BerkleyMed Claims News Bite
The Centers for Medicare &
Medicaid Services (CMS) faced an increasingly frustrated group of
liability insurers during its November 16, 2011 Town Hall
teleconference for Non-Group Health Plans (NGHPs) on technical
issues associated with insurer reporting under Section 111 of the
Medicare, Medicaid, and SCHIP Extension Act of 2007 (Section
111). Several callers complained about widespread Medicare
claim denials experienced by Medicare beneficiaries receiving
liability insurer payments, and there were many questions about the
ongoing confusion related to the amount that RREs should report
when a settlement is funded by multiple defendants or
insurers. CMS's answers provided little clarity on these
issues. Moreover, CMS and representatives from its
Coordination of Benefits Contractor (COBC) implicitly blamed
Responsible Reporting Entities (RREs) for coding problems that in
large part derive from ill-conceived elements of the Section 111
reporting scheme or from performance deficiencies of CMS and its
contractors. There was scant evidence that CMS has made any
substantial progress in addressing fundamental reporting issues
that continue to plague Medicare beneficiaries, counsel for both
plaintiffs and defendants in tort cases, and insurers and
self-insured entities.
Medicare's Widespread Denials of
Claims
Numerous callers expressed their concern and frustration over
Medicare's increasingly frequent denials of claims for Medicare
beneficiaries for care that is unrelated to the disease or injury
compensated or released by a reported tort settlement. A COBC
representative may have attempted to shift some responsibility for
these Medicare claim denials to liability insurers, contending that
RREs must ensure that they identify the correct ICD-9 codes for
their Section 111 reports and not adopt unrelated or incorrect
codes from beneficiary medical records. Insurance companies,
however, are ill-equipped to perform this task. Their claim
personnel typically are not trained medical experts, and while some
claim personnel may be familiar with ICD-9 codes, they often lack
access to detailed medical records and information that would be
necessary to perform the oversight or corrective actions possibly
envisioned by CMS and the COBC. In addition, the ICD-9 coding
system was not designed for liability insurer use, and as CMS has
conceded, there often may not be a perfect match between available
codes and the specific disease or injury that is the subject of a
tort claim.
Furthermore, Medicare's inappropriate denials of claims are taking place even where the ICD-9 codes contained in a Section 111 report accurately reflect RRE compensated or released injuries. Indeed, a COBC representative on the teleconference acknowledged that there have been reports of inappropriate claim denials even where RRE(s) have reported only accurate ICD-9 codes. This was confirmed by several callers who reported that Medicare beneficiary claims were denied for services unrelated to the diagnosis codes reported by the RRE. For example, it appears that Medicare beneficiaries with open ORM claims (referring to claims for which the insurer has an ongoing responsibility to pay the individual's medical expenses) are being categorically denied benefits for all services and told to speak with the applicable liability insurer about terminating the ORM so they can receive Medicare benefits.
CMS representatives stated that the Agency is working to resolve this issue, but there have been public complaints about claim denials for some time now, and anecdotal evidence suggests the problem may be getting worse. For example, Ilene Stein, a representative from the Medicare Rights Center, described several examples of beneficiary claim denials during a June 22, 2011 congressional hearing on issues related to the Medicare Secondary Payer (MSP) recovery process. During the teleconference, Peter Foley, vice president of claims administration at the American Insurance Association (AIA), stated that members of his organization are aware of claim denials across the country and are concerned because Medicare beneficiaries may believe the property and casualty industry is responsible for the inappropriate denials. AIA is recommending that its members, as well as Medicare beneficiaries, contact their congressional representatives to raise awareness about the problem and seek appropriate relief. Insurers do not cause Medicare's inappropriate denials of beneficiary claims, and they are not responsible for curing systemic Medicare claims processing errors.
Reportable TPOC Amount for Claims
Involving Multiple RREs
The teleconference further muddied CMS's ambiguous and
inconsistent guidance regarding the appropriate TPOC amount to be
reported with respect to claims involving multiple RREs.
Indeed, over the course of the teleconference, the CMS and COBC
representatives appeared to disagree at times with respect to the
proper application of some aspects of CMS's guidance, highlighting
the Agency's lack of clarity on this subject. Moreover, CMS
comments suggest that the Agency's views may be influenced by
fundamental misunderstandings regarding typical settlement
practices in large tort cases implicating multiple insurers, as
well as the concept of joint and several liability as applied to
such settlements.
As noted in prior Bulletins, CMS guidance in this area turns, at least in part, on the existence of joint and several liability. That guidance is unclear in part because:
- it does not clearly distinguish between the potential joint and several liability of codefendants in tort actions and the potential coverage liabilities of insurers (including multiple insurers for a single underlying defendant);
- it does not expressly address the typical settlement scenario in which (regardless of whether the underlying claimant has alleged joint and several liability) the settling defendant or defendants typically deny any liability whatsoever (joint and several or otherwise) but compromise the claim to avoid litigation expense, inconvenience and risk;
- it does not grapple with the fact that in the majority of cases, insurers are not parties to the settlement agreement; and
- it does not address the many limitations on potential insurer liability (including coverage defenses, policy limits and cost sharing agreements or other agreements that limit the insurer's share of any payment to an amount less than the total settlement with the claimant).
During the teleconference, a COBC representative addressed a question from a liability insurer regarding the amount to be reported when multiple insurers will be paying a portion of a defendant's settlement or judgment. The COBC representative stated that if the amount owed by each insurer was "clearly defined," the TPOC amount reported by each insurer should be the amount of each insurer's individual payment. By contrast, Barbara Wright, a representative for CMS, asserted that "clearly defined" was not necessarily the appropriate terminology, as there could be clearly defined allocations in a joint and several liability situation where the entire amount of the settlement or judgment would, nevertheless, need to be reported. She added that if each insurer had a "separate settlement," each insurer would report only the amount of its payment. In response to a later question about TPOC amounts, Ms. Wright repeated her statement that the determinative issue is whether there is a joint settlement with joint and several liability, or whether there are separate settlements. She also noted that it is important to look at "how the settlements are done." Ms. Wright then noted that CMS is "concerned about [receiving] full data" and is "not interested in duplicative data." She concluded by stating that the reportable number(s) will need to be worked out individually in each scenario.
These comments from CMS and COBC during the teleconference fail to resolve the ambiguities noted above. For example, Ms. Wright's comments appear to suggest that CMS believes that insurers routinely are parties to tort settlement agreements, which is not the case. In the context of a settlement or judgment that includes multiple defendants, CMS's comments fail to address the fact that an insurer for one defendant has no obligation to pay any liability imposed upon another defendant that is not insured under the policy. In the context of multiple carriers that insure a single defendant, CMS's view does not explain how the joint and several liability rubric would ever apply to insurers who each issued separate insurance policies, subject to their own terms and limitations, to the defendant. For example, in the simplest scenario involving a primary carrier and an excess carrier, the primary carrier has no obligation to pay any amount in excess of its policy limits, even if the defendant and excess carrier are unable to pay the amount in excess of limits. Conversely, the excess carrier typically has no obligation to pay any amount below the attachment point of its excess policy. Does CMS expect both carriers to report the entire amount of the settlement or judgment in that scenario (assuming the excess carrier paid the claimant directly and thus had a reporting obligation) despite the fact that neither could be compelled to pay the entire amount to the claimant? Similarly, in a scenario in which multiple insurers issued policies to a defendant providing coverage in separate, discrete policy periods (which is often the case in long tail claims involving exposures over a period of several years), a particular insurer often has entered into a settlement or coverage-in-place agreement with the policyholder, or a cost sharing agreement with the policyholder and other carriers, that resolves coverage disputes and uncertainties and limits the insurer's obligation to a specific amount or a specific allocated share of any settlement or judgment. A similar limitation to the insurer's pro rata, allocated share may apply pursuant to policy terms and applicable law, even in the absence of such a coverage settlement or cost sharing agreement. Does CMS expect each carrier to report the entire amount of the settlement or judgment in that scenario, even though no insurer could be compelled to pay the entire amount, or alternatively, does CMS expect each carrier to report only the amount for which it is liable?
Regrettably, the teleconference
comments and prior CMS guidance do not answer any of these
questions. In the face of uncertainty, some insurers appear
to have concluded that the conservative approach is to report the
entire amount agreed between the defendant and the claimant, on the
theory that the CMS guidance is hopelessly muddled and that an
insurer could never be faulted for reporting the larger
amount. Other insurers appear to have concluded that it makes
more sense to report the amount actually paid by that insurer,
reasoning that the concept of joint and several liability does not
apply in these scenarios and that CMS's approach to this question
appears to be based upon a non sequitur. The consequences of
this uncertainty are likely to fall most heavily upon claimants,
some of whom are likely to receive erroneous denials of Medicare
coverage from CMS because CMS will have misleading data suggesting
that the total TPOC amount paid on a claim is larger than the
actual total payment received by the claimant. CMS and its
contractors will face heavy administrative costs attempting to
figure out, on the "back end," the total amount actually paid to
the claimant, and may face a political backlash as the number of
frustrated Medicare beneficiaries and insurers mounts. A
better and simpler solution would be to require each RRE to report
only the amount that it paid, but there is little time for CMS to
make that clarification before more RREs begin to report in the
first quarter of 2012, and there is no evidence that the Agency
intends to fix the deficiencies in its current guidance.
Accuracy of Beneficiary Look-Up
Tool
CMS also acknowledged during the teleconference that it had become
aware of some accuracy issues related to the online beneficiary
look-up tool. This tool is available through the COBC Secure
Website (COBSW) and can be used by RREs to query an individual's
Medicare enrollment status and receive an immediate response.
CMS stated that it thought it had resolved the issue previously but
recently has been presented with examples where it appears that the
look-up tool is "out of sync" with actual Medicare enrollment
records.
"Revamped" NGHP User Guide and Other
Forthcoming Guidance
CMS also announced that the Agency is in the process of revamping
the User Guide to make it more user friendly. Representatives
stated that the revised User Guide will be reorganized and may be
published in the first quarter of 2012, along with a "quick
reference guide" and a "FAQ" document related to the technical
aspects of reporting. CMS also stated that it plans to
establish a Workers' Compensation Medicare Set-Aside Arrangement
(MSA) portal in the future.
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© 2011 Wiley Rein LLP
Posted with permission of Wiley Rein LLP
The Wiley Rein Section 111 Team routinely covers the Section 111
NGHP teleconferences held most months by CMS and sends out periodic
Alerts to clients addressing notable Town Hall discussions and
other Section 111 developments. The firm also maintains a
searchable electronic database of Town Hall transcripts dating back
to October 2008. To access their Section 111 webpage and
other Section 111 Bulletins and articles, please visit www.wileyrein.com/section111.
For more information, please contact Kathryn Bucher at 202.719.7530 or kbucher@wileyrein.com, Richard L. McConnell at 202.719.7265 or rmcconnell@wileyrein.com and Katherine R. McDonald at 202.719.7123 or kmcdonald@wileyrein.com.
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