Ready for Medicare Mandatory Reporting Civil Money Penalties?

Rafael Gonzalez, Esq. Cattie & Gonzalez, PLLC

I have been speaking and writing about Medicare secondary payer $1,000 civil money penalties since 2007. For 15 years, I have been warning the liability, no-fault, and workers compensation industry about such penalties. In 2013, Medicare got serious about it and asked the industry for their thoughts, concerns, and recommendations. Based on that feedback, in 2020, the Centers for Medicare & Medicaid Services (CMS) proposed methods to calculate and impose civil money penalties (CMPs) when a group health plan (GHP) or a non?group health plan (NGHP) entity fails to comply with Medicare Secondary Payer (MSP) mandatory reporting requirements.??

Per the CMS notice published December 30, 2004 (69 FR 78442), CMS must schedule all Medicare final regulations for publication within the 3-year standardized time limit in the current Unified Agenda. In other words, CMS must publish final rules within 3 years of its published proposed rules. The CMS mandatory insurer reporting civil money penalty proposed rule was published on February 18, 2020. Therefore, the 3-year period runs February 18, 2023. The proposed final rule is currently at the Executive Office of the President for review and final approval. As a result, it is anticipated that final code of federal regulations will be published by HHS on Medicare secondary payer $1,000 per day per file civil money penalties this fall, or at the latest by February 2023.

What follows is a comprehensive review of when such penalties would be and would not be imposed, and the comments to the 2013 advance notice which gave way to the 2020 proposed rule, and which may serve as the basis for a final rule. As I have been saying for 15 years, do not take this moment lightly; do not let this opportunity pass you by; do not assume MSP compliance will remain the same; do not allow your organization to get caught sleeping at the wheel. The time to prepare for this monumental change is now, as once these rules become final, the federal government will start measuring every responsible reporting entity’s registration, reporting, and accuracy.?

Bottom line here is if your organization fails to accurately report in more than 20% of its claims in 4 of 8 consecutive quarters, 25% penalties will start. Don’t assume such penalties will be $250 per day per file, as the rule allows for an adjustment annually. And every quarter thereafter in which such violation continues, the penalty increases by 25% until it hits the max of $1,000 per day, per file. And even after you become compliant, and are under the 20% error threshold, although penalties will be reduced by 25%, such penalties will continue until your organization shows it no longer violated such rules in 4 of 8 consecutive quarters.

When Penalties Would Be Imposed

The 2020 proposed rule specified how and when CMS must calculate and impose civil money penalties (CMPs) when group health plan (GHP) and non-group health plan (NGHP) responsible reporting entities (RREs) fail to report under their statutory obligation. RREs fail to meet their Medicare Secondary Payer (MSP) reporting obligations in any one or more of the following three ways:?

1) When RREs fail to register and report as required by MSP reporting requirements;?

2) When RREs report as required, but report in a manner that exceeds error tolerances established by the Secretary of the Department of Health and Human Services;?

3) When RREs contradict the information the RREs have reported when CMS attempts to recover its payments from these RREs.?

A word about the imposition of CMPs if a GHP’s or NGHP’s response to CMS recovery efforts contradicts the entity’s section 111 of MMSEA reporting. If a GHP RRE reported and repeatedly affirmed ongoing primary payment responsibility for a given beneficiary, then responded to recovery efforts with the assertion that coverage for that beneficiary actually terminated 2 years prior to the issuance of the recovery demand letter, the rule would impose a CMP. If a NGHP RRE reported and repeatedly affirmed a specific ICD-10 as associated with the injuries sustained resulting from the reported accident, then responded to recovery efforts with the assertion that such medical impairment is not related the accident reported, the rule would impose a CMP.

The penalty would be calculated based on the number of calendar days that the entity failed to appropriately report updates to beneficiary records, as required under section 111 of MMSEA. For a GHP, the penalty would be $1,000 (as adjusted annually under 45 CFR part 102) for each calendar day of noncompliance for each individual for which the required information should have been submitted. For an NGHP, the penalty would be up to $1,000 (as adjusted annually under 45 CFR part 102) per calendar day of noncompliance for each individual, for a maximum annual penalty of $365,000 (as adjusted annually under 45 CFR part 102) for each individual for which the required information should have been submitted.?

Yes, you read that right. For GHPs, the $1,000 penalty is adjusted annually, so an entity fined when this rule becomes final will pay considerably greater than $1,000 per day per file. For NGHP, the penalty is capped at $1,000 per day per file. However, this means that $250, $500, and $750 penalties will be adjusted annually, thereby ultimately producing maximum $1,000 per day per file CMP in situations where each of these smaller penalties adjusted annually 5, 10, 15, or 20 years later will have grown to over $1,000 per day per file CMPs.

When Penalties Would Not Be Imposed

The proposed rule also establishes circumstances under which CMPs would not be imposed. CMS would not impose a CMP where all of the applicable conditions are met:?

1) If an RRE reports any GHP beneficiary record that is reported on a quarterly submission timeframe within the required timeframe (not to exceed 1 year after the GHP effective date), or any NGHP beneficiary record that is submitted within the required timeframe (not to exceed 1 year after the TPOC date).?

2) If an RRE complies with any TPOC reporting thresholds or any other reporting exclusions published in CMS’s MMSEA Section 111 User Guides or otherwise granted by CMS (current reporting threshold is at $750).

3) If a GHP entity or NGHP entity does not exceed any error tolerance(s) in any four out of eight consecutive reporting periods.?

4) If a NGHP entity fails to report required information because the NGHP entity was unable to obtain information necessary for reporting from the reportable individual, including an individual’s last name, first name, date of birth, gender, MBI, or SSN (or the last 5 digits of the SSN), and the responsible applicable plan has made and maintained records of its good faith effort to obtain this information.?

Public Comments to 2013 ANPRM Give Way to 2020 Proposed Rule

In accordance with the rulemaking directed by the SMART Act, on December 11, 2013, CMS published an advance notice of proposed rulemaking (ANPRM) titled “Medicare Secondary Payer and Certain Civil Money Penalties.” The December 2013 ANPRM solicited public comments on specific practices for which CMPs may or may not be imposed for failure to comply with MSP reporting requirements for certain GHP and NGHP arrangements.

CMS received 34 responses to the December 2013 ANPRM. What follows is an analysis of the public comments received by subject area, with a focus on the most common issues raised, providing a basis and rationale for CMS’ 2020 proposed rule:

1. CMPs and “Good Faith Efforts” To Obtain Information To Report

Commenters suggested that CMS refrain from imposing CMPs where NGHPs with reporting obligations under section 1862(b)(8) of the Act make “good faith efforts” to obtain required information from individuals who are unwilling or unable to provide it. Some “good faith efforts” suggested included the following: (1) CMS could accept documentation signed by the individual stating that he, or she is either not a Medicare beneficiary, or will not provide the NGHP entity with his or her Social Security Number (SSN) (full SSN or last 5 digits); and (2) CMS could accept a judicial order establishing that the individual is not required to provide his or her Medicare Beneficiary Identifier (MBI) or SSN to the NGHP entity. CMS noted that concerns about “good faith efforts” were received from the NGHP industry and not the GHP industry, which is reflective of fundamental differences between the two industries and the relationships between those plans and the individuals in question. NGHP applicable plans may be in an adversarial relationship at times with the reportable individual, whereas the reportable individual is typically the client of a GHP.

In response to the comments, CMS is proposing that it would not assess CMPs against NGHP entities where those entities make efforts as defined in the proposed rule to obtain necessary reporting information. NGHP entities would document their records with their efforts to obtain this reporting information, as CMS would retain the right to audit such documentation.

2. Determining Noncompliance

Most commenters suggested that “noncompliance” with CMS's reporting requirements include failure to:

(1) report when an entity is required to report;?

(2) report all Medicare beneficiaries who are/were plan participants (GHP) or claimants (NGHP); and?

(3) report when medical care was either claimed or released (as a part of a settlement, judgment, award, or other payment).?

CMS agreed with the suggested concepts and incorporated them into the proposed rule involving these reporting requirements.

3. Amounts of CMPs

A number of commenters recommended developing a “sliding scale” or “tiered” CMP approach, based upon the requirement of the responsible reporting entity (RRE) to obtain the necessary reporting information from these entities. CMS considered the possibility of incorporating penalty tiers for NGHP entities that have reporting obligations under section 1862(b)(8) of the Act. However, CMS is not proposing to rely on the intent of the NGHP entity reporting. Instead, CMS is proposing that it would assign CMP amounts based on the number of times, meaning individuals, a particular entity fails to report, or fails to report correctly. CMS has solicited comments on this proposal.

4. Proposed “Safe Harbors”

Many commenters suggested that CMS should establish a series of “safe harbors” that would preclude the assessment of a CMP. CMS noted that multiple commenters were concerned about non-compliance due to technical issues and wished to define these myriad situations as “safe harbors.” As a result, CMS is proposing to employ tolerances related to submissions that contain certain types of errors or mistakes to address these comments, and to only consider performance against those tolerances over time so that a few poor submissions do not necessarily result in the imposition of a CMP. Multiple commenters were also concerned about their ability to obtain all of the required information for reporting and requested safe harbors for non-compliance due to non-cooperation on the part of the reportable individual. This situation has been addressed under the proposed rules for “good faith efforts.”

5. Develop an Appeals Process

A number of commenters suggested that CMS should develop a formal appeals process to provide entities with reporting obligations a formal structure in which to appeal any notice of a pending or imposed CMP. CMS expects that the proposed rule, once finalized, would comport with the appeals process as prescribed by 42 CFR 402.19 and set forth under 42 CFR part 1005. In broad terms, parties subject to CMP would receive formal written notice at the time penalty is proposed. The recipient would have the right to request a hearing with an Administrative Law Judge (ALJ) within 60 calendar days of receipt. Any party may appeal the initial decision of the ALJ to the Departmental Appeals Board (DAB) within 30 calendar days. The DAB's decision becomes binding 60 calendar days following service of the DAB's decision, absent petition for judicial review is US district court.

6. Rule is Prospective

Many commenters suggested that the rule should be enforced prospectively only. CMS agrees and will evaluate compliance based only upon files submitted by the RRE on or after the effective date of any final rule.

7. Statute of Limitations

Many commenters requested a statute of limitations on the imposition of CMPs. CMS agrees and will apply the 5-year statute of limitations as required by 28 USC 2462. Under this provision, CMS may only impose a CMP within 5 years from the date when the non-compliance was identified by CMS. An explanation and example of how this proposed statute of limitations would work for each of the three proposed types of CMPs is provided in the proposed rule.

For failure to report, the noncompliance occurs on every day of non-reporting after the required timeframe for reporting has elapsed. If an RRE fails to report any beneficiary record as required beginning in 2023, and CMS identifies this non-compliance in 2024 but fails to take action until 2030, then no CMP would be imposed.

For responses to recovery efforts contradicting reporting, the noncompliance occurs when the response is received by CMS. A CMP would be imposed if in 2023 an RRE reported ongoing primary payment responsibility for a given beneficiary and then responded to recovery efforts 1 year later, in 2024, with an assertion that coverage for that beneficiary was actually terminated prior to the issuance of the recovery demand letter. If CMS fails to impose a CMP for this noncompliance within 5 years (no later than 2029), then no CMP would be imposed for this incident of noncompliance.

For situations where the reporter exceeds the error tolerance threshold, the noncompliance occurs at the end of the fourth consecutive reporting period over the 20 percent threshold (out of eight consecutive reporting periods). If an RRE exceeds the error tolerance threshold in all four reporting periods of 2023 and then never exceeds the threshold again, it would normally be subject to a CMP for the following 4 quarters. But if CMS fails to impose a CMP for this noncompliance within 5 years (no later than 2028), then no CMP would be imposed for this noncompliance.

8. Informal and Formal Notice

Many commenters requested that CMS explain how it will provide notice to entities regarding pending or imposed CMPs and how much information will be included.

CMS expects to communicate with the entity informally before issuing formal notice regarding a CMP. Informal communications would depend upon the nature of the non-compliance. Regarding the potential imposition of CMPs on other grounds, CMS anticipates utilizing an informal (that is, prior to formal enforcement actions) written “pre-notice” process that would allow the RRE the opportunity to present mitigating evidence before the imposition of a CMP. Once we determine that a CMP will be imposed, we would provide formal notice to the entity in writing in accordance with 42 CFR 402.7, which would contain information on the reason for the assessment of a CMP, the amount of the CMP, and next steps for the entity, including appeal rights.

For example, CMS expects to continue to utilize the current messaging procedures around file errors described in the MMSEA Section 111 User Guides, which entail indicators on response files, emails, and phone calls depending upon the nature and severity of the error. RREs thus would remain informed about the performance of their quarterly file submissions. Upon the third submission out of seven consecutive reporting periods that exceeds error tolerances, the RRE would receive an “informal notice” that consists of a written warning letter (which requires no response, but is intended to warn the RRE that a subsequent submission that exceeds tolerances would result in potential CMP imposition). Upon the fourth submission out of eight consecutive reporting periods that exceeds error tolerances (and any additional triggering submissions), the RRE would receive another “informal” written notice of non-compliance indicating the nature of the non-compliance and the determination of the potential amount of the CMP, with 30 calendar days to respond with any mitigating information prior to the issuance of a notice of proposed determination in accordance with 42 CFR 402.7.

·?CMP for Lack of Timely Reporting

In the event that a CMP may be imposed for lack of timely reporting, CMS will issue an informal written notice of non-compliance, identifying the nature of the non-compliance and the determination of the potential amount of the CMP. The RRE would again have 30 calendar days to respond with mitigating information before the issuance of a written notice in accordance with 42 CFR 402.7.

·?CMP for Contradiction with Recovery Process

Recovery demand letters would be revised to include information regarding the potential for CMPs should an RRE contradict its own reporting in the recovery process. If an RRE submits a dispute or redetermination request in response to the recovery process that appears to directly contradict its own reporting, an informal written notice of non-compliance identifying the nature of the non-compliance and the determination of the potential amount of the CMP would be issued to the RRE. The RRE would again have 30 calendar days to respond with mitigating information before the issuance of a written notice in accordance with 42 CFR 402.7.

9. Suspension of CMP Imposition Where Programmatic Changes Are Required

Commenters suggested that CMS consider suspending the imposition of CMPs, where changes to mandatory reporting procedure require RREs to make significant revisions to the systems used to prepare the data for reporting.

CMS would expect to continue to provide at least 6 months' (180 calendar days) notice regarding any changes in policy or procedure associated with section 111 of MMSEA required reporting to allow reporting entities adequate time to react. CMS will not assess any CMPs associated with a specific policy or procedural change for a minimum of two reporting periods following the implementation of that policy or procedural change.

10. Duplicative Reporting and CMPs

Commenters suggested that CMS should not impose CMPs in situations where required information has already been reported to another agency or entity, such as the Department of Labor, or in situations where multiple entities have obligations to report the same information to CMS and one entity has already reported.

The reporting requirements established under sections 1862(b)(7) and (b)(8) of the Act imposed certain unique requirements on specific entities to report data to CMS for the purposes of identifying those situations where another party has primary payment responsibility. These reporting requirements were imposed under the Act, regardless of whether another agency or entity requires the same or similar data.

11. Correct Coordination of Benefits and Recovery

Commenters suggested that CMS not impose CMPs when CMS has been able to coordinate benefits correctly or CMS has otherwise been able to recover.

The obligations to report under section 1862(b)(7) and (b)(8) of the Act are separate and distinct from any other obligation with respect to MSP. The fact that CMS may be able to correctly coordinate benefits and pursue recovery does not negate the obligations established under section 1862(b)(7) and (b)(8) of the Act.

Are You Ready for Medicare Civil Money Penalties?

Per the CMS notice published December 30, 2004 (69 FR 78442), CMS must schedule all Medicare final regulations for publication within the 3-year standardized time limit in the current Unified Agenda. In other words, CMS must publish final rules within 3 years of its published proposed rules. The CMS mandatory insurer reporting civil money penalty proposed rule was published on February 18, 2020. Therefore, the 3-year period runs February 18, 2023. The proposed final rule is currently at the Executive Office of the President for review and final approval. As a result, it is anticipated that final code of federal regulations will be published by HHS on Medicare secondary payer $1,000 per day per file civil money penalties this fall, or at the latest by February 2023.

Are you ready? Is your organization ready? With hundreds of thousands of dollars potentially on the line, make no mistake about it, imposition of civil money penalties will change the landscape of Medicare secondary payer compliance. Overnight, CMS penalties will transform compliance from an exercise in reporting without any consequences or ramifications into potentially the most expensive, costly, burdening, and consequential compliance program confronting group health plans, as well as liability, no-fault, and workers compensation non-group health plans.

About Rafael Gonzalez

Rafael earned his Bachelors of Science degree from the University of Florida, and his Jurisprudence Doctorate degree from the Florida State University.?

Rafael has over 35 years experience in the legal and insurance industries. He is currently a partner in Cattie & Gonzalez, PLLC, a national law firm serving clients in all 50 states, focused on Medicare and Medicaid secondary payer law and compliance in auto, bodily injury, liability, mass tort, medical malpractice, nursing home, no-fault, products, workers compensation, and wrongful death claims and litigated cases.

Rafael writes and speaks about workers compensation, social security, medicare, medicaid, marketplace, mandatory insurer reporting, conditional payments resolution, set aside allocations, msa and snt administration, social determinants of health, and diversity, equity, and inclusion throughout the country.

Rafael can be reached at 844.546.3500 or at?[email protected]. You may also reach out to him on social media, as he is active on linkedin, twitter, facebook, instagram, and youtube.