GAO Report: Despite Challenges, Medicare Secondary Payer Rules Saved Program $124 Million Over Three-Year Period

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The Government Accountability Office (GAO) recently released a report analyzing the impact of a provision of the Medicare, Medicaid, SCHIP Extension Act of 2007 that imposes a mandatory reporting requirement upon certain insurers. The law, found at 42 U.S.C. § 1395y(b)(7)-(8), applies to situations in which Medicare’s payment obligation is secondary to another payer’s obligation. In these situations, CMS is not always notified that another payer is primary, and, as a result, Medicare sometimes covers benefits it is not obligated to pay. To minimize Medicare Secondary Payer (MSP) losses, the law obligates certain health plans to alert CMS once settlements have been reached with beneficiaries – to avoid having Medicare make payments and/or identify instances in which an attempt should be made to recover payments already made. Payers that fail to comply with the mandatory reporting requirements, which are still being phased in, are subject to fines.

The GAO report looked at the initial implementation of the law’s mandatory reporting requirement in the specific context of non-group health plans (NGHPs)—such as auto or other liability insurance, no-fault insurance, and workers’ compensation plans—and the resulting savings to Medicare. It also identified challenges to the implementation of the reporting requirement going forward and recommended steps to address them. With respect to increased efficiencies, GAO found that the reporting requirement, while not yet fully phased-in, resulted in $124 million in savings from 2008 through 2011 (the Congressional Budget Office had estimated that the reporting scheme would save Medicare $1.1 billion over a ten-year period). The report also noted that the law’s actual impact on Medicare “could take years to determine” because of delays between the time when CMS is notified of an MSP situation and any recovery, and because not all MSP situations lead to recoveries.

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