Medicare tips for auto insurance agents
Insurance professionals who manage bodily injury claims stemming from auto accidents need to know their way around Medicare organizations.
In the late 1970s, Congress began looking at the efficiency and costs of the Medicare program.
It found a significant number of instances when Medicare was paying for medical costs that were actually the responsibility of another entity.
As a result, Congress passed the Medicare Secondary Payer Act (MSP) in 1980. It makes Medicare the secondary payer of medical costs when another entity, or as the statute refers to them, “primary plans,” have made payment or can reasonably be expected to make payment.
According to the law, primary plans include workers’ compensation, automobile and liability insurance policies, or plans including self-insurance and no-fault insurance, which are referred to as non-group health plans, as well as traditional group health plans.
There are situations, however, in which a primary plan may not be able to immediately pay medical costs, such as a car accident or a work-related injury because the fault isn’t apparent, requiring an investigation or litigation to determine who is responsible for the medical costs. In these situations, Medicare is authorized to make conditional payments. However, these payments must be reimbursed by the responsible primary plan, and failure to do so could result in a severe penalty. The MSP established a direct priority right of action that allows Medicare or the Center for Medicare and Medicaid Services (CMS) to recover not only the unreimbursed medical costs but also damages.
How it works
Imagine that your child goes on a field trip to a museum and accidentally breaks something on display. You’re clearly liable for the damage, but the school pays for the damage without telling you. Months later the school sues you for failing to reimburse it for the damage. The judge rules in favor of the school, explaining that the law doesn’t require the school to notify you about the obligation, but because you didn’t pay the obligation you were unaware of, you now have owe double damages.
This is essentially how Medicare Advantage recovery liens work and what insurance companies are facing on a more regular basis.
Dealing with CMS
For a better understanding, here’s an example. Driver A is responsible for an accident in which Driver B is injured and requires medical attention. Because Driver A is responsible for the accident, Driver A’s insurance company should rightfully pay the medical costs. However, Driver B is a Medicare beneficiary. Upon arriving at the hospital, Driver B explains he is covered under Medicare. The hospital then bills Medicare, and Medicare pays the medical costs. Under the MSP, the insurance company is required to reimburse Medicare. In this situation, the insurance company would check the CMS database to determine the beneficiary status of Driver B and report any settlement involving a Medicare beneficiary to CMS.
If this was how the MSP always worked, few people, if any, would have serious concerns about it. Unfortunately, this is only how it works when dealing with CMS directly. When insurancecompanies are dealing with Medicare Advantage organizations the process can be very different.
Enter the MAO
Medicare Advantage organizations (MAOs) are healthcare companies that contract with CMS to administer Medicare benefits and at the same time offer added benefits for additional premiums.
MAOs are governed by many of the same CMS regulations and have been extended a private right of action regarding MSP conditional payments, which allows them to collect double damages for failure to reimburse conditional payments. Because MAOs are administrating Medicare using tax dollars, one would expect they would have the same ability to recover medical costs that should have been paid by someone else. So, what’s the problem/?
Simply put, it’s almost impossible for an insurer to determine whether it has a financial obligation to an MAO. There is no database for the insurance companies to check for beneficiary status of those enrolled in Medicare through MAOs, and, as a result of privacy laws, it’s often difficult for insurance companies to get beneficiary status even when directly contacting MAOs.
Claimants also often try to hide beneficiary status from insurance companies, believing that because Medicare has already paid medical costs they may be able to keep the money included in a settlement meant to pay those medical costs.
And here’s the kicker: Even if an insurance company had no knowledge of an obligation and no method to determine whether there was an obligation, MAOs still can and do file suit and pursue double damages. Not only can they pursue this litigation without notifying insurance companies of the obligation, but they can also transfer the lien to another entity, extending that other, non-Medicare entity the same private right of action to pursue double damages. That other entity is typically a law firm, and after the lien is transferred the law firm usually pursues litigation — sometimes in the form of a class action suit — but not before giving the insurance company the proverbial “offer they can’t refuse.” The offer usually goes something like this: “We can settle now for 150% in damages and avoid legal fees, or we can go to court where we will get double damages and you will incur exorbitant legal fees.”
I can’t imagine anyone could see this situation as fair, but most of the time the insurer has no choice but to take the offer and pay more than it was required to, even if it would have fully reimbursed the costs had it but known they existed.
These legal actions distort the intent of the Medicare secondary system and abuse the privacy rights of Americans solely for profit. It is clearly time for a change to the Medicare Secondary Payer Act to include Medicare Advantage organizations in the CMS database or establish a process by which companies can be sure they’ll have the opportunity to pay what is owed, without having to line a few pockets as well.
Quincy Enoch (qenoch@namic.org) is federal affairs director for the National Association of Mutual Insurance Companies.
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