The Centers for Medicare and Medicaid Services (CMS) postponed the implementation of new regulations requiring an employer to report to CMS any payment to a Medicare-eligible person, where that payment is for medical benefits or is in exchange for a release that waives claims for medical benefits. The new deadline recently announced by CMS requires that reports of covered payments must be submitted beginning in the first calendar quarter of 2011.

Background

Medicare is a government-funded health insurance program primarily for individuals age 65 or older. However, Medicare is not intended to be the primary insurance coverage for such individuals where there are other funds available to pay for medical treatment (i.e., Medicare is a "secondary payor"). In response to funding concerns for Medicare, Congress passed the "Medicare, Medicaid and SCHIP Extension Act of 2007" (MMSEA), which President George W. Bush signed into law on December 29, 2007. See 42 U.S.C. § 1395y(b). The purpose of the Act is to enable Medicare to determine when its beneficiaries have received payment or reimbursement for medical expenses that Medicare could recoup.

What Will Be Required, Once the Provisions of the Act Are Implemented?

An employer that is fully or partially self-insured will be considered a "Responsible Reporting Entity" (RRE) and will be required to report payments to a person who is eligible for Medicare benefits, if the payments are for medical benefits or are in exchange for a release that has the effect of waiving claims for medical benefits. Where an RRE has assumed "Ongoing Responsibility for Medical Benefits" (ORMs), payments made on or after January 1, 2010, must be reported. Where the RRE makes a one-time or lump-sum payment to resolve all or part of a claim, which the CMS refers to as a Total Payment Obligation to Claimant (TPOC), such payments occurring on or after October 1, 2010, must be reported. Without regard to whether the payment to be reported is an ORM or a TPOC, the RRE has until the first quarter of 2011 to submit its first report.

Significantly, where a settlement or other agreement between an RRE and a Medicare-eligible person includes a full release of all claims by the individual, any payment in exchange for that release must be reported. This is true even if the individual never asserted any claim for medical benefits, as long as the release would have the effect of waiving any such claim.

For the purposes of these new reporting requirements, an employer may be considered "self-insured" if it has insurance coverage subject to a retention.

Why Is This Important for Employers?

An RRE that fails to report covered payments will be subject to a civil penalty of $1,000 per day. Therefore, the delay of the deadline to begin reporting will provide employers additional time to review the Section 111 regulations and begin the process of registration with CMS (if necessary).

The process of registering with CMS is highly technical, and CMS cautions that RREs must begin the registration process a full calendar quarter before the obligation to submit reports arises. This period allows for testing of the technical elements of the reporting process.

What Should Employers Do?

  1. Employers should consult with their insurance carriers and the attorneys handling their insured liability claims to ensure that preparations have been made to report information on covered payments on time.
  2. Employers should examine their claims history and determine the likelihood of claims or demands being made against them for medical benefits. Employers also should consider whether there are other claims for which they would require a full release of all claims in exchange for a settlement payment.
  • If "yes," the employer should consult with counsel to discuss registration with CMS to prepare for filing information on covered payments.
  • If "no," the employer should stay on alert for such claims, and consider registering with CMS in case it is obligated to report a covered payment in the future.
  1. Employers should consult with counsel concerning what steps, if any, may be necessary to determine whether a plaintiff or claimant is eligible for Medicare benefits. Note that because an individual's Medicare status can change during the course of litigation, such an inquiry should be made at the beginning of the litigation and at the time of a final payment to the claimant, at a minimum. Inquiries about a claimant's Medicare status can be made (i) to the claimant, and (ii) to Medicare's database (by entities registered with CMS).

Additional Information

The CMS website is located at www.Section111.cms.hhs.gov.