The Centers for Medicare and Medicaid Services (CMS) announced via memorandum, issued through HPMS on July 24, 2009, that the agency is delaying implementation of the beneficiary-level Medicare Secondary Payor (MSP) payment adjustment. The payment adjustment will not be implemented until the July 2010 Medicare Advantage (MA) plan payment, although the adjustment will be retroactive to January 2010.

Contract-Level Versus Beneficiary-Level MSP Payment Adjustments

CMS traditionally has made contract-level adjustments to MA Plans’ monthly payments to account for the lower-than-expected costs incurred by MA Plans for members for whom Medicare is the secondary payor as a result of the members’ working-aged or working-disabled status. These adjustments have always been based on MSP-survey data collected and shared with CMS by MA Organizations.

In the Advance Notice of CY 2010 payment policies released in February 2009, CMS announced that it would implement beneficiary-level adjustments in lieu of the contract-level modifications. The agency determined that its efforts to establish a centralized coordination of benefits operation under a single contractor entity had created a comprehensive in-house source of MSP information with a “comprehensive health care insurance profile” for every Medicare beneficiary. This database currently is the source data for all Medicare Fee-for-Service and Part D MSP activities, and CMS will use the data to implement beneficiary-level MSP-status adjustments for MA Plan payments as well. The agency reaffirmed its intent to implement this change in its April 2009 Announcement of CY 2010 payment policies.

As noted during the May 2009 McDermott Will & Emery Medicare Managed Care Legal Issues Forum teleconference, this policy change shifts the burden of data errors and corrections – financial and otherwise – to MA Organizations.

Delayed Implementation of Beneficiary-Level MSP Payment Adjustments

According to its July 24, 2009, memorandum, CMS currently is analyzing and updating MSP information for MA Organizations’ members, incorporating new information resulting from the spring 2009 data sharing. The agency expects to complete this process “in the next two months,” and then send to MA Organizations an updated file that (1) identifies members with open MSP periods, and (2) contains all data elements necessary for MA Organizations to “successfully interact with the coordination of benefits contractor…via the Electronic Correspondence Referral System …to request that MSP periods be updated where appropriate.”

To ensure sufficient time for MA Organizations, CMS, and its contractor to validate the remaining MSP periods and “complete development of [MSP] periods that may need to be updated or closed,” CMS intends to delay implementation of the beneficiary-level MSP payment adjustment until the July 2010 payment. “At that time, the MSP adjustment will be applied retroactively to January 2010.”

MA Organizations therefore will have to be prepared for a July 2010 payment that potentially has been reduced significantly to reflect seven months of MSP-related adjustments, as well as reduced payments for August 2010 and beyond, when the beneficiary-level payment adjustments will be in place.