A little-known provision of the new Medicare reform law could save the program nearly $9 billion from 2004 to 2013 and make it easier for the CMS to collect healthcare claims payments for beneficiaries that should have been paid by other payers.
However, employer organizations are wondering if what was proposed as a technical clarification of the Medicare secondary payer law might unintentionally unleash a flurry of decades-old collections from employers and give the government sweeping new powers.
Medicare is a secondary payer for most working beneficiaries covered by group health insurance plans, patients with end-stage renal disease and other disabilities already covered by private insurance and accident victims with auto insurance policies or workers' compensation.
The clarification of the existing law seeks to explain when and how the CMS can approach beneficiaries and other payers to collect money when those entities, and not Medicare, should have been designated as the primary payers on claims for Medicare beneficiaries. The Congressional Budget Office estimates that the clarification of the law could help the CMS recoup $8.9 billion over the 10-year life of the bill.
Earlier this year, Modern Healthcare reported that the U.S. Justice Department and HHS' inspector general were investigating insurers that may have defrauded Medicare by hundreds of millions of dollars annually by billing the federal programs as the primary instead of secondary payer for their group health plan members who are Medicare beneficiaries. Hospitals may also be at risk under the government inquiry (Sept. 22, p. 16).
Hospitals face liability under the Medicare secondary payer law because they are required to collect accurate insurance billing information. If they fail to do that or bill improperly, they could face civil charges under the False Claims Act.
As the secondary payer, Medicare is only responsible for what remains after the primary insurer has been billed, such as deductibles and copayments, a far smaller portion of the total bill. In 1995, 67 Blues plans settled a Medicare secondary payer lawsuit for $115 million, paying $27 million in cash and agreeing not to resubmit $88 million worth of claims the plans said Medicare owed them.
Kate Sullivan, director of healthcare policy for the U.S. Chamber of Commerce in Washington, says the policy clarification may spur unintended side effects. Under the new law, the U.S. Treasury Department can go directly to the employer to collect, even if an insurer is responsible.
"This could pose real problems for every employer with a health plan, especially smaller employers," Sullivan says. "There are sometimes genuine differences of opinion about who has been billed and for how much they are liable. If the government follows this language to the letter it can go back as far as 1980 to collect from employers on claims that are old and messy. The retroactivity component could really have a stinging effect. We've had a lot of major issues under serious contention in the drug bill. And now that the dust has settled, we'll have to go start sweeping up some of the messes."
Alissa Fox, executive director of policy at the Blue Cross and Blue Shield Association, says the Justice Department sought the clarification.
"Our attorneys have scanned it and it's still very unclear what it does," says Fox, who pointed out that an earlier component of the Medicare bill relating to secondary payer coverage for end-stage renal disease was dropped before final passage of the bill.
"The government wants to get its medical expenses back, but the language wasn't clear whether those funds could be recouped and now it apparently is. The problem in the past has been that Medicare was left holding the bag."
Fox says she doesn't see the clarification dramatically affecting her members but views the changes as spelling out who the CMS can go after to collect. Still, she concedes that $9 billion is a lot of money. "It's got to come from someplace," she says.
An American Hospital Association spokeswoman does not see the change affecting hospitals.
"It's not an issue for our members," she says.