CMS proposes penalties for MSP reporting violations



Yesterday, the Centers for Medicare & Medicaid Services (CMS) published a proposed regulation in the Federal Register concerning the imposition of civil monetary penalties (CMPs) for failure to comply with reporting obligations under the Medicare Secondary Payer (MSP) laws. 85 Fed. Reg. 8793 (Feb. 18, 2020). As proposed, the rule would be prospective, applying only to violations that occur after the effective date of the proposed regulation. Even so, the proposed penalties represent a significant potential financial risk to responsible reporting entities (RREs) under the MSP laws. As such, RREs should review their current MSP reporting processes and procedures to ensure compliance with CMS requirements, work to address any gaps in processes or system issues prior to the effective date of the final regulation, and build in controls to monitor for non-compliance on a proactive basis.


The MSP laws generally prohibit Medicare from making payment to a provider if payment has been or can reasonably be expected to be made by a group health plan (GHP) or a non-group health plan (NGHP), the latter of which includes workers’ compensation, liability insurance, self-insurance and no fault insurance plans. In 2007, Congress enacted MSP reporting requirements designed to (1) prevent Medicare from making primary payments when a GHP or NGHP is responsible to pay primary, and (2) identify and recover conditional payments that Medicare was not responsible to pay. Pursuant to this law, RREs must report to CMS on a quarterly basis information relating to GHP and NGHP coverage of Medicare beneficiaries. (The specific information to be transmitted to CMS is set forth in the agency’s NGHP and GHP User Guides.)

Statutory authority for CMPs

In addition to creating these reporting requirements, Congress authorized the imposition of CMPs for failure to meet them. Under the current law, GHPs that fail to comply with the reporting requirements “shall” be subject to a CMP of “$1,000 for each day of noncompliance for each individual for which the information…should have been submitted.” By contrast, NGHPs “may” be subject to CMPs of “up to” a $1,000 per day. Until now, CMS has not proposed regulations to implement these statutory CMPs.

Proposed rule

Highlights of the proposed rule include the following:

  • Grounds for imposing CMPs. CMPs generally would be imposed in three situations. First, CMPs could be imposed where the RRE fails to report any Medicare beneficiary record within the required time frame. In the GHP context, this would be within one year from the effective date of GHP coverage or the Medicare beneficiary’s entitlement date, whichever is later (GHP CMP Trigger Date). By contrast, in the NGHP context, this would be within one year from the date of the settlement, judgment, award or other payment. Second, CMPs could be imposed where the RRE submits a quarterly MSP report that exceeds certain error tolerance thresholds established by CMS in any four of eight consecutive reporting periods. Third, CMPs could be imposed where the RRE contradicts its prior reporting during the demand letter recovery process.
  • Limited exceptions. Consistent with the statute, CMS views CMPs in the GHP context as mandatory. Moreover, the agency has indicated that simply because Medicare was able to correctly coordinate benefits is no defense to an RRE’s failure to file timely reports in either the GHP or NGHP contexts. CMS would not assess CMPs in the NGHP context where, after multiple attempts, an NGHP is unable to obtain necessary information from the Medicare beneficiary (or her representative). Exceptions also would allow for implementation of specific changes in CMS reporting policy or procedures without penalty for set periods of time.
  • Amount of CMPs. The amount of the CMP in question would vary depending on (1) the ground for imposing the CMP, and (2) whether the plan is a GHP or NGHP. For example, if a GHP RRE fails to report a required Medicare beneficiary record by the GHP CMP Trigger Date, the penalty would be $1,000 for each calendar day of noncompliance for each individual for whom the required information should have been submitted, as counted from the day after the CMP Trigger Date, up to a maximum penalty of $365,000 per year (with both the $1,000 and $365,000 amounts adjusted over time for inflation). In the NGHP context, the amount of the per-day penalty would be discretionary but would be capped at the same maximum amount as are CMPs in the GHP context.
  • Prospective application. As noted above, under the proposed rule, CMS would evaluate compliance “based only upon files submitted by the RRE on or after the effective date of any final rule.”
  • Statute of limitations. CMS would apply a five-year statute of limitations that would commence when CMS identifies the non-compliance. Because such identification could occur many years after the file submission, this creates a long tail for potential CMPs.
  • Notice process. CMS anticipates that, prior to sending a formal notice, the agency will engage in an informal “pre-notice” process in order to give the RRE an opportunity to present mitigating evidence in advance of a formal CMP notice being issued. After this informal process, RREs subject to a CMP would receive formal written notice of the proposed penalty containing the reason for the assessment, the amount thereof, and the entity’s appeal rights. This would include the RRE’s right to (1) request a hearing with an administrative law judge (ALJ), (2) appeal an ALJ decision to the US Department of Health and Human Services’ Departmental Appeals Board, and (3) pursue the matter in federal court (subject to jurisdictional considerations, such as amount in controversy thresholds being met).

Comments on the proposed rule are due on or before April 20, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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