For Medicare, it's time to get SMART

SMART Act should improve Medicare efficiencies and save money

By Michael J. Moody, MBA, ARM

—Tim Stanger
Vice President-Claims
Safety National

Many government programs frequently suffer from difficult and overly burdensome procedural concerns. One highly visible federal program that has been getting significant attention with respect to this issue is Medicare. A number of Medicare's shortfalls have been attracting a lot of attention over the past few years. One concern centered on legislation creating the conditional payment process of the secondary payer feature. Recently, a number of these major issues may have been addressed in a new law, the Strengthening Medicare and Repaying Taxpayers (SMART) Act of 2012.

The stage was set for President Obama's signature, with strong bipartisan support in Congress, late last year. The House gave the bill a 401-3 vote, which was followed by passage in the Senate by unanimous consent. The enabling legislation was signed into law when President Obama approved it on January 10, 2013. In essence, one of the primary purposes of the Act is to improve the overall efficiency of the secondary payer portion of Medicare. A summary of the Act, as well as a discussion of some of the benefits follows.

Background

Medicare is, of course, the federal government's health insurance program that covers more than 43 million seniors, Social Security disability recipients and a few other categories of beneficiaries. Historically, Medicare's primary purpose is to pay health-related costs for its beneficiaries. Since its inception in 1965, Medicare, for the most part, was designed to be the "first-in-line" payer of health-related expenses.

However, in 1980, due primarily to a concern about funding levels, Medicare was changed to a "secondary payer" system in cases where a primary payer (group health plan, workers compensation insurer, no-fault auto insurance coverage, etc.) existed, in an attempt to curb Medicare expenses. By changing Medicare to a secondary payer status, the government was given a priority right of recovery in cases where Medicare paid for services, known as "conditional payments," that were the responsibility of the primary payer. This change in status also created an obligation for primary payers in workers compensation and tort claims to show adequate consideration of Medicare's interest in such cases. Finally, Medicare was also authorized and directed to seek reimbursement of previously paid benefits, where appropriate. For a variety of reasons, these aspects of the Medicare Secondary Payer Act (MSP) proved difficult to implement, and prompted Congress to address the issue.

—Linda Jone
Executive Vice President at RCM&D/SISCO

Change was needed

Despite good intentions, the Medicare Secondary Payer Act was ineffective in addressing Medicare's interest, partially because of difficulty in identifying payments issued by Medicare but owed by someone else. Tim Stanger, vice president-claims at Safety National notes that, "Despite enactment of the MSP Act in the 1980s, identifying conditional payments owed to Medicare continued to be a major bottleneck in the claims administration process." As a result, new compliance procedures were introduced in 2002 through a memo issued by Medicare. Additional attention came about as part of the passage of a 2007 larger legislative effort, known as the State Children's Health Insurance Program Extension Act (SCHIP).

While SCHIP did not specifically deal with Medicare, Section 111 of the SCHIP Act provided details as to how the new law was going to be funded. One of the sections, notes Stanger, established a series of Medicare reporting requirements accompanied by an enforcement provision carrying a civil monetary penalty of $1,000 per day, per claim, for non-compliance. He says that it is important to understand that the purpose of SCHIP is threefold:

• Gather information on claims involving a Medicare-eligible person in order to recover conditional payments that have been made.

• Identify claims involving Medicare persons to flag them in order to preclude the possibility of conditional payments being made in the future.

• Ensure that all settlements involving a Medicare-eligible person adequately protect Medicare's interest.

Safety National and a number of other interested parties have, for the past several years, tried to advance the legislative agenda to correct some of the additional shortcomings of the secondary payer approach of MSP. Much of the heavy lifting in this endeavor was done through the steering committee of the Medicare Advocacy Recovery Coalition (MARC). The Coalition collaborates and develops strategic alliances with congressional leaders and government agencies to focus on implementation of MSP reporting and the broader issue of MSP reform. From Safety National's standpoint, the company's participation in MARC has been focused on pursuing guidelines for timely and appropriate reimbursements to Medicare, as well as appropriate consideration of Medicare's interest in claim settlements.

Linda Jones, executive vice president at RCM&D/SISCO, whose firm is also part of the MARC group, points out that the membership represents virtually every sector of the MSP-regulated community, including attorneys, brokers, insureds, insurers, insurance trade associations, self-insureds and third-party administrators. "For our firm," Jones notes, "the key was to get involved early, so we could educate our clients."

Stanger indicates that a number of improvements are incorporated within the SMART Act, most of which should greatly assist in settling claims in a timely fashion.

One of the better received changes has been the requirement for the establishment of an electronic portal to "notify the parties of the amount of the conditional payments issued by Medicare." Without the conditional payment information, which is issued by Medicare, effective settlement discussion of a claim cannot occur. Prior to the implementation of this change, it was difficult for all of the parties to obtain in a timely fashion current information as to Medicare's status.

While the introduction of an electronic portal for conditional payment information should expedite settlement on claims involving Medicare beneficiaries, Stanger notes that the portal doesn't solve all the MSP issues. "While this Web site will provide details on Medicare payments, it will not provide information for Medicare supplemental plans which have the same rights as Medicare regarding secondary payer status." But overall, the new legislation should help many people.

Jones notes that, historically, it took too long to settle some cases. For example, she points out, "It could take up to a year to resolve the Medicare lien, and it would require us to show the money in reserve and set up a separate bank account, just to hold the money."

Jones points out that, for many people, the prior laws resulted in too much confusion. "Now they have standardized the rules so everyone knows how to play the game," she says. Long term, this should certainly speed up the process and, Jones says, "result in quicker case closures." She believes that in addition to streamlining the process, it should also result in less attorney involvement. "Costs from implementation should save money as well," states Stanger. He points out that the Congressional Budget Office "estimates that the SMART Act will reduce Medicare spending by $45 million."

Conclusion

Most professionals that have to deal with the various aspects of Medicare secondary payments are very optimistic about the effects of the new SMART Act. Many have seen firsthand that the process was slow, inefficient and just plain burdensome and believe that the SMART Act should go a long way toward streamlining this process.

Stanger notes that some of the provisions of the SMART Act provide badly needed Medicare compliance reform that will bring critical efficiencies to the conditional payment process. However, as so often is the case these days, many of the features are introduced over time, so only time will tell if the implementation goes as planned. The MARC coalition is committed, however, to remaining engaged with appropriate governmental agencies to see that the new law is implemented in a timely manner.