Starting on January 1, 2010, insurers and self-insured businesses will be subject to a $1,000 per day per claim fine for failing to report to the Centers for Medicare and Medicaid Services ("CMS") any settlements, awards and judgments paid to Medicare recipients that involve claims of personal injury, medical monitoring and other health effects claims.

Medicare Secondary Payer (“MSP”) provisions have long protected Medicare from paying for medical services where another insurer or third party has the primary responsibility for making payment. In such situations, the other party is deemed the primary payer and Medicare is the secondary payer. If the primary payer has not made, or cannot reasonably be expected to make, payment promptly, Medicare may make a conditional payment on the beneficiary’s behalf. This conditional payment, however, is subject to reimbursement if the beneficiary later recovers from the primary payer.

Frequently, however, a Medicare claimant may recover funds from a primary payer without reporting the recovery to Medicare. When this happens, Medicare is left without any effective means of seeking reimbursement of the conditional payments.

To address this dilemma, Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”) requires that Responsible Reporting Entities (“RREs”) report specified information to CMS regarding settlements, awards and judgments paid to Medicare claimants. It also authorizes the imposition of stiff penalties (up to $1,000 per day per claim) against RREs who fail to comply.

An RRE is a fiduciary responsible for paying a Medicare claimant. If the award is paid by an insurer, the insurer is likely the RRE. A business, however, can be an RRE if it is self-insured or otherwise pays a Medicare claimant out of its own pocket.

To comply with Section 111, all RREs must electronically report data to CMS’s Coordination of Benefits Contractor (“COBC”). Before reporting data, RREs must register on-line through a secure web site (https://www.section111.cms.hhs.gov). Once an RRE’s application is submitted, the COBC will begin working with the RRE to set up the data reporting and response process.

CMS’s electronic reporting program will go fully live on April 1, 2010. At that time, RREs will be required to submit data regarding all settlements, awards and judgments paid after January 1, 2010. However, RREs should register now so that they are able to submit their first reports by April 1, 2010, and take advantage of the Claim Input File testing period that runs from January 1, 2010 through March 31, 2010.

Businesses should review their claims handling and litigation procedures to ensure that they comply with their reporting obligations. Among other things, this may require that businesses take steps to determine whether claimants are Medicare beneficiaries, collect all necessary information and structure settlement agreements or other awards to ensure compliance with these new provisions.