Medicare is paid for through two Trust Fund accounts—Hospital Insurance and Supplementary Medical Insurance—held by the United States Department of Treasury, How Is Medicare Funded. In 2018, over 60 million people were covered by Medicare with over $731 billion in total expenditures from the Trust Funds Facts on Medicare Spending and Financing. Further, CMS reports validating $493.68 million in recoverable mistaken conditional payments, while returning $98.68 million dollars to the Medicare Trust Funds in 2018 as a direct result of its recovery program activities, on top of $131.78 million in 2017, MSPRC Commercial Repayment Center in Fiscal Year 2018. Collection activity by the United States Department of Treasury (DOT) on Medicare conditional payments is reportedly increasing in 2019, plus, over the past 15 months, the United States Department of Justice reached six-figure settlements with two Plaintiff’s law firms for failure to repay Medicare conditional payments.
The purpose of Medicare’s recovery process involving a Non-Group Health Plan (NGHP) is to ensure Medicare does not pay for items or services to the extent that payment has been, or may reasonably be expected to be, made through a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity, Medicares Recovery Process.
Two entities handle the initial CMS NGHP recovery process. The Benefits Coordination and Recovery Center (BCRC), having notice of occurrence and the Applicable Plan demonstrating responsibility through settlement, judgment, award, or other payment, is charged with identifying Medicare conditional payments and seeking repayment from the beneficiary, their attorney or the Plan by issuing a recovery demand letter. Similarly, as of October 2015, the Commercial Recovery Contractor (CRC) identifies conditional payments and seeks repayment where the Plan (or its Responsible Reporting Entity) reports under Section 111 of Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) acceptance of Ongoing Responsibility for Medical (ORM) irrespective of whether there is a settlement, judgment or award. CMS reports CRC issued 39,756 Demand letter packages relating to 44,369 individual beneficiaries, representing $500.54 million in potential mistaken and conditional payments made by the Medicare program during 2018 with $493.68 million confirmed as correctly identified mistaken and conditional payments to be recovered. CRC focuses on very specific types of occurrences—those where an Applicable Plan has or can be reasonably expected to have primary payment responsibility for treatment for a given illness or injury prior to or in addition to a settlement, judgment, award, or other payment to the beneficiary. Section 201 of the Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act) granted Applicable Plans formal administrative appeals rights including the existence or amount of the debt.
Failure to respond to the demand letter within the specified time frame may result in the initiation of additional recovery procedures, ultimately including a referral of the debt to the Department of Justice for legal action and/or the Department of Treasury for further collection actions. However, if a NGHP requests an appeal, the debt will not be referred to the Department of Treasury while the appeal is being processed.
The DOT has authority to recover Medicare debts, 31 U.S.C. Section 3711; 31 C.F.R. Parts 285.1-13, 900-904, Treasury Offset Program. The BCRC or CRC provides the delinquency notification in an “Intent to Refer (ITR)” letter which explains the debt is being sent to the DOT Offset Program for further collection activities. The ITR letter is sent on day 90 (after the demand letter) if full payment or Valid Documented Defense is not received. If full repayment or Valid Documented Defense is not received within 60 days of the ITR letter, the debt is referred to Treasury to initiate debt collection. There are several collections contractors including CBEGroup, Coast Professional, Continental Service Group, Performant Recover, Pioneer, and Transworld Systems.
The debtor could advance a valid, good faith dispute to the Treasury’s collection action. Valid Documented Defenses may include erroneous referral, duplicate primary payment, previous payment, improperly applied payment, relatedness, treatment ended, wrong insurer, wrong address, wrong RRE, benefits exhausted, policy cancelled, appeal pending, or others.
If the collections contractor fails, then, generally, subject to certain program rules and requirements, the Treasury Offset Program (TOP), operated by the DOT Bureau of Fiscal Services, is a fully-automated system that matches a person or business owing past-due debts, like Medicare conditional payments, with money that federal agencies are paying, such as tax refund; and, consequently, when a match happens, TOP intercepts, withholds or offsets federal and state money payments to collect the delinquent debt, TOP Fact Sheet. An alleged debtor can dispute an offset as well by demanding proof of debt, requesting reimbursement and remand to BCRC or CRC, and explaining its position on liability and/or amount of the debt.
CMS may also refer debts to the Department of Justice (DOJ) for legal action if it determines that the required payment or a properly documented defense has not been provided. The Federal government is authorized to collect double damages from any party that is responsible for payment but fails to do so.
When debt is referred to either Departments of Treasury or Justice, it’s important to already have a process in place to diligently and promptly resolve the matter. The process could include working with your legal team, documenting compliance with Medicare Secondary Payer Act, settlement or release papers showing payment logistics, CMS recovery case history with important dates, requesting remand to CMS where BCRC or CRC undertakes a redetermination and/or reconsideration, making full payment with a plan to appeal, and written correspondence regarding resolution the matter.
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