Earlier this month, the Centers for Medicare and Medicaid released an updated MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide (Version 6.0).  Here are the key updates with analysis and practical implications.

Dan Anders

Additional definition of total payment obligation to claimant (TPOC)

Section 6.4 of Volume 3 (Policy Guidance) of the user guide defines TPOC this way:

The TPOC amount refers to the dollar amount of a settlement, judgment, award or other payment in addition to or apart from ORM [ongoing responsibilities for medicals]. A TPOC generally reflects a “one-time” or “lump sum” settlement, judgment, award or other payment intended to resolve or partially resolve a claim. It is the dollar amount of the total payment obligation to, or on behalf of, the injured party in connection with the settlement, judgment, award or other payment. Individual reimbursements paid for specific medical claims submitted to an RRE [responsible reporting entity], paid due the RRE’s ORM for the claim, do not constitute separate TPOC amounts.

The update added an explanation of the TPOC amount computation to this definition:

The computation of the TPOC amount includes, but is not limited to, all Medicare covered and non-covered medical expenses related to the claim(s), indemnity (lost wages, property damages, etc.), attorney fees, set-aside amount (if applicable), payout totals for all annuities rather than cost or present values, settlement advances, lien payments (including repayment of Medicare conditional payments) and amounts forgiven by the carrier/insurer.

CMS’ definition seems to have been largely pulled from the Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide’s definition of total settlement. Its purpose in the Reference Guide is to determine whether a settlement meets CMS MSA review thresholds. While we assume CMS’ intent is to help reporting entities better determine the TPOC amount, adding this computation definition raises some concerns:

• Liens and Medicare conditional payments: In some cases, lien payments, including the Medicare repayment conditional payment amount, is not known at the time of settlement. This is not a problem if the injured worker is repaying Medicare out of the settlement amount. But it may be a problem if the employer or carrier is agreeing to pay Medicare with funds outside of the settlement amount because they may not have a final demand amount prior to settlement. Our solution would be for CMS to clarify that a lien payment, namely a repayment of Medicare conditional payments made directly to Medicare or to a lienholder — Medicaid, for example — is not part of the TPOC computation.
• Amounts forgiven in settlement: Besides repayment of liens, CMS also brings in the term “amounts forgiven” from the WCMSA definition of settlement. While it has never been further defined in the WCMSA Reference Guide and CMS provides no further clarification here, the general understanding is that this refers to the carrier or employer’s waiver of a subrogation lien against a third-party liability settlement. An employer or carrier may waive the subrogation lien for many reasons and may do so without having a firm dollar amount to even determine the “amounts forgiven.”

We see using the amounts forgiven term as a way for CMS to provide settling parties the ability to obtain an MSA approval when the comp case is settling and all or most of the settlement funds are coming from a third-party liability settlement. However, in the mandatory reporting context, amounts forgiven is a specific dollar amount that must reported and, thus, becomes relevant to Medicare conditional payment recovery.

Were the comp carrier to report amounts forgiven in the TPOC amount, CMS and its recovery contractor would assume that the injured worker has received these funds as part of the WC settlement, which is not the case.

These funds are not a payment to the claimant. The injured worker presumably receives payment from the third-party liability settlement and, if he or she was a Medicare beneficiary at the time of that settlement, this will be reported to Medicare.

Requiring the WC carrier to report amounts forgiven in settlement, and then having the liability carrier report the liability settlement, is duplicative and unnecessary to protect Medicare’s interests. We hope CMS reconsiders the use of this terminology in its TPOC computation or clarifies what it means by "amounts forgiven."

Indemnity-only settlements are not reportable

Following its Aug. 13, 2020, webinar on Section 111 reporting, where CMS officials reiterated that indemnity-only settlements are not reportable as TPOC, CMS has now added the following to Section 6.5.1 of the guide, which also incorporates “property damage only” claims:

RREs are not required to report liability insurance (including self-insurance) settlements, judgments, awards or other payments for “property damage only” claims which did not claim and/or release medicals or have the effect of releasing medicals. Similarly, “indemnity-only” settlements, which seek to compensate for non-medical damages, should not be reported. The critical variable to consider is whether or not a settlement releases or has the effect of releasing medicals. If it does, regardless of the allocation (or lack thereof), the settlement must be reported.

This raises the question of whether a prior indemnity-only settlement amount is combined with a later settlement releasing medicals and reported as TPOC. 

As mentioned earlier, CMS’ TPOC computation definition was taken from the WCMSA Reference Guide and applied to the TPOC computation. In doing so, CMS excluded the phrase “prior settlements of the same claim” from the TPOC definition. Based on this exclusion, which is consistent with other guidance in the user guide, we accept that a prior indemnity-only settlement is not reported as TPOC, even when a later settlement releases medicals.

Dan Anders is chief compliance officer at Tower MSA Partners LLC. This entry is republished with permission from the Tower MSP Compliance Blog.