By Eli Poliakoff

The new Medicare Secondary Payer (MSP) reporting requirements go into effect next week.  Beginning on October 1, 2011, defendants  - including employers - and insurers must report to the federal government certain settlements with Medicare beneficiaries or face a $1,000 per day penalty.   That requirement and other MSP issues are outlined below.

Does MSP reporting apply to employment litigation that does not involve medical claims?   Yes, depending on the circumstances.  Reporting can be required when a broad settlement agreement releases potential liability for medicals - even if the allegation typically has no associated medical care and the claimant has not alleged a situation involving medical care or a physical or mental injury.   The Centers for Medicare and Medicaid Services' (CMS) guidance on this issue describes examples of such circumstances, including settlements of claims alleging a wrongful action related to employment status.  CMS has issued a special reporting code to use in these situations. 

Will the reporting deadline be delayed?  CMS has previously delayed the "Section 111" MSP reporting deadline three times.   CMS has acknowledged that it is considering additional delays, due in part to requests from industry groups, although no decision has been made.   Under current guidelines, settlements and other reportable actions finalized after October 1, 2011 must be reported in the first quarter of 2012 (with certain exceptions).

What is reportable?  Reportable events include one-time liability settlements and certain goodwill gestures, risk management actions, clinical trial payments and medical payments made to or on behalf of a Medicare beneficiary.  The reporting entity must determine if the claimant/recipient is a Medicare beneficiary at settlement or when the benefit is provided.

When is it due?  Reportable events must be electronically submitted every quarter during a pre-assigned reporting window beginning in January 2012.  Alternatively, entities that expect few reportable events can manually submit the information through the direct data entry process.  

Who must report?  The Responsible Reporting Entity ("RRE") has the reporting duty and is liable for noncompliance penalties.   In the litigation context, the RRE is either the insurer or the insured, depending on the settlement and insurance arrangement.   Insureds and insureds should communicate to identify the RRE and develop processes to flag reportable events and collect reportable information. 

Why does it matter?   Failure to report can result in regulatory scrutiny and $1,000 per day penalties.   Entities involved in employment litigation should develop processes to timely and accurately identify reportable incidents to avoid noncompliance penalties.   Additionally, for the first time Medicare will receive consistent and thorough notice of third party settlements with Medicare beneficiaries.  Under the MSP program, entities that provide settlements, payments or benefits to Medicare beneficiaries who are or may be tort claimants can be held responsible for the medical expenses relating to the claim.   Government demands for reimbursement will increase since the purpose of Section 111 reporting is to notify CMS of recovery opportunities.   This reporting process, combined with other regulatory and administrative changes to the MSP Program and the Department of Justice's renewed interest in MSP – as demonstrated in recent recovery lawsuits – indicate greater regulatory and litigation activity in this area.

For more information, contact a Nelson Mullins Employment Law attroney. Click here for a list and contact information