Anticipating the ACA’s Aftershocks

The nexus between the Patient Protection and Affordable Care Act and the Medicare Secondary Payer Act.

By Jessica Smythe

The Patient Protection and Affordable Care Act of 2010 (ACA) contains important provisions related to the prevention of Medicare fraud and abuse. The ACA also enhances benefits provided to Medicare enrollees. In addition, a reading of the ACA shows Congress’ intent to extend the life of the Medicare trust fund and reduce Medicare spending. In fact, the July 28, 2014, news release from the Centers for Medicare and Medicaid Services (CMS) reported that Medicare will remain solvent until 2030, four years beyond what was projected in the 2013 Medicare Trustees Report. The release quoted Marilyn Tavenner, administrator of CMS, as attributing the extension in part to the ACA:

Thanks to the Affordable Care Act, we are taking important steps to improve the quality of care for Medicare beneficiaries while improving Medicare’s long-term solvency. Specifically, we have made major progress in improving patient safety, decreasing hospital readmissions, and establishing new payment models such as accountable care organizations aimed at reducing costs and improving quality. These reforms slow the rise in health care spending while improving the quality of care for beneficiaries.

The ACA’s clear intent to preserve the fiscal integrity of the Medicare trust fund seems to be aligned with the original intent of the Medicare Secondary Payer Act (MSP). The question therefore becomes: What is the nexus between the ACA and MSP?

ACA Medicare Antifraud Provisions

How does the ACA change the guidelines for Medicare Set-Aside (MSA) preparation and the regulations for conditional payment reimbursement and Section 111 reporting? The short answer to this question is: not at all. The ACA does not explicitly address MSAs, conditional payment reimbursement, or Section 111 reporting. An exploration of the long-range implications of the ACA, however, provides some insight into how Medicare compliance ultimately may be affected by the legislation.

The ACA has many provisions designed to identify and prevent fraudulent claims. Those provisions include enhanced screening of medical providers and suppliers, stronger civil and monetary penalties on providers that commit fraud, and new penalties for submission of false data and false claims for payment.

Since 2006, CMS has been building the Integrated Data Repository (IDR), which is a database that allows CMS to gain access to certain Medicare and Medicaid data from one source. The ACA expands the IDR to include data from all federal health care programs, including Social Security and the Veterans Administration. The ACA also provides the Department of Justice and the Office of Inspector General with greater access to CMS databases.

In addition, the ACA expands Medicare’s Fee-for-Service Recovery Audit Contractor (RAC) program to Medicaid, Medicare Advantage (Part C), and Medicare drug benefit (Part D) programs. The RAC program is designed to detect improper payments in Medicare claims. The RACs are paid on a contingency-fee basis.

The ramp-up in enforcement and data collection is interesting in the context of Section 111 reporting and conditional payment reimbursement. Again, the ACA does not change any of the requirements for Section 111, mandatory insurer reporting (also known as the Medicare and Medicaid SCHIP Extension Act of 2007, or MMSEA), or conditional payment recovery. But will this increased accessibility to Medicare’s databases lead to greater scrutiny of Section 111 reporting data?

The future landscape around this issue includes the collision of the seemingly competing purposes of the ACA. Those purposes include fiscal preservation of the Medicare trust fund, reduction of Medicare spending, no annual lifetime limits on health care, guaranteed issue of health care coverage, and no denial for preexisting conditions. This collision potentially creates the perfect storm of the government bolstering enforcement of Section 111 reporting and, consequently, conditional payment reimbursement as more people are insured under the ACA.

Certainly, the conclusion that CMS may heighten MSP enforcement as a result of the ACA remains to be seen. The situation as it exists now can be compared to an earthquake; the claims industry is anticipating the aftershock. Other implications that have been researched, debated, and speculated on include the future costs, claims shifting onto the property and casualty industry, and the mitigation of future damage awards (see “The Ripple Effect” by Ruth Estrich in the August 2014 edition of Claims Management magazine and “Can the Affordable Care Act Be Used to Mitigate Future Damages?” by Jack Hipp and Caryn L. Lilling in the Winter 2014 edition of Litigation Management magazine).

The ACA and MSAs

Another industry debate centers on whether the ACA circumvents the need for an MSA. The proposition is that, since the ACA guarantees medical coverage and there are no denials for coverage based upon preexisting conditions, the workers’ compensation claimant may use ACA coverage to fund future medicals. Therefore, an MSA in a workers’ compensation claim (or liability claim, for that matter) may be unnecessary.

That argument harkens back to when MSAs first came on the scene in workers’ compensation claims. Claimants would agree to sign an affidavit or other agreement promising to use their own or their spouse’s private health care coverage to fund future medical costs related to a claim rather than using Medicare. The fallacy in that argument, however, lies in the fact that no contract can prevent claimants from exercising their legal right to enroll in the Medicare program. At that time, private health insurance benefits carried an element of uncertainty. For example, if the claimant or a spouse lost private health insurance benefits, coverage for future medicals no longer would be available. Consequently, an MSA still would be necessary for the protection of Medicare’s future interests.

Like Section 111 and conditional payment reimbursement, the ACA neither addresses nor changes MSA guidelines. Early controversy surrounding the ACA’s implementation included Medicare beneficiaries’ fears that they would lose coverage. To allay those fears, Medicare assured beneficiaries through its website, Medicare.gov, that the Health Insurance Marketplace was designed to help those without health coverage and would not affect a beneficiary’s Medicare choices or benefits. CMS also correctly noted that it is, in fact, illegal to sell a Medicare beneficiary a marketplace plan.

In addition, in a related section on the site entitled “The Affordable Care Act and Medicare,” CMS assured Medicare beneficiaries that they did not have to replace their coverage with ACA coverage, that they would receive more preventive services for less, and that the donut hole—the out-of-pocket deductible that must be exhausted before Medicare prescription drug coverage takes effect—would be closed entirely by 2020.

Since it’s illegal for a Medicare beneficiary to be sold a marketplace plan, in situations involving settlement of claims with Medicare beneficiaries, the ACA would not assume future medical coverage, and an MSA designed to protect Medicare’s future interests still would be necessary. The same argument is true for liability settlements.

But what about settlements in workers’ compensation claims where there is a reasonable expectation of Medicare eligibility within 30 months of the date of settlement and the settlement is greater than $250,000? CMS defines that type of settlement as a Class II case and recommends the preparation of an MSA along with CMS submission for review. Since the claimant is not a Medicare beneficiary at the time of settlement, an argument may be made that easy procurement of ACA coverage by the claimant obviates future Medicare-covered, injury-related expenses and, therefore, an MSA is not necessary.

Answering that argument requires an examination of the cornerstone of Medicare compliance—the intent behind the enactment of the MSP. Parties to a settlement may not shift the burden of future medical costs to Medicare when those expenses have been, or will be, paid by a primary plan of insurance (that is, a workers’ compensation or liability carrier). While it’s possible that workers’ compensation or liability claimants may obtain ACA coverage that will not be denied because of their preexisting conditions related to their workers’ compensation or liability claims, it’s also possible that the claimant/plaintiff may not elect to receive ACA coverage, even at the risk of a potential tax penalty. In that case, with no private coverage, the burden of payment for the future injury-related medical expenses would be shifted to Medicare when the claimant/plaintiff becomes Medicare eligible—despite the fact that the claimant/plaintiff already has been compensated for those losses by the primary payer. To avoid such potential prohibited cost shifting under the MSP, an MSA still should be obtained in these circumstances.

It also bears repeating that, in the current ACA climate of Medicare spending cuts, heightened government policing of Medicare fraud and waste, and the overall “under the microscope” scrutiny of the Medicare program in general, Medicare potentially will be scrambling to recoup as much money as it possibly can from liability and workers’ compensation claims and settlements. It’s likely that another industry aftershock will include higher scrutiny by CMS of how primary payers actually are protecting Medicare’s future interests, particularly in the liability sector, where MSAs are not yet required.

All that has been written, reported, and rumored about the rollout of the ACA and its impact on the insurance and health care system is reminiscent of the confusion, outrage, and paranoia surrounding the beginnings of the Medicare social program. Medicare obviously still figures prominently in national debates, but the program itself is widely accepted as an integral part of the American way of life. It remains to be seen whether the ACA ultimately reaches that level of acceptance and becomes the new normal for procurement of health insurance and how the assimilation of the legislation into claims handling ultimately changes Medicare compliance.   

Jessica Smythe is assistant vice president of customer relationship management at ISO Claims Partners, a member of the Verisk Insurance Solutions Group at Verisk Analytics. She has been a CLM Fellow since 2011 and can be reached at jsmythe@iso.com.

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