Is Medicare unknowingly underwriting clinical trials?

Medicare pays for clinical testing and check-ups they would have paid for anyway, but what if testing makes the Beneficiary ill?
See related article CMS probes billing

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Pharmaceutical, Medical Device and Biotechnology companies are all required to report their responsibility for treating clinical trial subjects under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), commonly referred to as CMS Mandatory Insurer Reporting.  The Section 111 civil penalty for not reporting is $1,000 per day per Medicare beneficiary.  Failure to properly report and treat the beneficiary may lead to double damages under Title 42 U.S.C. 1395y(b)(8), Medicare Secondary Payer laws.  Finally, sound public relations policy dictates that companies that include Medicare beneficiaries (everyone over 65 years of age, anyone being treated for kidney disease or covered by Medicare for special disabilities) in a trial must avoid the tinge of a trial underwritten with public (Medicare) funds.

In light of CMS’s public silence and private ambivalence to the reporting issues facing pharmaceutical firms as outlined in an industry letter endorsed by PhRMA; leading pharmaceutical firms are proceeding with efforts to become fully compliant rather than risk the $1,000 per day per beneficiary Mandatory Insurer Reporting fines or double damages under Medicare Secondary Payer statutes.

Section 111, passed in 2007, is just the latest in a long series of legislative changes to the Social Security Act aimed at reducing the Federal budget and protecting the Medicare Trust Fund.  The first legislation to limit Medicare’s exposure came with its genesis when Congress prohibited Medicare from making payments when a beneficiary’s injury was covered under a workers’ compensation plan or Act.  In 1980 under the Omnibus Budget Reconciliation Act (OBRA), Congress further prohibited Medicare from making payments when the beneficiary could turn to a liability or no-fault plan for payment.  Keeping pace with industry’s shift away from conventional insurance carriers to pools, captives and other self-funded risk mitigation strategies, Congress included “self-insurance” in 1982 under the Tax Equity and Fiscal Responsibility Act (TEFRA).  Since 1982, Medicare has strengthened their position through clarifying legislation and court action until now any business entity that explicitly or implicitly accepts the risk of making medical payments to a Medicare beneficiary is deemed an “insurance plan” or “plan”.  The owner of the plan, called the Responsible Reporting Entity (RRE) under Section 111, is responsible for reporting their obligation and may, in addition, be sued under 42 U.S.C. 1395y(b)(8) for double damages for failure to provide medical services after a beneficiary has made a valid medical claim.

The premise underlying the MSP statute is that third  parties may not shift the cost of medical expenses attributed to their wrongdoing from themselves to the taxpayers.

A Clinical Trial is a Liability Plan In a letter from Gerald Walters, Director, Financial Services Group, Office of Financial management, Medicare responded to industry inquiries seven years ago in April of 2004 asserting that a study sponsor’s commitment to cover the costs of injuries resulting from clinical trials constitutes a “”plan or policy of insurance under which payment can reasonably be expected to be made in the event such an injury occurs”” and Medicare would be secondary to the sponsor’s self-insured “plan.” 

In 2010, in response to inquires from the pharmaceutical, medical device and biotechnology industry regarding their responsibility to report under Section 111 Mandatory Insurer Reporting, CMS issued an alert which stated, “When payments are made by sponsors of clinical trials for complications or injuries arising out of the trials, such payments are considered to be payments by liability insurance (including self-insurance) and must be reported.”  This sentence, like Mr. Walter’s statement above, establishes that clinical trials are included by Statue 1395y(b)(8) and identifies the clinical trial plan as a liability plan.

The Alert also dictates how CMS expects the claims to be reported: “The appropriate Responsible Reporting Entity (RRE) should report the date that the injury/complication first arose as the Date of Incident (DOI). The situation should also be reported as one involving Ongoing Responsibility for Medicals (ORM).” It is not meant to be construed that only claims arising out of litigation must be reported.

The trigger for reporting ORM is the assumption of ORM by the RRE – when the RRE has made a determination to assume responsibility for ORM or is otherwise required to assume ORM – not when or after the first payment for medicals under ORM has actually been made. Medical payments do not actually have to be paid on the claim for ORM reporting to be required. -- NGHP User Guide version 3.1

The Intent of Section 111 Mandatory Insurer Reporting is to work in concert with the plain language of Title 42 U.S.C. 1395y(b)(8) prohibiting Medicare from paying primary by identifying primary plans and the beneficiaries covered by those plans.  Medicare uses the reported assumption of ORM to populate the Common Working File (CWF).  The CWF is used by Medicare claims processing centers to deny medical payments submitted by providers in situations where another plan is primary.  By reporting only after a payment has been made, sponsors are not in accord with the intent of Section 111 as they have precluded Medicare’s ability to deny claims they may have made in the past without the knowledge of the RRE.

For instance, if a test subject seeks treatment from their primary physician rather than the clinic trial physician that “made him sicker,” and the sponsor has yet to make, and may never make a payment, Medicare will pay.

By denying the claim, Medicare encourages providers to seek payment from the primary plan --  protecting the RRE from any tinge of impropriety and reducing any claims Medicare may have for reimbursement.

A Pharmaceutical, Medical Device and Biotechnology company that reports their assumption of responsibility to pay medical costs related to the trial protects themselves from risk of double damages.

Payment or Adverse Event -- Tort or Contract Payment is often misconstrued as the criteria and trigger for reporting claim under MMSEA.  The statutory language actually says, “... if payment has been made, or can reasonably be expected to be made, with respect to the item or service...”  then Medicare is prohibited from making a payment (Medicare is secondary).  Medicare uses the existence of a payment made or a contractual obligation to pay (e.g., Group Health Plan) by a business entity as prima facie evidence of a primary plan.

In addition to the reference to a payment made by Medicare in establishing the existence of the sponsor’s plan; Medicare’s definition that a clinical trial sponsor’s commitment to cover the costs of injuries arising out of the trial is “liability” insurance, muddied the waters.  Many attorneys have dealt with Medicare in tort cases involving a Medicare beneficiaries.  In tort cases, Medicare makes conditional payments and expects reimbursement for those payments when the case is settled.  Nothing is reported to Medicare until payment is made to the beneficiary.  Medicare’s direction that sponsor’s report ORM rather than a Total Payment Obligation to Claimant TPOC) would have been clearer if Medicare could have labeled the sponsor’s plan as a workers’ compensation plan instead of a contractual liability for treatment.   Much like a sponsor’s commitment to pay for injuries related to their trial, a workers’ compensation plan is contractually obligation to pay for injuries arising from their work.

Sponsors are required to report the establishment of their ongoing contractual obligation to pay for medical claims arising out of the clinical trails.  In practice, when a test subject reports an Adverse Event (AE) or Serious Adverse Event (SAE) and the sponsor has concluded that they are obligated to pay the claim, they must report the date when the AE or SAE was reported as the Date of Incident (the date for which your "plan" becomes responsible) and report it as Ongoing Responsibility for Medicals.

Maintain your double-blind status, contact Medicare Consul Services to act as your Reporting Agent.
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