from primary payers, WCMSAs or the Medicare beneficiaries themselves.

As I mentioned earlier, CMS has alerted medical providers and pharmacies to be on the look-out for WCMSAs and make sure they’re billed appropriately.  That might be another sign that CMS has been monitoring WCMSAs and is identifying issues that need to be addressed.

All of this is happening at a time when Medicare’s trustees have forecasted that the Medicare Hospital Trust Fund will be exhausted within the next decade.  There’s going to be a lot of effort to extend the life of those funds for as long as possible.  Everyone who has responsibilities under the MSP rules should prepare for greater scrutiny as a result.

To find out more about MSP and how to best protect injured parties, contact us.

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