Medicare has reduced the threshold for when a physical trauma-based liability settlement is large enough that the beneficiary needs to report it and repay conditional payments. On November 15, 2016, the Centers for Medicare & Medicaid Services (“CMS”) issued an alert which decreased the current reporting threshold from $1,000 to $750. The threshold decrease is a result of the mandatory annual review required by Section 202 of the Strengthening Medicare and Repaying Tax Payers Act of 2012 (“SMART Act”) to determine at what level do the costs related to collecting data and determining the amount of Medicare’s recovery claim outweigh the benefits of recovering the conditional payments.
The new threshold is effective as of January 01, 2017 for cases where a recovery demand has not yet been issued. It is important to note this threshold does not apply to settlements for alleged ingestion, implantation, or exposure cases. This means that physical trauma-based liability settlements of $750 or less do not need to be reported, nor will the beneficiary need to repay Medicare’s conditional payments.
CMS determined the average cost of collection for Non-Group Health Plan (NGHP) cases is $368.75 per case. NGHP cases are: liability insurance (including self-insured liability), no-fault insurance, and workers’ compensation. To arrive at a threshold, CMS compared the average cost of collection per case to the average liability insurance demand amount per settlement range. Among liability insurance cases, the average cost of collection most closely aligns with settlements of $750 and below, which have an average final demand amount of $384.25.
Among workers’ compensation and no-fault insurance cases, the settlement ranges of $750 and less result in average demand amounts of $510.03 and $573.27 respectively. These ranges most closely align with the average cost of collection per case. Based on these findings, CMS revised their reporting thresholds.
The SMART Act was designed to save Medicare money. Part of the expected savings is to come from an annual review meant to ensure that the federal government does not spend more money pursuing a reimbursement amount than the cost of that recovery effort. The wise personal injury attorney can co-op this purpose and save his clients who receive de minimis recoveries from the hassle of dealing with the Medicare conditional payment issue.
The alert is available on the CMS website by click here.