Medicare mandate raises liability worries

A government effort to ensure that Medicare does not pay expenses for which casualty insurers and self-insured employers are primarily responsible could hamper the settlement of liability claims, observers warn.

The government's effort, which includes a mandate to report information to Medicare, also could increase litigation, said Roy Franco, director for risk management strategies at Pleasanton, Calif.-based Safeway Inc.

And it comes as risk managers are likely to face more liability claims filed by Medicare beneficiaries because of an aging population. Medicare compliance issues affect 15% of Safeway's open liability claims, Mr. Franco said.

Mr. Franco also serves as steering committee co-chair for a recently formed Medicare Advocacy Recovery Coalition, which met last week with the Centers for Medicare & Medicaid Services.

The U.S. administrative agency is eager to help resolve some of the potential problems that policyholders, insurers, self-insureds, attorneys, third-party administrators and others in the liability industry could face as CMS implements the claims data reporting mandate that goes into effect on July 1, 2009, Mr. Franco said.

Precisely what payers will have to do to be in compliance still is under development, Mr. Franco said.

But legislation may become necessary and its makeup would depend on CMS' ability to address payer concerns, said Katie A. Fox, manager of a Medicare secondary payer compliance unit of Franklin, Tenn.-based MedInsights Inc.

MedInsights is a managed care subsidiary of GAB Robins North America Inc. Ms. Fox also is a steering committee co-chair for MARC, which has periodic meetings planned to provide CMS with input on the mandate.

The reporting mandate was contained in the Medicare, Medicaid and SCHIP Extension Act of 2007 that President Bush signed a year ago. Among other measures, it aims to help Medicare collect medical expense reimbursements.

The law is part of a congressional attempt to ensure the government saves money in cases where Medicare is supposed to be a secondary payer for its beneficiaries, after health plans, liability insurers and self-insured employers pay their primary share of claims.

Data that payers are to provide will enable Medicare to review all liability and workers compensation settlements, judgments and awards owed to Medicare beneficiaries.

The reporting mandate potentially poses several problems for settling liability claims, but many employers remain unaware of it, Mr. Franco said.

One potential problem for payers stems from a requirement that anyone paying a general liability claim must report the activity to Medicare if the claimant is a Medicare beneficiary.

Verifying that a liability claimant also is a Medicare beneficiary would require obtaining their Social Security number, Mr. Franco said.

Managing liability claims already can be an adversarial undertaking, Mr. Franco added. Asking for a Social Security number could cause additional friction that would undermine an established risk management practice of settling some claims quickly and amicably before attorneys are called.

"For the claims examiner to ask as (one of) their first questions, `what is your Social Security number?' tends to, unfortunately, push the claim in a direction we don't necessarily want to push at that time," Mr. Franco said.

One hope is that CMS will provide a work-around or help payers collect Social Security numbers, birth dates and other necessary information from Medicare beneficiaries, said Marcia Nigro, assistant vp and complex claim consultant in Philadelphia for Sedgwick Claims Management Services Inc.

"Elderly people are told by many organizations, `You never give your Social Security number out,"' Ms. Nigro said. "It's going to be hard to crack that nut. That is one of the major issues we are all going to have."

Sedgwick also is a MARC participant.

Another concern is that Medicare does not recognize state laws apportioning liability among claimants and defendants who share fault, Ms. Fox said.

Medicare wants 100% reimbursement from claims payers regardless of contributory negligence laws in some states, Ms. Fox said, and one MARC goal is to encourage Medicare to follow states' contributory negligence laws.

While group health and workers comp payers must report information under the new Medicare mandate, doing so for general liability claims is likely to present additional complications, several sources said.

Under group health plans and workers comp systems, payers typically pay a claim immediately, before Medicare pays. But because general liability claims regularly require determining fault, which can be a time-consuming process, Medicare is more likely to pay first and then require reimbursement, sources said.

Yet Medicare cannot provide payers with a final dollar amount they are responsible for until all necessary medical treatment has been provided. That could leave payers that want to settle a claim quickly not knowing how much they may have to reimburse to Medicare, Mr. Franco said.

Additionally, to cover its medical payouts, Medicare could require reimbursements totaling the entire amount an insurer or self-insurer would otherwise provide to a beneficiary.

Mr. Franco said that could mean claimants would not receive money because it all would go to pay Medicare instead. Those claimants would be less likely to settle and, instead, pursue litigation in hopes of obtaining dollars for themselves, he said.

"Ultimately, it could be a significant cost driver," Ms. Fox said.

Apart from claims-settlement issues, self-insured employers should assure all of their contracted third-party administrators are positioned to provide Medicare with required information, said Darrell Brown, workers comp practice lead for Sedgwick in Long Beach, Calif.

"Employers are concerned because the penalty for failure to report is $1,000 per day per claim," Mr. Brown said. "You have to get the reporting piece of it right because the penalties are pretty steep."

So far, though, the government has focused more on smoothing the reporting mandate's implementation than on penalizing payers, Mr. Franco said. But if the process is proving complex for sophisticated payers, beneficiaries are even more likely to be caught in the middle, he added.