MSP Changes Include Penalties, Review Criteria, Double Damages: Viewpoint

By Shawn Deane | May 28, 2019

As we approach the halfway point of 2019, Medicare Secondary Payer (MSP) continues to be one of the most rapidly evolving areas of compliance in claims. On the horizon are possible significant changes relating to each compliance point: Section 111, Medicare Set-Asides (MSAs), and recovery. Insurance carriers, self-insureds, claims professionals, attorneys, and MSP practitioners will potentially be affected. To properly prepare for potential changes, industry stakeholders first must understand what those changes are and their possible impact.

Enforced penalties and expanded compliance may be on the horizon for Section 111
Shawn Deane

Civil money penalties

The potential for a per-claim penalty of $1,000 per day for Section 111 noncompliance has loomed over the industry since the 2007 passage of Section 111 of the Medicare, Medicaid, and SCHIP Extension Act (Pub. L. No. 110-173 [2007] [codified in various sections of 42 U.S.C.]). Section 111 brought stringent reporting requirements on the part of insurance carriers and self-insureds—known as Responsible Reporting Entities (RREs)—to alert Medicare to the existence of responsibility under MSP.

The associated civil money penalty (CMP) for noncompliance is grounded in the MSP statute,[1] but currently, there’s no regulatory mechanism indicating when it may be imposed. The SMART Act of 2012[2] revised the statutory language to ensure the penalty was optional versus mandatory, and the SMART Act required the Centers for Medicare and Medicaid Services (CMS) to provide clarification about when penalties may be imposed.

In 2013, CMS initiated the rulemaking process by soliciting comments. But the agency took no further action until fall 2018, when the Office of Management and Budget (OMB) issued a notice indicating that CMS is planning to release proposed rules for public comment about civil money penalties.[4] It’s expected that later in 2019 CMS will outline a proposed rule around the imposition of CMPs. RREs will need to be on alert for the release of a formal proposed rule in order to comment and advocate for reasonable, fair, and appropriate guidelines concerning Section 111 CMPs.

Medicare Parts C and D data

A major difficulty for primary payers is the identification of Medicare recipients who are enrolled in Medicare Part C (Medicare Advantage) and Medicare Part D (prescription drug) plans. The Section 111 query response provides general information only about traditional Medicare (Parts A and B) enrollment. The Provide Accurate Information Directly (PAID) Act (H.R. 1375), if passed, would require CMS to return Medicare Parts C and D information for the last three years before the applicable injury. RREs would most certainly require updates to the query response file to ingest and capture new data points. Should this legislation pass, it will be important for RREs and their technical teams to follow CMS’s guidance when the changes go into effect.

Medicare Set-Asides in 2019: The hunt for alternatives, off-label meds, and potential expansion

Submission alternatives

In the last few years, insurance carriers, self-insureds, TPAs, and vendors have been increasingly exploring alternatives to submitting MSAs to CMS for review when they otherwise meet submission thresholds. Costs have been reported as the primary driver behind this trend. Parties to a workers’ compensation settlement can typically contain costs and achieve compliance through the formalized voluntary Workers’ Compensation Medicare Set-Aside (WCMSA) submission process. Yet, there are circumstances when engaging in traditional submission that may result in unfairness, inequality, and speculative treatment proposed by CMS. At the individual claim level, CMS’s methodology may be unsound and unreasonable, resulting in a claim that cannot be settled. From a programmatic viewpoint, the risk tolerance of the parties may weigh against availing themselves of the process altogether.

In addition to forgoing submission, other features and elements are often used to guard against exposure and mitigate costs, including:

  • professional administration
  • insurance/indemnification provisions
  • alternative allocation methodologies

So long as CMS continues to uphold inflexible and unreasonable requirements for future medical care, it is assured that the appetite to explore alternative options to traditional MSA submission will likely increase.

Stricter WCMSA review criteria

The Workers’ Compensation Review Contractor (WCRC) is requesting copies of treatment records for zero-dollar submissions. In the past, the WCRC rarely made this type of request. In some cases, these requests can be successfully protested, and there are recent examples of zero-dollar approvals following the submission of medical records. Claims payers should monitor whether the Centers for Medicare and Medicaid Services and the WCRC will continue to move toward a more stringent review or formalize new policies around the zero-dollar proposal.

Since taking over the WCRC, Capitol Bridge, LLC, has consistently required Lyrica to be included in MSAs where it was historically excluded as an off-label medication. CMS formally announced a policy change requiring Lyrica in MSAs in the January 2019 release of the Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide,v2.9. The basis for inclusion, per the WCMSA Reference Guide,is that “[t]here are many off-label indications that are listed in recognized compendia and peer-reviewed sources; thus, they would be covered under the Part D Benefit, and should also be included in a WCMSA” (see section Based on this rationale, submitters should keep a close eye on whether additional medications with off-label indications will be required in the future.

Liability Medicare Set-Asides

As long as the WCMSA program has existed, the industry has speculated and offered different opinions about the applicability of future medicals in the liability arena. Liability Medicare Set-Asides (LMSA) have been the perennial concern of the MSP industry. Regardless of where a practitioner lands on the issue, for years CMS has intimated that settling parties should take Medicare’s interests into consideration in liability claims. In the latter part of 2018, the Office of Information and Regulatory Affairs (OIRA) released a notice indicating that CMS plans to issue proposed rules on options to address future medicals in relation to liability, workers’ compensation, and no-fault claims.[5] This notice further indicated that a Notice of Proposed Rulemaking (NPRM) on this subject is targeted for release by September 2019.

While the released notice doesn’t provide any specifics, the forthcoming proposed regulation is believed to be focused on LMSAs. The industry is closely watching to see if CMS will finally take steps to codify policy around future medicals in liability claims.

The state of recovery: Part C decisions, performant’s continued challenges, and rising Treasury involvement

Increase in Part C recovery and double damage rights

Judicial decisions in various jurisdictions have recognized Private Cause of Action (PCA) rights under the MSP, whereby a Part C/Medicare Advantage Plan entity can recover double damages to recoup conditional payments. These rights have increased the activity in Part C recovery against primary payers and have opened the door for litigants seeking to recover under the PCA. CMS provides the Non-Group Health Plan (NGHP) Section 111 data to Part C plans, although the details and scope of this process remain unclear. However, this data exchange—along with court decisions—has bolstered Part C recovery.

With proposed PAID Act legislation requiring CMS to return Part C enrollment data[6] to RREs in the query process, RREs would be permitted to investigate a potential Part C plan lien. The entities could then take proactive measures to ensure that the lien is properly addressed and resolved. The industry is closely keeping an eye on movement in Part C recovery litigation and continued reforms that could level the playing field between primary payers and Part C plans.

Performant’s performance

The Commercial Repayment Center (CRC) contractor change and the initiation of pre-settlement recovery against primary payers were two of the biggest changes to the MSP program since its start. The first entity to hold the post, CGI Federal, struggled with a new process and NGHP recovery concepts under the MSP. Within two years, in October 2017, CGI Federal was replaced by Performant Corp.

Performant inherited a significant backlog that it continues to work through. Improvements in turnaround times and general performance have been made; however, the CRC still needs to improve accuracy of charges, the dispute/appeal process, the MSP Recovery Portal (MSPRP), obtaining refunds, integration with Section 111 data, incorrect referrals to the U.S. Treasury Department, and issue resolution, to name a few.

As the CRC continues to increase its recovery efforts, the latter half of 2019 will be a critical year for the contractor and an area for industry stakeholders to watch.

Treasury collections rise

Recovery sought of MSP debts to the U.S. Department of the Treasury increased in 2018.[7] Many of them originated as mistaken or premature referrals from the CRC. With an increase in referrals to Treasury, it appears that there was also an increase in referrals to the Treasury Offset Program (TOP). When a debt is referred to the TOP, federal funds owed to an entity or individual can be intercepted in consideration of the MSP debt. This particularly affects entities that are frequent recipients of federal grants as well as beneficiaries who rely on Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and other federal benefits. Recently, states also became more involved in offsets through the State Reciprocal Program (SRP), where they can intercept funds owed for federal debts and vice versa. [8]

Treasury collections, including the TOP, are effective means for CMS to recover delinquent MSP debts. However, it’s critical that referral integrity exists and that appropriate information be available to primary payers. This would ensure that inappropriate collections can be contested and refunds obtained. CMS is mandated to refer delinquent MSP debts to Treasury, so this will be a developing issue in 2019 as recovery only increases.

Preparing for the changes ahead

With all the new requirements in the pipeline, it’s important for insurers to remain vigilant by keeping informed about MSP trends and legislative developments. Carriers will also want to make sure they have the resources on hand to pivot their compliance efforts when necessary. By staying a step ahead of the potential changes, insurers can successfully achieve compliance and contain costs in the ever-changing MSP landscape.


[1]42 USC 1395y

[2]Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act):



[5] Miscellaneous Medicare Secondary Payer Clarifications and Updates (CMS-6047-P)

[6]Sec. 2(2)(II) “to the extent applicable, identify by plan name and address any Medicare Advantage plan under part C and any prescription drug plan under part D in which the claimant is enrolled or has been enrolled during such period.”

[7]See The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2018 Report to Congress


About Shawn Deane

Shawn Deane is vice president of Medicare/Medicaid compliance and policy at ISO Claims Partners, a Verisk business.

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