Journal of American Law

SPRING 2015

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Spring 2015 // Journal of American Law 17 enactment of medicare Secondary Payer Act In an efort to reduce Medicare costs and expenses and to ensure that certain insurers fulflled their obligations as pri- mary payers to benefciaries, the Medicare Secondary Payer Act (MSP) was enacted as Section 953 of the Omnibus Rec- onciliation Act of 1980. 2 In general, Medicare is the second- ary payer for benefciaries who also are covered through (1) a group health plan based on their own or their spouse's current employment, (2) auto and other liability insurance, (3) no- fault liability insurance, and (4) workers' compensation pro- grams, including the Federal Black Lung Benefts Program. Since 1980, the federal government has embraced its statutory right to recover its expenses from any proceeds obtained by a Medicare-eligible plaintif from a settlement, hearing, or trial. 3 Under the MSP, Medicare is recognized as the secondary payer and will not pay for medical expenses in those instances when payment has been made or reasonably could be expect- ed to be made promptly under a "workmen's compensation law or plan of the United States or a state or under an automo- bile or liability plan (including a self-insured plan) or under no-fault insurance." 4 Tus, Medicare becomes the secondary payer, and the relevant insurer becomes the primary payer for the payment of injury-related medical expenses. Under the MSP statute, CMS has a statutory right of re- imbursement for all injury-related medical expenses paid by Medicare that should have been paid by an insurance carri- er. 5 CMS can seek damages against any entity that attempts to transfer the burden of payment for medical costs and expenses to Medicare. Te MSP statute provides a statutory framework for CMS to seek penalties against the primary payer or entity for medical expenses and costs that should have been paid by that primary payer. Moreover, if a plaintif or a plaintif 's rep- resentative or lawyer does not address the Medicare lien, she can be responsible for double actual damages for such failure to reimburse Medicare. 6 In addition, defendant insurance compa- nies or primary payers also can be responsible if a plaintif fails to reimburse Medicare from settlement proceeds. The United States v. Baxter, Int'l Decision On Sept. 5, 2003, the 11 th U.S. Circuit Court of Appeals rendered the United States v. Baxter, Intl decision that applied the MSP statute and Medicare's right of reimbursement to a class action products liability case. 7 Baxter involved a class products liability action that began in 1995 against silicone breast implant man- ufacturers. Under the settlement, several manufacturers agreed to provide coverage for medical expenses and costs incurred by qualifed members of the class. CMS sought to recover medi- cal expenses it paid on behalf of the Medicare benefciaries for 2 42 U.S.C. § 1395y(b)(2); 42 C.F.R. 411.20, et seq. 3 42 USC 1395y (a), (b)(2). 4 42 U.S.C. § 1395y(b)(2)(A)(i)(ii). 5 42 U.S.C. § 1395y(b)(2)(A)(i)(ii)(iii). 6 42 U.S.C. § 1395y(b)(2)(A)(i)(ii)(iii); 42 U.S.C. § 1395y(b)(3)(A). 7 345 F.3d 866 (11th Cir. 2003). treatment related to the silicone breast implants. Te court ac- knowledged that the MSP was enacted by Congress in the 1980s for the express purpose of reducing taxpayer costs and that bil- lions of dollars had been lost in the interim because of the fail- ure of some parties to follow the MSP statutory requirements. Te court also noted that Congress had previously expanded the MSP to extend Medicare's recognition as a secondary payer. Tus, the court permitted the recovery of a Medicare lien from a settling defendant in a product liability class action. Amendment of mSP Statute After the Baxter Decision Afer the Baxter decision, the MSP statute was amended by the federal government in the Medicare Act of 2003 to clarify CMS' position that self-insured entities are included in the re- sponsible parties obligated to reimburse Medicare. Te 2003 amendment defned a self-insured entity as one that engages in a business, trade, or profession that carries its own risk—by failure to obtain insurance or otherwise—in whole or part. 8 Te MSP statute also broadened the scope of individuals sub- ject to reimbursement to include a Medicare benefciary who received a settlement or award. 9 Moreover, one of the primary purposes of the Medicare Act of 2003 was to make persons or entities responsible for injuries to a Medicare benefciary also responsible for reimbursement of those medical expenses to Medicare. 10 Although the Medicare Act of 2003 expanded the scope of the entities responsible for reimbursement and the persons subject to reimbursement, the federal government still lacked the appropriate mechanisms to identify those in- stances when Medicare should be the secondary payer to the party responsible for medical expenses, which caused the MSP statute to be inefective. 11 Medicare's right to reimbursement was recognized, but there were issues regarding Medicare's ability to enforce its statutory right of recovery under the MSP statute. Tus, in 2007, Congress implemented Section 111 to the Medicare, Medicaid and SCHIP Extension Act (MMSEA), commonly known as Section 111. 12 new Reporting Requirements and Strengthened enforcement Pursuant to the enactment of Section 111 Under the MSP statute, notice of a claim is made to CMS. Section 111, efective Jan. 1, 2009, implemented new report- ing duties for self-insured entities and insurance carriers. Te enactment of Section 111 did not modify or eliminate any of the obligations under other provisions of the MSP statute. It simply created a framework for responsible reporting enti- ties (RREs) to obtain the data used by CMS to process claims billed to Medicare for reimbursement. Reporting was required for any applicable primary plan, which broadly encompasses 8 42 U.S.C. § 1395y(b)2(A)(ii) (2002). 9 Id. 10 Id. 11 Kenneth Paradis, New Requirements to for Medicare Set-Aside Arrangements, 18 J. Workers' Comp. 32, 32 (2009). 12 42 U.S.C. § 1395y(b)2(A)(ii).

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