Penalties for Late Medicare Secondary Act Reports Take Effect Next Year

By Jim Sams | October 13, 2023

Federal rules that impose $1,325-per-day civil money penalties on insurers and other organizations that fail to report settlements or judgments that require payment for a Medicare beneficiary’s medical care will take effect on Oct. 11, 2024.

The final version of the rule, published in the Federal Register on Wednesday, is simpler than the version proposed in February 2022 and less harsh on organizations that are required to report, said Dan Anders, chief compliance officer for Tower MSA Partners in Chicago. The Centers for Medicare and Medicaid Services removed proposed provisions that would have imposed penalties for errors and contradictory reports. The final version imposes penalties only for late reporting.

Still, violations can bring total penalties of $483,625 per year for each individual who was the subject of a late report.

Dan Anders

“I think it’s reasonable that they are looking at just the timeliness of reporting,” Anders said. “The penalty, itself, still seems disproportionate to the potential harm to Medicare.”

A law passed by Congress in 2007 required insurers and other organizations, called responsible reporting entities, to report settlements and judgments that require them to pay for a Medicare beneficiary’s medical care. The reporting is required to protect Medicare from the expense of treating injuries that should be paid by insurers or other parties.

The original law called for penalties of $1,000 per day for late reports, but an amendment adopted by Congress in 2013 directed CMS to write rules for non-group health plans with penalties up to $1,000, with annual inflation adjustments. The maximum penalty is now $1,325.

The final rule establishes a tiered penalty structure. For a record that was reported more than one year after it was due, but less than two years, the penalty is set at $250, plus the inflation adjustment. (Now $331.25). A report filed two years late brings a $500 penalty, plus the inflation adjustment ($662.50). The maximum penalty will be imposed only if the record is reported more than three years after the due date.

Anders said the final version of the rule provides some safe harbors. Reporters that experience technical issues, or experience problems caused by CMS or one of its contractors, will not be considered to be out of compliance. Also, CMS won’t impose penalties for reports that were late because of a lack of cooperation by the beneficiary. Reporting entities will be asked to submit supporting documents, however.

Anders said every claims adjuster who handles cases involving bodily injury needs to be aware of the reporting rule. He said most large organizations, such as insurers, already have reporting systems in place, but there may be smaller entities that don’t yet understand the requirement or the potential for major penalties.

“I think most entities at this point are reporting when they are required to report,” Anders said. “The nature of claims is you are going to have some errors. I certainly think there’s going to be some penalties issued down the road.”

CMS said it won’t begin issuing penalties until Oct. 11, 2024.

CORRECTION: Penalties for failure to report judgments or settlements that require payments for future medical care take effect on Oct. 11, 2024, contrary to an earlier report. Dean Anders previously said penalties may accrue at an earlier date, but after discussions with CMS he now knows no penalties will be levied until next Oct. 11.

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