New Liability Thresholds & Relief for Reporting General Releases

The American Insurance Association (AIA) appealed to the Secretary of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) responded with clarification of pre-1980 exposure and new vastly larger reporting thresholds under MMSEA Section 111 Mandatory Insurer Reporting.

Changes in Reporting Mass Tort Cases
In response to earlier concerns expressed by the insurance industry, CMS instituted a mass torts working group.  The members of the group ranged from reporting agents to insurance company defense counsel and plaintiff attorneys.  As the meetings progressed two issues came to the forefront: 1.) Reporting cases prior to 05 December 1980 and 2.) General releases.  CMS has addressed the first issue in their latest alert published on 30 September 2011 by exempting from reporting cases in which the relevant Date Of Incident (DOI) was before 05 December 1980. CMS dealt with industries second issue by exempting “broad general release (rather than a specific release), which effectively releases exposure or ingestion on or after 12/5/1980.”  Much as they exempted during one teleconference reporting general releases that released (unclaimed) medicals as part of an employment termination. These two concessions should effectively resolve industry concerns.

Changes in Liability Reporting Thresholds
Although there has been significant external and internal pressure on CMS to establish realistic reimbursement thresholds since the June 2011 House Oversight and Investigations Subcommittee grilling of Deborah Taylor (CMS’s CFO), CMS’s change to the reporting thresholds should not be attributed to a softening on their position on the $300 dollar limit on recovery.  The most likely scenario is that CMS is trying to reduce the pressure on the Medicare Secondary Payer Recovery Contractor (MSPRC) to allow them to catch up and manage the transition to a new contractor early next year.

CMS has raised the limit for reporting a payment, judgment or award:

  • After 1 October 2011 from $5,000 to $100,000
  • After 1 April 2012 to $50,000
  • After 1 July 2012 to $10,000
  • After 1 October 2012 back to $5,000

Keep Running Queries
As alluded to above, the RRE should not confuse their reporting requirements [42 U.S.C. 1395y(b)(8)] with the Medicare Secondary Payer statute [42 U.S.C. 1395y(b)(2)] right to recover conditional payments.  Medicare is still going to issue conditional payment letters and demands for reimbursement for payments, judgments or awards over $300.  Plaintiff attorneys are still going to file their cases with the COBC and the insurer / self-insurer should still take what measures they deem fit to protect Medicare’s interest in recovering their conditional payments.  At a minimum stay on top of querying to determine which settlement involved a Medicare beneficiary.

History of Recovery Thresholds
In my role as the Medicare Secondary Payer Recovery Contract (MSPRC) Program Director I led a Six-Sigma effort to proactively reduce the time and cost of recoveries across the program.  We had many successes within our organization: we caught up on 800,000 pieces of work left us by prior contractors and got well within our contractual guidelines (e.g., less than 65 days) within a year.  One of the initiatives that the MSPRC CFO and I personally led was an effort to establish a minimum recovery amount.  It was obvious to us, as it was later to the members of the Congressional Panel, that it could cost more to recover money than it was worth.  Our analysis demonstrated that the absolute minimum collection costs were $25 -- opening the mail, sorting the mail, processing the payment, posting the payment, balancing the ledger and mailing the case closed letter.  When we first approached this subject with CMS, we were warned by our Project Officer that attempts had been made in the past by previous MSP contractors and all were rebuffed by the office of the CMS CFO (prior to Ms. Taylor’s tenure).  The CMS CFO’s logic was that it was an automated process and therefore didn’t cost “anything.”   We got the same message as before and the effort died.  I am happy to see things have changed.

Is the $300 Minimum Likely to Increase?
As noted above, the MSPRC could process a payment for $25, so why isn’t that the minimum?  As part of our Six-Sigma efforts we counted everything; for instance, the number of Conditional Payment Letters (CPL), the time it took to process them, the number that were returned as disputed, the number that were disputed more than once, AND over all of this which worked better: our then-new automated CPL tool, the old manual system or a combination.   With this data the MSPRC created simple statistical models: it takes 20 minutes to generate a CPL, 30% are disputed, 2% are disputed twice and know you know how much time on average it takes to do an entire process.  Do this for each process and you know how what the average cost per case is across the entire operation.  One suspects that the cost today is $300.  Sad news for those that were hoping for the RAND Corporation’s approved $5,000 mark.