MSP Reform Shines Bright in House Subcommittee Hearing

Today members of the House of Representatives took an important step in shining a spotlight on Medicare Secondary Payer (MSP) reform. Led by Congressmen Cliff Stearns (R-FL), the Energy and Commerce Committee’s Subcommittee on Oversight and Investigations received key testimony from government agency officials (Medicare and the Government Accountability Office) and key stakeholders to settlements involving Medicare enrolled beneficiaries concerning the current state and effectiveness of the MSP system. The hearing was held as part of a follow up to H.R. 1063 the “Strengthening Medicare and Repaying Taxpayers Act of 2011” (a/k/a the SMART Act) .

Some of the key testimony included metrics that highlight the importance of maintaining an efficient cost recovery system for the Medicare Trust Fund, including testimony that:

• Over the past decade, the MSP system is responsible for recovering $58 billion
• Current workloads for the MSP system are estimated to be 413,000 files
• CMS contractor goals include a turnaround time of 65 days to issue Conditional Payment letters, but current workloads have pushed back these timelines to as long as six months (and beyond)

The hearing involved very timely and detailed testimony by settlement stakeholders, including the Vice-President, Risk Management of Publix Super Markets (Marc Salm), the Vice-President & Governmental Relations Officer for The Cincinnati Insurance Companies (Scott Gilliam), a partner of the Pennsylvania firm of Raizman, Frischman & Matzus (Jason Matzus), and the Federal Policy Director, Medicare Rights Center (Ilene Stein). The testimony identified that delays in the MSP system are causing tremendous pressures on settling parties, as the parties are in many cases ready, willing and able to repay the Medicare Trust Fund but do not have the necessary payment information from the Medicare contractor to do so. The CFO of Medicare acknowledged that workload increases following adoption of Section 111 of the MMSEA have led to delays.

The Members of the Subcommittee asked questions designed to identify whether the MSP system is working, and where improvements can be made to protect taxpayers, minimize healthcare costs and work with settlement industry stakeholders to ensure justice is not sacrificed by the MSP system.

The key takeaways from the hearing include:

1. The non-agency panelists testified that the single biggest tool Congress can provide to the industry would be a change in the law to require Medicare’s contractor to provide a reimbursement amount before settlement.
2. Members and panelists alike, from both sides of the political aisle, discussed the propriety of thresholds for CP reimbursement based on cost effectiveness criteria, including a RAND Institute for Civil Justice Study that concludes that using a $5,000 threshold for MSP recovery would result in exempting 43% of the government’s potential recover, which in turn, would only lead to a 2.4% reduction in such recovery.
3. The GAO is working on a study designed to provide the Subcommittee with hard data to lead to MSP reform recommendations. The study would be released by the end of this year.

Based on the testimony and the tone of the hearing, there are some very strong indications that those changes may lead to thresholds being placed on CMS recovery rights, and perhaps even caps being placed on Conditional Payment amounts to ensure that the estimated reimbursement amount can be reasonably relied on by the settling parties to result in quicker settlements, less time with settlement funds held in limbo while Medicare reimbursement claims are finalized, and more timely payments back to the Medicare Trust Fund.

When taking into account HR 1063’s proposed changes to streamline the MSP system, and now adding to that legislation some significant momentum in the form of this hearing and follow up hearings to be scheduled with the Subcommittee, and taking into account the broad, bipartisan support that such reform seems to have, at least at the committee level, changes to the MSP system in 2012 seem very likely.

We will continue to follow the progress of these hearings as some form of legislation, currently being propelled by the SMART Act, seems to be just around the corner in 2012. Please check www.garretsongroup.com often for updates, as well as new client advisories and practice tips.

A copy of the testimony may be found by clicking this link: http://energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8716