Challenging Medicare Recovery Demands and MSA Determinations

A deeper look at Medicare's new proposed appeal rights and WCMSA reconsideration process.

By Jessica Smythe

My last column, “Medicare Conditional Payments: New and Improved or Business as Usual?” detailed the new expedited conditional payment process at the Centers for Medicare and Medicaid Services (CMS). The process, which went into effect Nov. 19, 2013, allows parties to obtain Medicare’s final conditional payment demand in advance of settlement. Certainly that’s an improvement over the former procedure, in which parties to a settlement with a Medicare beneficiary could obtain Medicare’s final demand only after settlement. The challenge, however, remains Medicare’s delay in the actual implementation of the new rules.

Another sticking point frequently cited by “applicable plans” (liability, self-insurance, no-fault, and workers’ compensation) in the conditional payment process is that applicable plans, unlike Medicare beneficiaries, don’t enjoy formal rights to appeal Medicare recovery demands. In other words, the Medicare beneficiary ultimately can get into federal court to challenge a Medicare conditional payment, but the insurance carrier or self-insured entity footing the bill for the settlement cannot. Since both the Medicare beneficiary and the applicable plan share liability under the Medicare Secondary Payer (MSP) Act for failure to reimburse Medicare, insurance companies and self-insured organizations have long argued the inequity of the situation.

New Proposed Appeal Rights

In an attempt to correct the imbalance, on Dec. 27, 2013, Medicare published a proposed rule extending formal administrative appeal rights to applicable plans. The proposed rule would implement provisions of the Saving Medicare and Repaying Taxpayers (SMART) Act, which requires Medicare to provide a right of appeal process for applicable plans when it pursues an MSP recovery claim directly from the plan.

Currently, if the MSP recovery demand is issued to the beneficiary as the debtor, the beneficiary has formal administrative appeal rights and final judicial review. The applicable plan, however, doesn’t allow for formal appeal rights. Medicare’s contractor will address any dispute raised by the applicable plan as to the amount and charges contained in the recovery demand, but there is no multilevel formal appeal process.

The proposed regulations outline the following new procedure: When Medicare pursues recovery directly from the applicable plan (in other words, when Medicare attempts to collect against the primary plan versus the Medicare beneficiary), the plan may participate in Medicare’s existing administrative review process contained in Subpart I of CFR Part 405. That review process consists of five steps: redetermination by the Medicare secondary payer recovery contractor (MSPRC); reconsideration by a qualified independent contractor (QIC); a hearing before an administrative law judge; review by the Medicare Appeals Council (MAC); and, once those levels have been exhausted, federal district court review.

The most salient point of the proposed rule includes the requirement that the demand be issued directly against the applicable plan—not the Medicare beneficiary. For example, if the applicable plan receives a courtesy copy of the demand sent to the beneficiary, those new proposed appeal rights will not be available to the plan. Pursuant to the MSP, Medicare may pick and choose to whom it directs the demand—and Medicare’s decision to pick the beneficiary first, and not the plan, is not appealable.

As is usually the case, Medicare invited public comment on the proposed rule. The public comment period closed Feb. 25, 2014. As of press time, Medicare still had not issued the final rule implementing those appeal rights. The proposed rule did not contain an effective date, so it’s not clear when Medicare will begin accepting those appeals.

The proposed rule also explicitly excludes workers’ compensation Medicare set-aside (WCMSA) determinations, which leads to the discussion that follows on the latest development around new rules for reconsideration of WCMSA decisions.

New Proposed WCMSA Reconsideration Process

Not only has Medicare proposed new expanded appeal rights in the conditional payment space, but it also has outlined new avenues for review of Medicare Set Aside (MSA) decisions. In the past, when parties submitted an MSA to the workers’ compensation review contractor (WCRC) for approval, there was no true formal avenue for appeal of the contractor’s decision. For example, a counterhigher is a recommendation by the review contractor that a higher amount should be allocated to the MSA account. For example, an MSA in the amount of $30,000 is submitted for approval. In response, the contractor rejects the $30,000 and, instead, proposes MSA funding in the amount of $100,000. At that point, the MSA submitter could request reconsideration of the decision.

The Nov. 6, 2013, Workers’ Compensation Medicare Set-Aside Arrangement Reference Guide detailed this reconsideration process:

1. The claimant can contact the regional office that issued the decision with additional documentation that supports the originally submitted amount;

2. Re-review requests can be submitted if the contractor’s decision contains an obvious error, or;

3. Additional evidence predating submission was not considered by Medicare, and that evidence warrants a change in the decision. 

Last February, CMS released a proposal for expansion of the WCMSA review process. The proposal includes the following provisions:

1. All requests for re-review must be sent to the WCRC for resolution within 30 business days.

2. The WCRC will direct the review request to a “group of experts” different from the original CMS reviewers.

3. Re-review requests can be submitted at any time to the WCRC in the event of a mathematical error or when the original submission contained another beneficiary’s medical records.

4. Re-review requests can be submitted when:

    a. The original WCMSA was approved within the last 180 days.

    b. The case has not settled.

    c. No prior re-review request has been submitted.

    d. The re-review requests a change to the approved amount of 10 percent or $10,000 (whichever is higher) for any of the following reasons:

        i. Submitter disagrees with CMS’ interpretation of the medical records.

        ii. Medical records dated prior to submission were mistakenly omitted.

        iii. Items or services priced in the approved set-aside amount are no longer needed, or there is a change to the beneficiary’s treatment plan.

        iv. A recommended drug should not be used because it is harmful to the beneficiary.

        v. Items priced for an unrelated body part are disputed.

        vi. Rated age is disputed.

Public comment on the new reconsideration process closed March 31, 2014. As of press time, Medicare had not yet released its new reconsideration guidelines.

It’s yet to be seen what the impact of the new reconsideration process—if it’s adopted by Medicare in the manner described above—will be on claims and risk managers’ decisions to submit MSAs to the WCRC for approval. The Nov. 6, 2013, WCMSA Reference Guide underscores that MSA submission is a voluntary process; however, will parties be more inclined to submit MSAs to CMS if expanded options exist for “appeal” of the decision? Will CMS consider the adoption by the claimant of a weaning program from prescription drugs a “change in the treatment plan,” which would open a CMS counterhigher to review? If the submitter can demonstrate an opioid or other prescription drug would be “harmful to the beneficiary,” will that be sufficient evidence to exclude the drug from the MSA? Those are certainly thought-provoking arguments, but everything is still to be determined.

With respect to conditional payment appeals, if CMS adopts the new expanded appeal rights, applicable plans will pursue the same remedies formerly available only to beneficiaries. Will that result in Medicare pursuing applicable plans for collection less frequently? Why are those new appeal rights available only if Medicare pursues the applicable plan first? Will the conditional payment process overall be overburdened by a proliferation of those new challenges?

In my next column, I will discuss whether or not—and in what fashion—the proposed rules were issued in final form. Hopefully at that point, we will also have a foreshadowing of the ultimate implications of the changes on claims practices.   

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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