Third parties create a Medicare headache for insurers and employers
Dealing with Medicare-related issues in a workers’ compensation claim has never been anyone’s idea of a “good time” from an employer’s and insurer’s perspective. From the challenges Medicare creates with settlement, to the uncertainty it faces when submitting Medicare waivers (MSAs) to the Centers for Medicare and Medicaid Services (CMS), it’s fair to say that most of the people on the defense side of workers’ compensation claims do. don’t do a happy dance when they realize their claim has a Medicare component. Unfortunately, while we already have enough to deal with related to common Medicare issues, private third-party actors are willing to further disrupt the claims process by trying to enforce the Medicare Secondary Payer (MSP) Act even more than the federal government .
Medicare Secondary Payor Act in Workers’ Compensation Claims
The MSP Act provides, in part, that employers and insurers in workers’ compensation claims may not transfer claim-related medical costs to Medicare. Generally speaking, employers and insurers achieve this goal by funding MSAs where appropriate and addressing any conditional payment issues as part of an agreement. A conditional payment is a payment made by Medicare for a condition related to a claim, for which Medicare is requesting reimbursement. Conditional payment information is typically requested directly from CMS, usually in the process of obtaining an MSA and approval. However, CMS only provides data and seeks reimbursement for Medicare Parts A (hospital or hospital treatment) and B (such as outpatient services, doctor visits, and durable medical equipment). CMS does not have information or data on any payments made by private health insurance plans, such as Medicare Advantage plans. These plans offer an insurance-like alternative to traditional Medicare plans and are known as Medicare Part C. Medicare Part D plans offer prescription coverage.
The MSP provides a private cause of action when a primary payer, such as an employer or workers’ compensation insurer, fails to reimburse Medicare for conditional payments and, if successful, recovers twice the amount owed.
Private entities funding lawsuits to recover double damages
In a series of federal court cases between 2012 and 2016, the private cause of action established by the MSP was extended to private Medicare Parts C and D plans. Previously, administrators of these plans pursued recovery through traditional theories of the surrogacy and the contract. Following this series of decisions, private entities began filing lawsuits against insurance companies on behalf of Part C and Part D plans in an effort to recover double damages in unreimbursed conditional payments. These private entities are backed by significant assets and have large pockets to finance these demands, with the obvious goal of a substantial recovery. After all, as a reminder, the potential damages in these causes of action are double the contingent payments.
As of the publication of this article, the vast majority of these private causes of action are being pursued against auto or general liability policies. The speculation is that given their success in the lawsuits already underway, these private third parties are ready to set their sights on the workers’ compensation industry.
Emerging Risk Area for Workers’ Compensation Claims
The reason these private actors would pursue these claims against workers’ compensation companies is obvious: money. According to CMS, there were nearly 28 million enrollees in Part C and D plans as of October 2021, which is about eight percent of the total U.S. population. The US Bureau of Labor Statistics has estimated that there are nearly 3,000,000 non-fatal workplace accidents and injuries each year. While it is by no means a scientific estimate, if we take the numbers above, it is reasonable to assume that there are 210,000 Medicare Part C and D beneficiaries each year who are injured in workplace accidents. If we further assume that in each of these cases there is a minimum conditional payment of $50.00, this problem could be a $21 million problem for employers and insurers. (It could actually be substantially higher, since in practice, health insurers in general, which includes any Medicare plan, but specifically Parts C and D, often inadvertently pay for treatment and/or prescriptions without know that there is a primary payer).
While there is no evidence at this time that lawsuits have threatened the commercial and auto insurance industry, it seems pretty obvious that given the potentially large amount of recovery that these third parties are considering pursuing, these claims against employers and workers’ comp insurers. ‘compensation claims.
How employers and insurers can protect themselves against these costly claims
So how do employers and insurers avoid and address these issues? They should try to identify whether the injured worker is a Part C or Part D beneficiary and, if so, ensure that conditional payment information is requested from those carriers. (Again, because CMS doesn’t keep this data, it’s not something the workers’ compensation carrier would know unless they proactively ask the Part C or D carrier.) If there are conditional payments from the part C or D, these must be paid as part of any settlement or otherwise dealt with in the settlement of the claim. The risk of not doing so could be substantial and could result in the reopening of a claim long thought to have been closed or resolved. Employers and insurers want certainty in the resolution of their claims, and without trying to determine whether there are conditional Part C or D payments (in addition to the traditional Part A and B searches), certainty cannot be achieved .
Proposed legislation to curb MSP litigation
While the above steps can ensure that employers and workers’ compensation insurers are protected from these private causes of action, Congress is considering legislation that could address this issue. The Remediation of Abuse in MSP Payments (RAMP) Act was introduced as bipartisan legislation earlier this year. If passed, it would eliminate the MSP’s private cause of action provision and apply to all primary payers, including employers and workers’ compensation insurers.
There has long been a saying in the claims industry that “a good claim is a closed claim”. Claims managers want to know that when they close a claim, it’s closed for good. The increase in these third-party causes of action in commercial and auto claims, and the threat of them intruding into the workers’ compensation system, poses an obstacle to having the certainty that when a claim is closed, is permanently closed. If we follow the steps above, we can make sure they are.
Hopefully, Congress will act in the near future to put this problem to bed for good, but in the meantime, by taking the right steps, employers and insurers can avoid having to reopen their claims and potentially paying double damages for conditional payments of parties C and D.