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

This email address is being protected from spambots. You need JavaScript enabled to view it.

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.
This email address is being protected from spambots. You need JavaScript enabled to view it.


Question: How can I query more than 500 claimants and still use Medicare's Direct Data Entry? Answer: You can't.

Unfortunately, the Responsible Reporting Entity or RRE that submitted that question to us does not seem to fully understand the restrictions placed by Medicare on the use of the Direct Data Entry (DDE), or, worse, does not grasp the significance of the privacy agreement they signed with Medicare.   In an effort to provide a low-cost solution to Section 111 Mandatory Insurer Reporting, CMS developed a rudimentary web-based tool that a Responsible Reporting Entity (RRE) can use to meet their MMSEA reporting requirements.

The use of the DDE was specifically restricted by CMS to companies processing less than 500 claims per year.  CMS's policy is not a technical issue to be resolved by an RRE with workarounds; it is a prohibition against large processors using system.  This policy is documented in the NGHP User Guide and associated Alerts.  Keep in mind that the User Guide is much more than your typical "how to" set of instructions.  Section 111 empowers the Secretary of HHS to dictate implementation of the law, and as such, unlike the Medicare Secondary Payer (MSP) Internet Only Manual (IOM), the Courts will probably find the User Guide persuasive.  RREs that flaunt the policies laid out in the User Guide may find themselves facing civil penalties. 

A legitimate RRE won't just run some queries for you, so you can report a Total Payment Obligation to Claimant (TPOC) or Ongoing Responsibility for Medicals (ORM) for query responses that indicate the claimant is enrolled Medicare beneficiary.  Your RRE ID is tied to the DDE.  You are only allowed to report via DDE or via file.  You are not allowed two RRE IDs -- one for queries and one for reporting.  Should a Section 111 Reporting Agent agree to submit queries under an RRE ID that you don't own, that Reporting Agent would be violating the other RRE's Medicare privacy agreement putting both their client  and themselves in a very bad position.

It is not worth the perceived cost savings to try and defeat Medicare's prohibition against adding more than 500 claimants using the DDE.

Rumor on the street is that some Group Health Plan (GHP) Health Reimbursement Arrangement (HRA) administrators are not stepping up to meet their Medicare Section 111 Mandatory Insurer Reporting Requirements.  Apparently, their rationale is based on, "How is Medicare going to find out?"  The short answer is that your covered life is going to let let the cat out of the bag.

Health care providers are required by statute to have in place a method for determining if a Medicare beneficiary has alternative insurance before they are allowed to bill Medicare.  Providers can be fined up to $2,000 for providing inaccurate information relating to the existence of other health insurance or coverage, so providers generally require the patient to complete a Medicare Secondary Payer Questionnaire before they will treat them.  If the beneficiary refuses to answer the questionnaire, his claims will be denied.  If the beneficiary does not cooperate with Medicare in identifying an alternative insurance plan, Federal regulations provide for Medicare to take action against the beneficiary.

Once the beneficiary identifies their alternative insurance, an HRA in this case, the information is reported by the provider to the Coordination Of Benefits Contractor (COBC) .  The very same COBC that is in charge of processing Medicare Section 111 Mandatory Insurer Reporting.

The bottom line is that your insured is the the most likely source of informing Medicare of your failure to report.  Proper reporting is cheap insurance compared to Medicare's $1,000 per day per beneficiary fines.

This email address is being protected from spambots. You need JavaScript enabled to view it.


The Second Quarter of 2011 is the mostly likely time that Responsible Reporting Entities need to report a Group Health Plan (GHP) Health Reimbursement Arrangement (HRA) to meet Medicare Section 111 Mandatory Insurer Reporting Requirements.  HRAs are generally effective for one year and their annual renewal often coincides with the first of the year.  If your HRA is in that boat, then you don't have to report until the second quarter of 2011 -- UNLESS your are going to add someone to your plan in the last quarter of this year.  As you'll not be sure no one will join your plan, you should immeadiately build or buy a reporting solution.  You only have a couple of months left to pick a solution and test your files.  Medicare requires you submit two files before you can begin production reporting next year.  The thing to remember is that a first time responsible reporting entity must test their CMS MSP file transmissions no later than in the first quarter in which their plans become effective. They can then report the following quarter to meet Medicare's MMSEA reporting requirements.  You must register as a Group Health Plan RRE in .  Don't forget: if you are going to report your Health Reimbursement Agreement under MMSEA, then your are an responsible reporting entity and you have to register as a Group Health Plan RRE in order to determine which week in the quarter you must report

There is also a common misconception about what an HRA RRE (including a third party administrator) has to report under Medicare Section 111.  The RRE is only required to report periods of HRA coverage.  They are not to report, as some less knowledgeable reporting companies and agents may lead some to believe -- each payment. Only RREs that are reporting under MMSEA Non-Group Health Plans (e.g., liability, workers compensation and no fault plans) have to report an individual payment as a total payment obligation to claimant.

Responsible reporting entities are not required to report policies (and their periods of coverage) under Mandatory Insurer Reporting if the annual benefit value is less than $1,000.  If unspent funds from a previous year roll into the following year and the annual benefit then equals or exceeds $1000, the RRE must report HRA in the following quarterly report.  If the funds are expended and drop back below $1000 you may terminate that period of coverage.  You should not send a delete record, which would, in effect, erase the earlier reported valid period of coverage.

At one point in the development of the Section 111 Mandatory Insurer Reporting User Guide, Medicare had excepted "embedded" Health Reimbursement Arrangement from reporting.  The thought was that Medicare would seek recovery from the Group Health Plan and the GHP RRE would pay the demand out of the right account.  That idea has been left by the wayside.  RREs and TPAs that administer GHP coverage and HRA coverage for the same employee, must report each record separately.

In summary, here are the do's, don'ts and things to consider for a Responsible Reporting Entities reporting Group Health Plan (GHP) Health Reimbursement Arrangements (HRAs) to meet Medicare Section 111 Mandatory Insurer Reporting Requirements.

DON'T: Report each payment made by the plan

DON'T: Report policies with less than annual benefit value of $1000

DON'T: Delete a previously reported plan

DO: Test no later than the quarter in which your plan becomes effective

DO: Read the GHP User Guide

DO: Read the June 24th 2010 GHP Teleconference Transcript

DO: Your home work before selecting vendor

Things to Consider: Your HRA plan is always, regardless of the amount of the annual benefit value, primary to Medicare.  Medicare can seek recovery from your plan, whether you report it nor not.  CMS may learn your plan is primary, even if you don't report it because providers are obligated to report other sources of insurance.

Things to Consider: Get the best advice and the best reporting solution (Medicare Consul Services)
and expert demand resolution services Medicare Consul Services.  We can have you up in a day and reporting as soon as you can give us the data!

Visit our web site often for current news and updates

A recent case heard by the Nebraska District Court in Seger v Tank Connection may help insurers obtain a claimant's personal information. CMS has repeatedly said during Non Group Health Plan policy teleconferences that a claimant cannot be compelled by an RRE to provide either their SSN or HICN.  They have suggested that the RRE attempt to obtain the claimant's personal information, but if they fail they should resort to keeping on file a signed copy of the Model Letter posted on the CMS web site.

In the past CMS had asserted that a beneficiary was required by statue to provide their HICN; however, that assertion was withdrawn during the  August 25th town hall meeting.  The beneficiary is only required to release that information to CMS and its contractors (refer to C.F.R § 411.24).

In Seger v Tank Connection the court found that "Although the Extension Act [Section 111] does not require this information be submitted to CMS until after a final settlement or judgment is issued, there is no harm to the plaintiffs in providing the information sooner." and that "Mr. Seger [plaintiff] has not met his burden of proving that providing the requested information is unduly burdensome. To the contrary, he has simply refused to provide the information. As Mr. Seger will be required to provide the requested information eventually, and as providing the information could reasonably bear on the issues in the case, the court finds Mr. Seger should respond to Interrogatories Nos. 4 and 9 [Providing privacy information including SSN and HICN] to the extent he must provide identifying information along with either his Medicare Health Insurance Claim Number or his Social Security Number in order that Roundtable's insurance company [defendant's insurer] may comply with the Extension Act."