A SMART Change for Tort Defendants?

This post was written by Michael Mandell and Eric J. Buhr.

President Obama recently signed the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act (commonly referred to as the SMART Act) to alleviate some of the confusion surrounding the Medicare Secondary Payer Act (MSP), which allows Medicare to seek reimbursement, and potential penalties, from “responsible” parties. These “responsible” parties include tort defendants, such as drug and medical device manufacturers, who become primary payers once they settle or have a judgment awarded against them in a case involving a Medicare beneficiary. The SMART Act will, among other things, introduce a three-year statute of limitations for which the government may bring an action for reimbursement and create a minimum settlement/judgment threshold below which the government will not seek reimbursement.

One of the most significant aspects of the SMART Act is that it creates a new process for obtaining final Medicare lien demands, which is meant to give some closure to defendants and plaintiffs by providing them with Medicare’s final lien amount prior to settlement. Under current practice, Medicare only issues a final lien demand after there is a settlement, judgment, award or other payment resolving the Medicare beneficiary’s liability claim against a tortfeasor. This leaves parties uncertain over what Medicare’s piece of the settlement will be and in turn hinders the settlement process. Under the SMART Act, Medicare must now create a website where the claimant or applicable plan can obtain Medicare’s “final conditional reimbursement amount” prior to settlement. Armed with this information, parties will be able to make more informed settlement decisions.

Although the Act will remove some of the ambiguity surrounding Medicare’s lien demands, the multistep process for acquiring Medicare’s final lien amount may prove too rigid. To satisfy the requirements for a finalized lien demand, individuals must pay careful attention to the SMART Act’s numerous deadlines.

In short, the process for obtaining Medicare’s final claim for reimbursement under the Act is as follows:

  1. A Medicare beneficiary/claimant or applicable plan is required to provide Medicare at least 120 days’ notice of a reasonably expected settlement, judgment or award.
  2. Medicare will then have 65 days from receipt of this notice to provide the Medicare reimbursement amount. In exceptional circumstances this period can be extended to 95 days.
  3. The parties can then rely on the reimbursement amount as a final amount so long as (i) settlement occurs within the notified date of the expected resolution (provided in part 1) and (ii) the reimbursement amount statement is last downloaded within three business days of the settlement.

The consequences of failing to adhere to each of the above deadlines could result in Medicare enforcing a higher lien demand post-settlement. For instance, downloading the reimbursement amount statement four business days before settlement would result in a non-final statement. The same result would occur if one settled the case outside of the expected settlement date originally specified to Medicare. Therefore, defendants attempting to settle should remain vigilant of the above deadlines to ensure reliance on Medicare’s lien demands are warranted.

What’s Next? 

The Secretary will establish regulations for the right to appeal and an appeals process for primary plans that oppose Medicare’s collection actions. Stay tuned for what these provisions will be.

Effective 9 months from enactment

The Secretary will annually create a minimum settlement or judgment threshold below which the government will not seek reimbursement or require reporting.

Effective January 1, 2014

Medicare will issue regulations providing an alternative form of identification for beneficiaries, which may eliminate the need for responsible reporting entities to report to Medicare a beneficiary’s social security number or health insurance claim number.

Effective within 18 months from enactment (with possibility of 12 month extension)

The SMART Act has many more implications as well; stay tuned tomorrow for a more detailed analysis of how this new legislation impacts Medicare Secondary Payer law and the opportunities and issues it creates in contexts besides final lien demand resolution.