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Medicare Secondary Payer Rules Violation


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If an employer improperly provides an incentive to a Medicare-entitled employee to waive employer-based coverage or otherwise violates the Medicare Secondary Payer rules with respect to that employee and Medicare learns of this, is there any potential adverse consequences to the employee for such violation?

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  • 10 months later...

Chaz, curious if you ever found a clear answer to this and also wanted to bump up in case there was additional insight or expertise from the Board.

We have client that erroneously thought it could kick dependent spouses covered under the large group plan out at age 65 once they qualified for Medicare. Employer did not incent or encourage them to leave--just gave them the boot.  Fortunately, this only happened for two people and has only been going on since the end of 2020.  Their insurer is going to let them reinstate back to the beginning of the plan year (March 1) so they will correct going forward and presumably be able to cover prior claims going back a couple of months but I'm wondering what if anything else they need to do given the past violations.  I assume without doing anything there is a chance CMS could come in and challenge and make the employer pay for any claims Medicare covered since the individuals were kicked off the plan in late 2020.  Fortunately, I think those amounts / claims are pretty limited.  Is there an affirmative obligation on the part of the employer to report this and/or make some corrected reimbursements?  I cannot seem to find much useful guidance.  Thanks.

 

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The penalty for violating the MSP prohibited incentive rules is $5,000 per violation.  CMS takes the position that the MSP rules are violated every time a prohibited offer is made, whether orally or in writing.

Here's a couple materials that may be useful:

https://www.theabdteam.com/blog/medicare-group-health-plans-2/

ABD Office Hours Webinar: Medicare for Employers

Here are the best cites:

42 CFR §411.103 Prohibition against financial and other incentives.
(a) General rule.
An employer or other entity (for example, an insurer) is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in, or to terminate enrollment in, a GHP that is, or would be, primary to Medicare. This prohibition precludes offering to Medicare beneficiaries an alternative to the employer primary plan (for example, coverage of prescription drugs) unless the beneficiary has primary coverage other than Medicare. An example would be primary coverage through his own or a spouse’s employer.
(b) Penalty for violation.
  • (1) Any entity that violates the prohibition of paragraph (a) of this section is subject to a civil money penalty of up to $5,000 for each violation; and
  • (2) The provisions of section 1128A of the Act (other than subsections (a) and (b)) apply to the civil money penalty of up to $5,000 in the same manner as the provisions apply to a penalty or proceeding under section 1128A(a).

CMS MSP Manual
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/msp105c01.pdf

An employer or other entity is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in or to terminate enrollment in a GHP or LGHP that is or would be primary to Medicare. This prohibition precludes the offering of benefits to Medicare beneficiaries that are alternatives to the employer's primary plan (e.g., prescription drugs) unless the beneficiary has primary coverage other than Medicare. An example would be primary plan coverage through his/her own or a spouse's employer. This rule applies even if the payments or benefits are offered to all other individuals who are eligible for coverage under the plan. It is a violation of the Medicare law every time a prohibited offer is made regardless of whether it is oral or in writing. Any entity that violates the prohibition is subject to a civil money penalty of up to $5,000 for each violation.

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Brian,

Thanks very much for this.  Do you have a sense of the current enforcement posture here?  For example, regarding the penalty of "up to $5,000 for each violation," I think we would have a couple of violations but if the company has reversed the action, would CMS likely pursue action?  If it did pursue, how does it decide on the amount to assess?  (In my experience in other areas, it seems often they may not routinely pursue the maximum penalty but not sure about these issues.)  Also, is there any sort of voluntary correction type program where one can "self-correct" or bring to the attention of CMS and expect to come out with a significantly lower penalty. 

In short, what do employers typically do that know they have a violation--obviously we've stopped it and are attempting to correct mostly but is there any duty / benefit to bringing this to the regulator's attention or should they just go forward and sin no more but realize their is some potential exposure?

Many thanks.

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The only enforcement activity I've seen in this area are demand letters from CMS stating that the employer must pay back Medicare for all claim amounts where Medicare incorrectly paid as primary.  I believe they get this information from the data match program.  Where the employer fails to repay, the Treasury will send a letter to follow up on the unpaid debt and threaten collections, interest, penalties, costs, etc. on top of it.

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This is all good stuff but note that my question involved whether there was any possible adverse consequences to the EMPLOYEE if the employer violated the MSP rules.  I never did find an answer to that question,

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