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As I have previously written, there is pending legislation in Congress to reform the Medicare Secondary Payer Act (MSP) called the SMART Act.  HR 1063 was introduced on 3/14/11 by Rep. Tim Murphy and Rep. Ron Kind.  The bill was referred to the House Energy and Commerce committee. The House Energy and Commerce Committee met on 6/22 in response to the SMART Act.  The purpose of the meeting was to take testimony and to discuss the problems with Medicare’s collection practices in group health plan & Non-group health plan situations. 

During the committee, the CFO of CMS (Deborah Taylor) was grilled by Republican and Democratic lawmakers over the financial controls implemented by CMS in relation to the Medicare Secondary Payer program.  Below are two reports regarding the committee meeting which shed some light on the appetite for reform of the MSP by members of Congress.  There was an unusually large turnout for this hearing which seems to indicate recognition by Congress of the problems in the MSP system.  To see the Committee’s web page, click HERE. 

Below are the reports:

CQ HEALTHBEAT NEWS
June 22, 2011 – 5:05 p.m.

When Medicare Pays Second, Its Work Isn’t First-Rate, GOP Says

By John Reichard, CQ HealthBeat Editor

It wasn’t a great morning to be the chief financial officer of the Centers for Medicare and Medicaid Services. With Republicans anxious to show that government is lousy at running the program and Democrats wanting to prove they are able stewards of federal dollars, Deborah Taylor was confronted by a room of lawmakers who repeatedly questioned her about the financial controls she uses in running the Medicare Secondary Payer program.

It was an improbable scene, given the obscurity and complexity of the program, the unusually large turnout of lawmakers asking questions, and the detailed nature of what they asked. The hearing was held by the House Energy and Commerce Oversight and Investigations Subcommittee.

Subcommittee Chairman Cliff Stearns, R-Fla., assisted at times by Tim Murphy, R-Pa., needled Taylor throughout, asking her how long she had served as CFO and wondering why she wasn’t writing down the many questions she would still need to get back to them about after the hearing. “You don’t have the information you need to be CFO,” Murphy declared at one point. Just before Taylor rose to leave the witness table, Stearns said that “the feeling on both sides is you just didn’t seem to know so much. To see a CFO know so little is really disappointing.”

Whether Taylor should have known everything lawmakers expected was unclear. What was clear: With the GOP Medicare overhaul plan looming as a pivotal issue in the 2012 elections, every hearing about Medicare is a potential battleground over whether the public sector or private sector is better equipped to run the entitlement program.

‘Complex and Arcane’

No one disputed that it is important to scrutinize the Medicare Secondary Payer (MSP) program.

“The Medicare Secondary Payer program is complex and arcane,” Henry A. Waxman, D-Calif., said in his opening statement. “Few people have heard of this program, and even fewer people understand it, but that does not mean it is insignificant. The program saves taxpayers billions of dollars, helping to make sure that Medicare is not forced to foot the bill in cases where other insurers should be paying.”

A central point to grasp in understanding the MSP program is that Medicare, contrary to popular understanding, is not always the primary payer of Medicare beneficiaries’ medical bills.

For example, Medicare is the secondary payer if the beneficiary still has employer-sponsored health insurance. It also pays second if a beneficiary is injured in a car crash, for example, or slips on the job and is injured. In the former case, the automobile insurance company has primary responsibility for the medical bills, and in the latter it’s the worker’s compensation insurer.

CMS divides the world of payers to which Medicare is secondary into “GHPs,” or the group health plans sponsored by employers, and “NGHPs,” or non-group health plans that include auto or other liability insurers, no-fault insurance, and worker’s compensation plans.

“The vast majority of MSP situations arise when a Medicare beneficiary is covered by an employer’s health care insurance,” Taylor testified. “This is a highly automated process that allows beneficiaries to be automatically identified where Medicare is not the primary insurer. In these situations, unnecessary costs are avoided and there is no pay and chase.” In other words, Medicare doesn’t pay the bills involved because it is clearly the secondary payer.

Taylor said “the second MSP situation arises when a Medicare beneficiary is harmed or injured and receives a settlement payment from another insurer,” usually an automobile, liability, or workers’ compensation insurer. “These cases require close communication and coordination between CMS, the beneficiaries, and their representatives. In order to ensure continuity of care for Medicare beneficiaries, Medicare may pay conditionally for the health care of the beneficiary under these situations. If Medicare makes a conditional payment, Medicare has a statutory right to recover from the insurer legally required to pay for care.”

Taylor said the MSP program has saved $55 billion over 10 years either in costs that were avoided or in settlement money recovered. For every dollar spent to administer the MSP program, Medicare has saved nine dollars, she said.

Reporting requirements enhanced

The MSP program hasn’t always had a firm handle on how much money it should be collecting, however. Until a few years ago, there was only a limited requirement for NGHPs to report settlements to CMS, and in some cases beneficiaries were getting settlement checks thinking they could spend them, not knowing that some of the money should go to Medicare and that at some point down the road CMS could and would come asking for it.

A 2007 law (PL 110-173) stiffened the settlement reporting requirement, however.

As a result, the MSP recovery program “received approximately 413,000 new NGHP cases and issued over 74,000 NGHP recovery demands in fiscal year 2010, a significant increase from the 222,000 NGHP cases received and 43,000 recovery demands in fiscal year 2007,” Taylor testified.

She noted that “when a NGHP is properly identified as the primary payer and pays promptly, Medicare often does not receive a bill for the associated services and has no way to calculate associated savings to the program. This is particularly true for no-fault insurance and workers’ compensation claims.”

Lawmakers expressed concern that in some instances CMS might not be recovering the money it is owed and that in others it is going after beneficiaries long after they have spent settlement funds without knowing they owed Medicare money, or that the agency is dunning beneficiaries for trivial amounts.

Murphy described the recovery system as being in disarray, saying that “only in Washington could somebody send money back to the federal government and be ignored.” He said that hundreds of millions of dollars that could go to the Treasury are sitting in lawyers’ accounts. “The system just doesn’t work.”

Stearns ticked off a number of items he said Taylor should have known about. For example, he said she should have known the number of the 413,000 NGHP cases that involved recovering small dollar amounts from beneficiaries, the median amounts of money involved in the 413,000 cases, whether CMS had a threshold dollar amount under which it didn’t pursue recovery in a given case, and so on. “You had no idea how much CMS is failing to collect . . . I asked you about the duration time for claims settlement; you didn’t have any idea,” he complained.

Stearns also said CMS is not providing parties involved in settlements a full list of the medical costs Medicare has paid for.

“This raises several questions,” Stearns said. “Why can’t CMS more quickly and accurately track medical costs for covered individuals? And is CMS even capable of administering a health payment program for the medical community or accurately tracking costs? Based on a hearing in this subcommittee earlier this year, we already know CMS cannot accurately measure the amount lost to fraud and that CMS doles out tens of billions of dollars in improper payments every year.”

But Waxman said that when Republicans talk about turning Medicare over to private insurance companies “one of their talking points is that Medicare has extremely high erroneous payment rates.”

“This is simply false,” he said, citing a new American Medical Association report that said Medicare paid claims accurately 96 percent of the time. “Private insurers’ payment inaccuracy rates were five times higher than Medicare,” he said. “This is a great example of Medicare leading the way and doing better than the private sector when it comes to cutting waste.” 

FROM POLITICO

STEARNS NOT HAPPY WITH MEDICARE CFO — The Energy and Commerce oversight subcommittee held a hearing this morning on how Medicare acts as a secondary payer in situations involving beneficiaries’ accident coverage, such as workers comp and auto insurance. These situations, in which Medicare serves as a backstop to private insurance, are handled by the Medicare Secondary Payer program — a system that even Henry Waxman called “complex and arcane.” The program, which handles about 410,000 claims a year and has returned $58 billion to CMS over the past 10 years, was also apparently arcane for CMS CFO Deborah Taylor. Subcommittee Chairman Cliff Stearns said it was “a little disappointing” that Taylor wasn’t able to provide the committee with information about claim response and settlement times, typical claim amounts, money CMS is leaving on the table and the number of claims for small-dollar amounts. Committee members have given her a considerably lengthy list of items to follow up on.