On February 27, 2015, CMS published a final rule, effective April 28, 2015, to establish a formal, multilevel administrative appeals process for applicable plans against which Medicare Secondary Payer (MSP) recovery demands are issued.  Prior to the final rule, an applicable plan did not have formal administrative appeal rights or judicial review if a MSP recovery demand was issued to the plan.  Instead, CMS’s recovery contractor addressed any dispute raised by an applicable plan.  Pursuant to the final rule, an applicable plan is afforded the formal administrative appeal rights and eventual judicial review as set forth in subpart I of part 405 (i.e., redetermination by contractor, reconsideration by a Qualified Independent Contractor, an ALJ hearing, a review by the DAB Medicare Appeals Council, and eventual judicial review).

The final rule implements provisions from the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act), enacted January 10, 2013, which requires the right of appeal and an accompanying process for liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans when Medicare pursues a MSP recovery claim directly from such laws or plans.  The final rule, among other things, accomplishes the following:

• Defines an “applicable plan” that may be a party to the appeal process to include liability insurance (including self-insurance), no-fault insurance, or a workers’ compensation law or plan;
• Clarifies that the appeal rights are available to the identified debtor and not potential identified debtors.  Therefore, an applicable plan is a party to the appeals process where Medicare is “pursuing recovery directly from the applicable plan,” which means that the applicable plan would be the identified debtor, with a recovery demand letter issued to such plan (or its agent or representative) requiring repayment.  An applicable plan is not a party to the appeals process where it only receives a courtesy copy of a recovery demand letter issued to a beneficiary;
• Explains what constitutes notice of an initial determination for appeal purposes; and
• Requires a CMS contractor to send notice of an applicable plan’s appeal to a beneficiary if an applicable plan requests a redetermination.

In its preamble discussion, CMS further clarified its right to recover from the applicable plan even if the applicable plan has already reimbursed the beneficiary or other party.  CMS also asserted its right to pursue recovery from the beneficiary, the primary payer or any other entity receiving proceeds from the payment by the primary plan.  This rule applies to plans that are parties to initial determinations issued on or after April 28, 2015, where CMS pursues recovery directly from an applicable plan.  The final rule is available here.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.