By Mark Webb
Pacific Compensation Insurance Co.
By now, most of the workers’ compensation community in California has heard of Medicare set-asides. While affecting a relatively small number of claims, the effects of MSAs are anything but small. According to a 2009 study by the California Workers’ Compensation Institute, approximately 6.5% of permanent disability claims involved Medicare-eligible claimants. The average cost of those claims valued at 36 months compared to non-Medicare eligible claims are $85,000 or about a third higher. In other words, claims where the injured worker applies for Medicare disability benefits, or who because of age becomes Medicare eligible, after the date of injury are significantly more expensive and take longer to resolve than similar claims for non-Medicare eligible claimants. Costs for claimants who were on Medicare at the date of injury are also higher than for non-Medicare eligible claimants.
But that isn’t the only cost associated with the Medicare Secondary Payer (MSP) Act. Starting next January, claims payers, known as Responsible Reporting Entities (insurance carriers and self insureds), will have to start reporting claim information on Medicare claimants as required under Section 111 of the Medicare, Medicaid, and State Children's Health Insurance Program Extension Act of 2007 (MMSEA). That involves not just claimants who were on Medicare at the date of injury, but any claimant who secures Medicare benefits after the date of injury while the claim is being adjusted, no matter the date of injury. The data collected under Section 111 reporting will be used by the Centers for Medicare and Medicaid Services (CMS) to collect payments made by Medicare and make whole the trust fund for those items and services furnished Medicare beneficiaries that should have been paid by the primary payer. The fines for failing to report are severe – $1000 per day per claimant. Further, primary payers have no right to appeal disputed unrelated charges that Medicare may have paid.
Meanwhile, efforts are ongoing in Congress to bring some sense of order to this process. Two bills have been introduced in the 111th Congress (2009-2010) to resolve many of the procedural and enforcement complaints that insurers, self-insured employers, and attorneys representing plaintiffs and workers’ compensation claimants have been raising since more aggressive enforcement by Medicare began in 2007. Of these, the one on the faster track is HR 4796, supported by the Medicare Advocacy Recovery Coalition (MARC). With thirty co-sponsors in the House, this bipartisan effort is endorsed by a wide range of business and claimant advocacy groups. Its primary objectives are to establish a streamlined process of resolving how much is owed Medicare prior to settlement, create safe harbors for good faith reporting of claims to Medicare so as not to trigger substantial penalties, provide primary plans with a right of appeal and clarify the statute of limitations applicable to Medicare recovery efforts.
As part of the effort to enact HR 4796, Pacific Compensation is sponsoring AJR 42 (Solorio), a resolution supporting this legislation and calling on Congress to reform the Medicare Secondary Payer Act. Supported by a broad coalition, including the Consumer Attorneys of California, the California Applicants' Attorneys Association, California Coalition on Workers' Compensation, the California Chamber of Commerce and Small Business California, this resolution unanimously passed the state Assembly and is awaiting final action on the state Senate floor before being transmitted to Congress.
Medicare’s enforcement of its secondary payer position is only going to get more aggressive as more financial pressures are put on it. The objective of efforts in Congress both for liability insurers and for workers’ compensation claims payers is to establish a fair and timely process that does not unnecessarily delay the resolution of claims nor unreasonably inflate the value of settlements. This should benefit Medicare, claims payers, and those seeking compensation for their injuries. As our working population continues to age (44 million beneficiaries today, about 80 million seven years from now) and more Medicare eligible workers remain in the workforce (because of poor economic performance), the effect on medical severity will increase and the costs associated with fulfilling our obligations under federal law will increase right along with it.
<i>Mark Webb is vice president and assistant general counsel for Pacific Compensation Insurance Co. (PacificComp), a workers' compensation based in Agoura Hills, Calif.</i>