The Hidden Risks behind reporting those Pesky ICD 09 Codes under Mandatory Insurer Reporting (Updated)

Medicare updated the Section 111 Mandatory Insurer Reporting by adding specific guidance in the most recent release of the NGHP User Guide to clarify that ICD 09 Codes are not to be used lightly by the Responsible Reporting Entity:

"The requirements for reporting ICD-9 diagnosis codes in Section 11.2.5 were updated to clarify that ICD-9 diagnosis codes submitted should be those that reflect the illnesses/injuries claimed and/or released by the settlement, judgment, award, or for which ORM is assumed"

Mandatory insurer reporting requires each claim submitted by the RRE under MMSEA have at least one ICD 09 event code and one ICD 09 diagnosis code in order to report a claim, but despite the sometimes cavalier attitude displayed by CMS during the town hall meetings toward selecting the appropriate code there are two significant dangers and potential cause of action on behalf of the claimant.

The ICD 09 codes the RRE provides to Medicare when they report serve two purposes.  The first is to deny payments where another insurer should pay primary.  This is accomplished by using the code to deny specific provider claims.  If the ICD 09 codes are incorrect, or too general, the claimant (beneficiary) will be denied coverage and may have a cause of action against the insurer, plaintiff attorney or carrier that provided those codes.  (Read the related article "Workers' Comp and multiple TPOCs).  Although, Medicare has stated in some of their NGHP Section 111 town hall meetings that codes provided by insurers and carriers will not be used to deny claims, the question then arises: How are they going to deny claims of a Pro Se Claimant?

Medicare also uses ICD 09 codes supplied under the MMSEA reporting to sort out which claims should be the responsibility of the primary payer's plan.  If Medicare pays conditionally in the case of a liability plan or mistakenly under no-fault or workers' compensation, they will demand a reimbursement from the primary plan.  Obviously, a poor choice of ICD 09 codes will result in improper demands for reimbursement.  The primary payer will have to expend extra energy to dispute the claims on the demand, especially if they unintentionally accepted the responsibility in the first place.

Bottom Line:  Competently designed MMSEA software (see Medicare Consul Services) will prevent you from reporting invalid ICD 09 Codes, but the Responsible Reporting Entity must take great care in choosing which ICD 09 codes to report under Section 111 Mandatory Insurer Reporting.  Don't deny your claimant proper treatment and don't add an additional burden to your claims department.

Compliance and Workers' Compensation ORM Thresholds

If the first presentation of claim does not meet the threshold it does not have to be reported.  If a subsequent claim exceeds the threshold, then claim has to be reported using the CMS Date of Incident associated with the initial claim.  If the subsequent claim is reported one quarter (minus the 45 day grace period) or later, then the report will result in a compliance flag.  Although Medicare may not seek to impose the $1,000.00 per day penalty, the RRE should maintain detailed records of the payments and payment dates to defend any assertion of a penalty for late reporting.


CMS had stated in the past that an RRE could report any payment, judgment or award, now they will reject a payment (or combined payments) that do not meet the threshold; however, timeliness penalties will be assessed according to when the threshold was broken, not based on the first payment or the date of incident.  The RRE no longer has to report all payments to avoid a possible late reporting violation if a claim subsequently exceeded the threshold and triggered a report.

Reporting Hospital Risk Management Write-Offs to Medicare under MMSEA Section 111 Reporting

How and what a hospital reports can alter the impact on their risk retention or their insurance experience when they report to Medicare under Section 111 Mandatory Insurer Reporting.

Hospitals approach mitigating the risk of a potential liability suit much like any other insured entity: they try to rectify the situation and placate the potential claimant before matters escalate.  For hospitals this might include a second surgery, cosmetics or just a free pass to the cafeteria.  These  payments are referred to as risk management write-offs by Medicare for the purposes of MMSEA Section 111 Mandatory Insurer Reporting and hospitals as responsible reporting entities must report them.

Medicare includes risk management write offs under the MSP law

In order to bring hospital write offs into the purview of Medicare Secondary Payer statue (42 U.S.C. 1395y) for both MSP recovery and Mandatory Insurer reporting, Medicare defines a hospital write off as "... a risk management tool to lessen the probability of a liability claim against it [Hospital or Provider] and/or to facilitate/enhance customer good-will, entities may reduce charges for items and services (write-off) or provide something of value (e.g., cash, gift card, etc)."   CMS then adds, to seal the verdict, that, "Risk management write-offs (including a reduction in the amount due as a risk management tool) constitute liability self-insurance for the purposes of the Medicare Secondary Payer provisions."  With that, hospital risk management write offs are now squarely in the sights of Medicare and the Medicare Secondary Payer Recovery Contractor.

How to report a hospital risk management write-off

In the Non-Group Health Plan Mandatory Insurer Reporting User Guide, Medicare outlines separate methods for reporting hospital risk management write offs:

  1. Discounted Medicare claims are to be reported via current claims processing systems and
  2. Gifts or discounted services or products are not covered by Medicare through Mandatory Insurer Reporting guidelines.

In the first situation, in which a provider discounts a Medicare claim, the provider is to submit a claim reflecting the unreduced permissible (e.g., limiting charge) amount and then subtract the discount from the original claim.  The discount claim is supposed to identifiable as being attributable to liability insurance.  It is important to note that "... providers and beneficiaries make their own agreements on payment without billing Medicare, which Medicare allows them to do." (see page 143 of CMS Billing IOM clm104c1), so this is not the same as not reporting.  Providers can code a claim as covered and non-covered in one bill (effectively reporting a non-billable transaction) and retain the liability for that bill through standard encoding practices, but it is not readily apparent how they attribute the non-covered claim to liability insurance.   If the provider wants to be thorough and clearly assume liability for the tort through standard processes, they can do so via the Medicare Secondary Payer Questionnaire.

The other two options for providing a risk management write off -- freebies and discounts on services and products Medicare does not cover -- are to be reported under Medicare Section 111 Mandatory Insurer Reporting and are clearly recoverable under the Medicare Secondary Payer statue (42 U.S.C. 1395y).  The responsible reporting entity is to report them as liability insurance.

What to report under a hospital risk management write off

The first option is to report it as Ongoing Responsibility for Medicals (ORM), signaling CMS that Medicare should pay secondary over the duration; however, a problem arises when considering when to close the ORM period.  If, as some in the hospital industry have suggested, there is no general release signed after the write-off, there is no audit trail indicating that the Hospital really has ended their responsibility.  Additionally, the Hospital will have to report all write-offs, even the gift cards, because there is no lower limit to reporting ongoing responsibility for medicals.  Given CMS's description of risk management write-offs as: ["property of value" or "...reduced ... charges, written off some portion of a charge or provided other property of value] ... [as .. a risk management tool when there is evidence, or a reasonable expectation, that the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk..."] it is apparent that these events can be characterized as discrete, individual attempts to reduce risk of litigation and can be reported as one-time TPOCs.  Reporting risk management write offs as TPOCs will minimize the impact on your risk retention and / or insurance experience.

What does reporting a risk management write off mean to the hospital?

Medicare may deny payment for claims related to the injury

If you report ongoing responsibility for medicals (ORM), then based on the injury information that you provide in reporting, Medicare could deny payment of claims related to that injury.  The beneficiary’s only recourse will be to seek medical services and products from you.  If they are not forthcoming, the beneficiary may have a cause for action.  If you are reporting a one-time settlement (TPOC), the beneficiary’s access to Medicare will not be denied.

You may want to take steps to Protect Medicare’s Interest

The insurer (self-insured) should take steps to protect Medicare's interest -- Although it seems unlikely that Medicare would expect you to put that new wheelchair you intend to give the beneficiary in the closet and wait to see if the MSPRC requires the beneficiary to sell in in order to pay any conditional payments;  if you intend to give a gift of significant monetary value (e.g., over the $5,000 reporting limit), then you should consult legal council and / or contact us.

Select a knowledgeable firm to help you report your hospital risk management write offs under MMSEA Section 111 Mandatory Insurer Reporting.  Review our reporting solution Medicare Consul Services or This email address is being protected from spambots. You need JavaScript enabled to view it.


Medicare does not seek recovery directly from Insurers - The Medicare Secondary Payer Recovery Contractor (MSPRC) is responsible for recovering "overpayments" "conditional payments" or as some in the industry call them "liens." The MSPRC also recovers "mistaken payments" (see our November 2011 News letter for a description of mistaken payments:  ORM Reimbursement Demands) from GHP insurers acting on behalf of their covered employers and workers' compensation carriers or other insurers that accept ongoing responsibility for paying for medical claims (reported as Ongoing Responsibility for Medicals or ORM).  The MSPRC recovers settlements from beneficiaries, not insurers.  The MSPRC follows the money.

Statutes may support recovery from insurers in a civil suit. The MSPRC does not pursue insurers, but in 2009 Medicare's attorneys tried to recover from plaintiff attorneys, insurers and their defendants through the civil courts (see US vs Stricker).  The action was triggered by the failure by Stricker et al (a plaintiff attorney firm) to report a mass tort settlement, which cost Medicare the opportunity to pursue recovery from the claimant - beneficiaries. Stricker, unfortunately, was dismissed by the court based on expiration of the statute of limitations before Medicare's right of recovery was decided.  Reporting under Section 111, Mandatory Insurer Reporting should prevent that particular situation from occurring again.

Medicare does not require Liability Set-Asides - Medicare's requirement is that funds allocated in a settlement for "future medicals" must be properly expended by the beneficiary on medical claims related to the injury before Medicare will once again pay primary.  Medicare does not require that a workers' compensation or liability settlement MSA be set-up, reviewed or approved by Medicare. Insurers acting in an abundance of caution, may wish to get an MSA to avoid being the possibility Medicare may seek recovery in a civil action (e.g. US vs Stricker).

Facts to Consider

Fact One:  There are no statutory or administrative laws requiring set-asides.

Fact Two:  The Code of Federal Regulations § 411

§ 411 is the guiding administrative law behind the Medicare Secondary Payer provisions and Medicare Set-Asides are tenuously based on  § 411.46 Lump-sum payments:

"(a) Lump-sum commutation of future benefits. If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment."

and is applied to workers' compensation only. There is no similar provision for Liability and No-Fault.  However, if a liability litigation results in future medicals, the plaintiff attorney should include that fact when they report settlement of the case to Medicare.

Fact Three:  The Medicare Set-Aside approval is a voluntary process.  Medicare's review is not a formal process.  The Administrative law above only requires that future medicals be spent down before Medicare will pay primary and an MSA does not substantively change that requirement.

Fact Four:  If a Workers' Compensation set aside is not established, Medicare will simply not pay for related care until that lump sum has been spent down.

When challenging proponents of liability set-asides with these facts, they often reply, "That may change."  There can be no rational or logical response to such an assertion.  Yes, it is a fundamental fact of the universe that things change -- when things change you adapt.  Spending money and resources for what may never happen is the province of the risk manager.  In assessing that risk, the best advice I can offer is to take into account your source of information -- their experience, knowledge and motivation.

The following excerpts from recent CMS teleconferences are added for reference:

Moderator: John Albert
03-24-09/11:30 am CT
Confirmation #1872111
Page 61
Barbara Wright: Liability set-asides; both of them, worker’s comp and liability neither one of them has ever been required to participate in a CMS review process.
(Roy Franco): Okay.
Barbara Wright: Nonetheless they’re based on the same underlying statutory language which is that Medicare is not supposed to pay if payment has been made. And to the extent a settlement, judgment award or other payment takes into consideration future medicals then that settlement, judgment or award should be appropriately expended for those future medicals.
Found at

Why is Medicare requesting Multiple Total Obligation Payment to Claimant (TPOC) fields

CMS Alert 13 July:

"In situations where the applicable workers’ compensation law or plan requires the RRE to make regularly scheduled periodic payments to, or on behalf of, the claimant, and the applicable workers compensation law or plan specifically precludes these periodic payments from including any direct or indirect payment for past, present, or future medical expenses; the RRE does not report these periodic payments (they are not reportable as either TPOCs or ORM). Otherwise, these payments are considered to be part of and are reported as ORM."

During July 13th teleconference, CMS indicated that the requirement to make separate lost wage payments may be adequate to fulfill the requirement -- ed.  Be sure to consult the next release of the NGHP User Guide for specific instructions.

UPDATE 28 May 2010

CMS changed course during their 27 May 2010 Town Hall conference.  Now an insurer has no option, but to report if they make any payments including indemnity payments.  In essence, CMS stated that if the RRE is making indemnity payments, then the RRE has implicitly, if not explicitly, accepted ORM. If an insurer makes periodic payments for obligations other than medical payments, the the RRE does not report the individual payments as long as they report ORM.

Impact on Beneficiary and Medicare Secondary Payer Recovery

If the payments are, in fact, strictly indemnity payments (as the City of Boston makes for retired emergency workers), then one assumes that the insurer or carrier will be forced to report old injury codes.  If those medical costs were compromised and Medicare recovers their conditional payments from the settlement, Medicare should be primary -- not denying the beneficiary's claims based on out-of-date codes.

Forcing insurers and carriers to accept ongoing responsibility for medicals where none exists will unnecessarily complicate recovery efforts.  The Medicare Secondary Payer Recovery Contractor, will incorrectly send demands for reimbursement to the insurer or carrier.  If the case was compromised, Medicare has a right to recover conditional payments, not to insist the insurer or carrier continue to pay medical costs.  If the case was commutated, then funds allocated to future medical costs become the "plan" and Medicare should send demand letters to the future medical plan, not the insurer or carrier.