Farber: SPARC Act Does Not Make Medicare Responsible for Prescription Drugs

Thursday, November 17, 2016 | 0

Many employers have been interested in recent federal legislation proposing to reform the Medicare Secondary Payer (MSP) laws surrounding the Medicare Prescription Drug program, known as “Part D,” and for good reason. 

The current law is ambiguous at best, and many do not understand how the Part D program actually operates. For example, Part D is not run or paid for by the federal government or the Center for Medicare & Medicaid Services (CMS) — it is a private benefit managed and paid for by private health care insurance companies who receive certain subsidies from CMS to keep costs low for beneficiaries. 

Nor is there a “cost shift,” as suggested in prior articles. In fact, As explained below, instead of shifting costs onto private insurers, recent legislation known as the SPARC Act tries to make sense of the confusing process, and improving it for beneficiaries, Part D Plans and settling parties alike.   

The central purpose of the SPARC Act is to reconcile and consolidate paying back Part D providers at the time of settlement. Currently the process is fractured and virtually unmanageable, leaving the settling parties in the dark as to how much is owed to Medicare under Parts A&B, and the private carriers under Part D. The SPARC Act for the first time defines the roles, responsibilities and rights of both CMS the Part D providers, requiring CMS to share important information with the Part D insurers, requiring the insurers to timely assert claims during the settlement process, and allowing settling parties to quickly and properly reimburse the insurers.      

Unfortunately, a recent article in WorkCompCentral entitled “Bill Could Eliminate Pharmacy Requirement From MSAs” (Oct. 12) incorrectly claimed the legislation would require repayment of prescription drug costs up to the date of settlement, after which “Medicare's prescription drug plan — deemed, until then, a secondary payer — would take over.” 

Compounding this mistake, two of the commenters stated erroneously that the legislation is “trying to limit the number of dollars that workers' compensation would have to reimburse back to Medicare.” 

Neither statement is accurate.

Rather than limiting the dollars repaid to Medicare, the legislation does precisely the opposite. Once enacted the SPARC Act will result in both more dollars being repaid faster to Part D providers, and fewer dollars paid by Part D providers for drug costs that are others’ responsibility. Just like its progeny, the SMART Act of 2013, the legislation will save Medicare money, and benefit Part D providers in the process.  

Here’s how it works: When a workers' compensation claim reaches settlement, award or payment, notice is provided to CMS, and the agency must timely provide that information to the applicable Part D provider for repayment of any drugs already paid by the provider. This is far from the purported “cost shift” described in the Oct. 12 article, and instead will result in employers and workers' compensation insurers being able to reimburse from the settlement funds to the proper Part D providers that paid for medications associated with the injury. 

What will result? Part D providers will be repaid months, if not years, faster than is the case today. 

The article does suggest confusion by some about how the legislation defines the rights and responsibilities of the Part D providers, and how Part D providers could collect for “future” drugs. There is nothing in the Part D statute today that addresses that issue, and the voluntary Medicare Set-asides (MSAs) rules promulgated by CMS, applicable at best to roughly 25,000 workers' compensation settlements across the hundreds of thousands of settlements involving Medicare beneficiaries each year, were created before the Part D providers ever existed.

Although CMS since 2009 has insisted on including drugs in MSAs, the funds are rarely, if ever, actually used to pay for drugs, and CMS only accounts for MSA spending against the Part A and Part B treatments for which Medicare actually pays. Because Medicare does not actually pay for any prescription drugs, there is no need for prescription drug protection in MSAs.  

Since the law, at best, is ambiguous, the SPARC Act works to clarify a functional system by clearly defining the Part D provider rights to reimbursement as ending at settlement. This policy choice reflects the near impossibility of creating a functional “future liability” scheme for the many small-dollar prescription drug claims that might be affected in the future (much less accounting for the future drugs that do not even exist today). By doing so, the legislation addresses all parties to the settlement (carrier/employer, claimant, attorneys and Part D providers) and provides clarity as to when the Part D providers had a statutory right of recovery.      

Since Part D providers never really had that right to begin with and had never exercised that right, the Part D plans lose nothing through this legislation, and in fact stand much to gain.  Nor is Medicare losing anything because any MSA funds that were allocated for prescription drugs were not benefitting the Medicare Trust or the Part-D providers. 

Who is threatened by this legislation? No one. Part D providers will be reimbursed for prescription drugs in a timely and efficient fashion. Employers and beneficiaries should embrace this system because they can resolve Part A, B and D conditional payment issues at the same time. And even better, the workers' compensation MSA process will be streamlined to include only those items (Part A and Part B) that it was intended to protect.

Medicare will still be made whole and the Part D providers will no longer have to worry about or deal with MSA process that it was not benefiting from anyway. As such, the SPARC Act is a win-win-win for all interested parties — Part D Plans, beneficiaries and settling parties alike.  

For more information about the SPARC Act, click here.

David Farber is a Washington, D.C., attorney who serves as counsel to the Medicare Advocacy Recovery Coalition.