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Under the Medicare Secondary Payer (MSP) law, first enacted in 1980 and updated many times since then, Medicare may not pay claims when another payment is available or reasonably expected to be available, such as workers’ compensation paid medical care for an industrial injury.

When a primary-payer plan doesn’t or can’t pay “promptly” – say, for instance, when it is contesting liability – Medicare can make a conditional payment on behalf of a beneficiary, for which it can later seek reimbursement from the primary plan. If revise 42 CFR section 405.980 and corresponding manual instructions Medicare pays and then seeks reimbursement, only to be refused, the United States can sue the primary plan (or a medical provider) to recover its payment.

The Centers for Medicare & Medicaid Services (CMS) must protect the fiscal integrity of Medicare trust funds. And the Office of the Inspector General (OIG) is responsible for the oversight of that process.

An OIG audit which took place more than a decade ago determined that CMS had not recovered $332 million of the $416 million of Medicare overpayments that it had identified in audit reports issued during the 30-month period ended March 31, 2009.

And now, a new OIG audit published this summer, reflects that CMS conditional payment collection results remain inadequate, even after a decade of efforts to improve its track record.

OIG verified that CMS collected $120 million of the $498 million in sustained Medicare overpayments identified in HHS-OIG audit reports issued during its audit period. Of this sustained amount, CMS reported that it had collected $272 million (55 percent) and that it had not collected $226 million (45 percent).

In addition, CMS did not take corrective action in response to all of the recommendations made in prior audit report published a decade ago. The Report concluded that the “combination of a substantial balance of uncollected overpayments, inadequate policies and procedures, and unimplemented recommendations increases the risk that CMS will not collect millions of dollars owed to the Medicare Trust funds.” Thus, in this 2022 report, a number of recommendations were again made.

CMS officials gave various reasons for not collecting sustained overpayments, such as provider appeals and CMS/MAC redeterminations of overpayment amounts.

One of the recommendations this year by OIG is for CMS to “revise 42 CFR section 405.980 and corresponding manual instructions” which is an invitation for a rulemaking process that will likely make changes to payer appeals of WCMSA settlement set-aside proposals.

Under this regulation as it is currently written, party may request that a CMS contractor reopen its initial determination or redetermination within 1 year from the date of the initial determination or redetermination for any reason, or within 4 years from the date of the initial determination or redetermination for good cause in accordance with § 405.986. Some industry experts expect that the time frame for appeals is likely to be shortened.

Additionally, CMC announced its intent to solicit applicants for a new Workers’ Compensation Review Contractor (WCRC) that will evaluate workers’ compensation Medicare set-aside arrangement (WCMSA) proposals and project the future medical costs, including prescription drugs, related to the workers’ compensation (WC) injury, illness, or disease that would be otherwise reimbursable by Medicare.