Viewpoint: Third Parties Create a Medicare Headache for Insurers and Employers
Dealing with Medicare-related issues in a workers’ compensation claim has never been anyone’s idea of a “good time” from the employer and insurer’s perspective. From the challenges Medicare creates with settlement, to the uncertainty faced when submitting Medicare Set-Asides (MSAs) to Centers for Medicare and Medicaid Services (CMS), it is fair to say that most people on the defense side of workers’ compensation claims do not do a happy dance when they realize their claim has a Medicare-component. Unfortunately, although we already have enough to deal with related to the usual Medicare issues, private, third-party actors are poised to further disrupt the claims process by seeking to enforce the Medicare Secondary Payer (MSP) Act compliance even more than the federal government.
Medicare Secondary Payer Act in Workers’ Compensation Claims
The MSP Act provides, in part, that employers and insurers in workers’ compensation claims cannot pass along claim-related medical costs to Medicare. Generally speaking, employers and insurers accomplish this goal by funding MSAs when appropriate and addressing any conditional payment issues as part of a settlement. A conditional payment is a payment made by Medicare for a claim-related condition, for which Medicare seeks repayment. Typically, conditional payment information is requested directly from CMS, usually in the process of obtaining an MSA and getting it approved. However, CMS only provides data and seeks recovery for Medicare Parts A (inpatient or hospital treatment) and B (such as outpatient services, doctor’s visits and durable medical equipment). CMS does not have information or data on any payments made by private health insurance plans, such as Medicare Advantage Plans. These plans offer an insurance-like alternative to traditional Medicare plans and are known as Medicare Part C. Medicare Part D plans provide prescription coverage.
The MSP provides a private cause of action when a primary payer, such as a workers’ compensation employer or insurer, fails to reimburse Medicare for conditional payments, and if successful, the recovery is double the amount due.
Private Entities Funding Lawsuits to Recover Double Damages
In a series of federal court cases between 2012 and 2016, the private cause of action established by the MSP was extended to the private Medicare plans, Parts C and D. Previously, the administrators of such plans pursued recovery through traditional subrogation and contract theories. Following this series of decisions, private entities began filing lawsuits against insurance carriers on behalf of Part C and D plans in an effort to recover double damages on conditional payments not reimbursed. These private entities are backed with significant equity and have deep pockets from which to fund these lawsuits, with the obvious goal of a substantial recovery. After all, as a reminder, the potential damages in these causes of action are double the conditional payments.
As of the publication of this article, the vast vast majority of these private causes of action are being pursued against general liability or automobile policies. The speculation is that, given their success in the suits already being pursued, these third-party, private parties are poised to set their sights on the workers’ compensation industry next.
Emerging Risk Area for Workers’ Compensation Claims
The reason why these private actors would pursue these claims against workers’ compensation carriers is obvious: money. According to CMS, as of October 2021 there were nearly 28 million enrollees in Part C and D plans, which is approximately eight percent of the total United States population. The U.S. Bureau of Labor Statistics has estimated that there are nearly 3,000,000 non-fatal work-related accidents and injuries each year. While by no means a scientific estimate, if we take the above figures together, it is reasonable to assume that there are 210,000 Medicare Parts C and D beneficiaries each year who are injured in work accidents. If we further assume that in each of those cases there is a minimal conditional payment of $50.00, this problem could potentially be a $21 million problem for employers and insurers. (In reality, it could be substantially higher as in practice, health insurers generally, which includes any Medicare plan, but specifically Parts C and D, quite commonly pay for treatment and/or prescriptions inadvertently without knowing there is a primary payer.)
While there is no evidence at this point that the suits that have threatened the commercial and auto insurance industry, it seems rather obvious that, given the potentially large pool of recovery that these third parties are considering pursuing, these claims against employers and insurers in workers’ compensation claims.
How Employers and Insurers Can Protect Against these Costly Claims
So how do employers and insurers prevent and address these issues? They should seek to identify if the injured worker is a Part C or D beneficiary, and if so, make sure that conditional payment information is requested from those carriers. (Again, since this data is not kept by CMS, it is not something the workers’ compensation carrier would know about unless it proactively makes a request from the Part C or D carrier.) If there are Part C or D conditional payments, they should be paid for as part of any settlement or otherwise addressed in the settlement of the claim. The risk of failing to do so could be substantial and could result in the re-opening of a claim that was long thought to have been closed or resolved. Employers and insurers want certainty in the resolution of their claims, and without seeking to determine if there are Part C or D conditional payments (in addition to the traditional Part A and B searches), no certainty can be achieved.
Proposed Legislation to Curb MSP Litigation
While the above steps can ensure that workers’ compensation employers and insurers are protected from these private causes of action, Congress is contemplating legislation that could eventually address this issue. The Repair Abuse in MSP Payments (RAMP) Act was introduced as a bipartisan piece of legislation earlier this year. If passed, it would eliminate the private cause of action provision of the MSP and would apply to all primary payers, including workers’ compensation employers and insurers.
There has long been a saying in the claims industry that a “good claim is a closed claim.” Claims handlers want to know what when they close a claim, it is closed for good. The rise of these third party causes of action in commercial and auto claims, and the threat of them intruding into the workers’ compensation system, poses an obstacle to having the certainty that when a claim is closed, it is closed for good. By taking the above steps, we can ensure that they are.
Hopefully, Congress will act in the near future to put this issue to bed for good, but in the meantime by taking appropriate action employers and insurers can avoid having to re-open their claims and potentially pay double damages for Part C and D conditional payments.
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