As health care reform gathers momentum, the government is increasingly focusing on the high cost of Medicare. One area receiving increased scrutiny is Medicare's role as a secondary payer. The Medicare Secondary Payer (MSP) issue arises when, for example, a Medicare beneficiary (Beneficiary) submits a claim for provider visits, a medical device or DME. Later, a third party such as an insurer or a self-insurer (including a manufacturer) makes a payment to the Beneficiary (for example, via settlement agreement or court verdict) which, at least in part, reimburses the Beneficiary's medical expenses.

The MSP rules make liability insurers, including self-insurers, primarily liable for the value of the covered Medicare benefits, and Medicare assumes a secondary payer status. The MSP rules then obligate the compensated Beneficiary to reimburse Medicare from the settlement or verdict proceeds. Not surprisingly, this system was fraught with opportunities for noncompliance and abuse. Even if Medicare ultimately became aware of the settlement or verdict, the proceeds may have been long gone and Medicare was left holding only a worthless lien.

In an attempt to add teeth to the MSP concept, Congress passed Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007. Section 111 obligates liability insurers, including self-insurers, to register electronically with the U.S. Centers for Medicare and Medicaid Services (CMS) and report all claims resolved with Beneficiaries via a settlement, judgment, award or other payment on or after January 1, 2010.

Stated another way, the burden is now on the liability insurers, including self-insurers, to notify the government when a Beneficiary receives a settlement or verdict which covers, in whole or in part, Medicare covered medical expenses incurred by the Beneficiary.

Noncompliance by an insurer or self-insurer could be met with significant civil monetary penalties. Insurers and self-insurers subject to these requirements were required to register with CMS by September 30, 2009, and must begin submitting claims data to CMS in the second quarter of 2010 Failure to do so could give rise to a civil monetary penalty of $1,000 per day for each Beneficiary for whom claims information should have been reported. For further information, please see the MSP Mandatory Reporting User Guide available at Click on "Medicare," and then "Coordination of Benefits," and then "Mandatory Insurer Reporting."

The significance of these new reporting obligations is drawing the attention of some lawmakers in Washington D.C. Congressional leaders and stakeholders have expressed the need for a Government Accountability Office (GAO) Report studying Medicare Secondary Payer issues, including the potential impact of the new Section 111 reporting requirements. B&D Consulting, a division of Baker & Daniels based in Washington, D.C., expects the GAO will begin examining MSP issues in early 2010 and is working on this effort on behalf of clients.