J1-6 MSPRC Interest through Misc 12012010 DRAFT.pdf

Section J1.1

Attachment J-1

INTEREST ON MSP RECOVERY CLAIMS

Section 1862(b)(2)(B)(i) of the Social Security Act (the Act) and 42 CFR 411.24(m) provide express authority to assess interest on MSP debts. Interest is calculated on MSP debts using the method applicable to non-MSP Medicare overpayments and underpayments as stated in 42 CFR. 405.378. For Medicare overpayments and underpayments and MSP debts, interest is calculated in full thirty (30)-day periods.

Interest instructions for Medicare overpayments and underpayments are found in Chapter

4, Pub.100-06, Medicare Financial Management Manual.

MSP Debt Interest Calculation Methodology With respect to the recovery of payments for items and services furnished before October

31, 1994, CMS charges interest, exercising its common law authority (see 42 CFR

411.24(m)(1).

With respect to the recovery of payments for items and services furnished on or after

October 31, 1994, CMS charges interest in accordance with section 1862(b)(2)(B)(i) of the Act (see 42 CFR 411.24(m)(2)). The method for calculating interest is set forth in 42

CFR 405.378. The interest rate on overpayments is determined in accordance with regulations promulgated by the Secretary of the Treasury and is the higher of the private consumer rate or the current value of funds rate prevailing on the date the recovery demand letter is issued.

Interest is computed for both delinquent payments and installment payments as simple interest using a 360-day year. The U.S. Postal Service postmark date (or the date of physical receipt in the MSPRC’s mail area for a commercial shipper) is used to determine the receipt date of the payment.

Interest is calculated for a thirty (30)-day period as follows:

1. Principal x Prevailing Interest Rate + Interest for Year

2. Interest for Year ÷ twelve (12) = thirty (30) day Interest

Effective October 1, 2004, 42 CFR 405.378 and 42 CFR 411.24 were amended to change how interest is calculated on MSP recoveries. For debts established before October 1, 2004, interest on delinquent debt is due and payable for the entire thirty (30)-day period as of the first day of each thirty (30)-day period. For debts established on or after

October 1, 2004, interest on delinquent debts is due and payable as of the end of each thirty (30)-day period.

MSP Debt Interest Accrual Interest “accrues” from the date of the recovery demand letter but is not “assessed” unless/until the debt becomes delinquent, (i.e., if the first demand letter provided for sixty

(60) days for the debtor to repay the debt and was dated August 31, 2004, the entire debt will become delinquent on 10/30/04 or sixty-one (61) days [one (1) day delinquent] after the date of the demand if it remains owing.)

The general rule is that interest will accrue from the date the debt is established. MSP debts are routinely established as of the date of the initial recovery demand letter. Interest is owed when the debt is not fully resolved/paid within the time period specified in the recovery demand letter (e.g., sixty (60) days). If payment is received within the time-frame specified in the recovery demand letter, no interest will be due or assessed. If payment is not received when due, interest is assessed on the outstanding principal amount from the date of the initial recovery demand letter for each full thirty (30)-day period.

Note: The date of the recovery demand letter (not the day after) is the first day of the first 30-day period.

Examples:

MSP Debt Established Prior to 10/01/2004 –Recovery Demand Letter Specified that

Payment was due within 60 Days. On 08/31/2004, the contractor issues a recovery demand letter establishing an MSP-based debt for $10,000 and stating that interest will be charged if payment in full is not made within 60 days. Payment is not remitted until

11/04/2004 (65 days after the date of the recovery demand letter). Interest has accrued on the $10,000 for three 30-day periods: one for the first 30 days, one for the period of time between days 31-60, and one for the period of time between days 61-65 (because interest is due and payable for the full 30-day period as of the first day of that period).

MSP Debt Established Prior to 10/01/2004 – Example of Interest Accrual –

Recovery Demand Letter Specified that Payment was Due Within 30 Days. On

08/31/2004, the contractor issues a recovery demand letter establishing an MSP-based debt for $10,000 and stating that interest will be charged if payment in full is not made within 30 days. Payment is not remitted until 10/03/2004 (33 days after the date of the recovery demand letter). Interest has accrued on the $10,000 for two 30-day periods: one for the first 30 days, and one for the period of time between days 31-60 (because interest is due and payable for the full 30-day period as of the first day of that period).

MSP Debt Established On or After 10/01/2004 –Recovery Demand Letter Specified that Payment was due within 60 Days. On 10/31/2004, the contractor issues a recovery demand letter establishing an MSP-based debt for $10,000 and stating that interest will be charged if payment in full is not made within 60 days. Payment is not remitted until

01/04/2005 (65 days after the date of the recovery demand letter). Since only two full 30-day periods have passed, interest has accrued on the $10,000 for two 30-day periods.

MSP Debt Established On or After 10/01/2004 – Example of Interest Accrual –

Recovery Demand Letter Specified that Payment was Due Within 30 Days. On

10/01/2004, the contractor issues a recovery demand letter establishing an MSP-based debt for $10,000 and stating that interest will be charged if payment in full is not made within 30 days. Payment is not remitted until 11/03/2004 (33 days after the date of the recovery demand letter). Since only one full 30-day period has passed, interest has accrued on the $10,000 for one 30-day period.

MSP Debt Interest Accrual on Partial Payments For situations where partial payment is received on a debt with outstanding interest --

Payment is normally credited to interest first, principal (HI first, then SMI) second, leaving an outstanding amount of principal due (or in some situations, leaving both principal and interest due if the partial payment is insufficient to satisfy the outstanding interest amount).

For debts established before 10/01/04, interest for the entire 30-day period in which the partial payment was received is required to be accrued and posted before application of the partial payment. Consequently, further interest/any additional interest on the outstanding principal amount for an MSP debt established before 10/1/04 would be calculated starting with the first day of the next 30-day period following receipt of the check.

Example: Debt established 8/31/04 for $500 and a partial payment of $200 dollars was received (post marked) 11/1/04. Calculate and post interest specific to 3 30-day periods (63 days from date of demand equals 3 interest periods).

Assuming the interest equaled $5 for each 30-day periods, $15 would be applied to interest and $185 would be applied to principal. The remaining outstanding principal of $315 would continue to accrue interest. Interest for an additional prospective 30-day period for the $315 would be due on day 91 (the first day of a new 30-day period as interest is due and payable for the full 30-day period as of the first day of each period).

For debts established on or after 10/1/04 where a partial payment is received midway through the 30-day period, interest on the debt will not have accrued up to the date of payment, but only through the end of the prior 30-day period.

Consequently, further interest/additional interest on the outstanding principal amount for an MSP debt established on or after 10/1/04 would be calculated on the principal amount outstanding as of the end of the 30-day period in which the partial payment was received and would be calculated from the first day of the

30-day period in which the partial payment was received.

Example: Debt established 10/01/04 for $500 and a partial payment of $200 dollars was received (post marked) 12/1/04. Calculate and post interest specific to 2 full 30-day periods (62 days from date of demand equals 2 full interest periods). Assuming the interest equaled $5 for each 30-day periods, $10 would be applied to interest and $190 would be applied to principal. The remaining outstanding principal of $310 would continue to accrue interest. Interest for an additional retrospective 30-day period for the $310 would be due on day 91 (the day after the end of a current 30-day period, as additional interest is due only after each full 30-day period for that part of the principal that remains unresolved).

MSP Debt Interest Assessment Under the regulations for calculating interest, as effective for MSP debts established on or after October 1, 2004, interest is assessed for each full 30-day period when payment is not made in full (both principal and interest) and continues to be assessed for each full

30-day period on any portion of the debt that remains outstanding. This change in the manner in which interest is calculated applies to all MSP debts, both GHP-based debt and non-GHP-based debt, regardless of who is the debtor. Interest on MSP debts established prior to October 1, 2004 will continue to be assessed under the former method (interest is due and payable as of the first day of each 30-day period for that full 30-day period) until recovered in full (Note: “interest only” debt does not accrue interest).

Additional Rules with Regard to the Assessment and Collection of

Interest for MSP-based Debts Interest must be charged on all MSP debts except: 1) GHP-based debt where the beneficiary is the debtor, and 2) debt where the “current debtor,” as that term is defined in section 60.2 of Pub. 100-5, Chapter 7, is a Federal entity. To implement this requirement, the MSPRC shall identify all outstanding debts where a Federal entity is the current debtor. Once identified, the MSPRC shall make a downward adjustment for all accrued interest previously reported and associated with these debts.

NOTE: The rule applies only when the current debtor is the Federal entity. It does not apply in the rare circumstance where the employer is a Federal entity:

and the current debtor is the insurer or TPA.

interest charged is simple interest, not compound interest. The CMS does not charge interest on any outstanding interest. Interest accrues only on unpaid principal amounts.

when compromising an MSP debt, CMS’ primary concern is protection of the

Trust Funds. When CMS compromises a debt, the policy is to compromise interest first and principal second; otherwise, compromises would often be of little or no benefit to the Trust Funds. The only exception to this policy would be if a compromise agreement specifically allocates the amount to be repaid in some other manner. The amount compromised is written off closed as bad debt. Two examples of the correct application of payment received from the debtor when

CMS has notified the contractor of a compromise agreement include:

o Assume there is an AR with principal due of $1,000, interest due of $200 as of the date of receipt of payment, and CMS has agreed to compromise for $700. When the payment of $700 is received, the end result must be:

$200 interest written off closed as bad debt, $300 principal written off closed as bad debt, and the $700 payment applied to principal.

o Assume there is an AR with principal due of $2,000, interest due of

$1,000 as of the date of receipt of payment, and CMS has agreed to compromise for $2,200. When the payment of $2,200 is received, the end result must be: $800 interest written off closed as bad debt, $200 of the payment applied to interest, and $2,000 of the payment applied to principal.

As long as the agreed upon compromise amount is paid within the time frame specified by the CMS MSPRC PO, any interest accrued after the date of the compromise agreement is written off closed as bad debt.

Notes: 1) The MSPRC may not take write-off closed actions for the compromised

(“forgiven”) portions of a debt until payment for the remaining portion of the debt has been received; 2) The MSPRC shall maintain the compromise instructions from CMS to support the associated write-off closed action(s) for principal and/or interest; and 3) The

MSPRC will be notified by CMS when Treasury has compromised a debt and instructed as to how the compromise portion of the debt shall be shown on the financial statements.

Where the principal amount of the debt is adjusted downward due to a valid documented defense or a waiver of recovery under § 1870 of the Act, the interest amount must be recalculated based upon the remaining principal. (Decisions for waiver of recovery under § 1870 of the Act are decisions with regard to the principal amount of the debt. For any amount of principal waived under § 1870, the associated interest ceases to exist and must be adjusted downward accordingly.)

Where the MSPRC is informed by CMS that CMS has waived some or all of the interest on a particular debt, the MSPRC shall perform an adjustment for the amount of the waived interest before applying any payment. A waiver of interest is recorded as an adjustment on line 5(a). (Note: Use of line 5(h) is limited to waiver actions under § 1870 or § 1862 of the Act).

Waiver of interest requests should be rare. If such a request is received, the request must state the basis for the request. When this information is received, MSPRC shall forward the request to the CMS MSPRC PO along with the applicable case file.

Where a beneficiary establishes that he/she did not receive settlement/ judgment/award funds until after the issuance of the recovery demand letter, no interest is due until sixty (60) days from his/her receipt of such funds. Receipt of such funds by the beneficiary or his/her representative constitutes receipt by the beneficiary. In such situations, the MSPRC shall adjust off any interest showing as owed within its financial tracking systems for the period prior to sixty (60) days from receipt of the funds. Such an adjustment is not a waiver of interest and shall not be treated as a waiver of interest and forwarded to CMS.

Section J1.2

MSP DEBT WRITE-OFF PROCEDURES

General The MSPRC has primary responsibility for collecting all MSP debts and shall pursue recovery of all accounts receivable (AR) to the fullest extent possible, regardless of the identity of the debtor. MSPRC shall follow all financial reporting requirements contained in Pub. 100-6, Chapter 5.

Reclassification to Currently Not Collectible (CNC) The MSPRC shall follow instructions regarding the identification, definition and recommendation for CNC reclassifications contained in Pub.100-6, Chapter 5, Sections

310 and 400 (exhibit 20).

Write-Off Closed for MSP AR

Identification of MSP Write-Off Closed Accounts

Generally, the MSPRC may recommend write-off closed on debt which is being reported as part of its ending AR balance. ARs that have been referred to another location, without transfer, remain the responsibility of the contractor (i.e., referred to Treasury for cross-servicing).

Note: These instructions apply only to established ARs (e.g., a recovery demand letter has been issued). They shall not be used to close MSP liability/no-fault/workers’ compensation leads where no settlement, judgment or award exists and no recovery demand has been issued.

Write-off closed Definition

The term, write-off closed, refers to an AR on which collection activity and servicing of the debt have been terminated. The MSPRC shall maintain records of the debts written off as “closed.” However, the debts are not to be used for future offset or interest accruals.

Bases for Termination of Collection

Title 42 CFR 401.621 sets forth several bases for the termination of collection action on debts. The criteria set forth in this instruction for write-off closed are based upon CMS’ consideration of a combination of the bases set forth in this regulation rather than any single basis. In some situations, an AR could be written off as closed as of six (6) years from the original demand date solely based upon the statute of limitations for initiating litigation. In other situations, this would not be true because the statute may have been suspended for some period or started a new due to a particular event, but CMS may have still determined that write-off as closed is appropriate because of the likelihood of recovery and/or the cost of recovery, age, or the application of some other factor. In other instances, CMS may determine that collection action beyond six (6) years is appropriate, in part, due to the governments offset authority.

http://www.cms.hhs.gov/regulations

Attachment J-1

Criteria for MSP-Based Debts to Qualify for Write-Off Closed

In accordance with the Debt Collection Improvement Act of 1996 (DCIA), MSP AR which are 180 days delinquent must be referred to the Department’s Program Support

Center (PSC) for cross-servicing, which includes referral to the Treasury Offset Program.

No debt shall be recommended for write off closed without having first been referred for cross-servicing and subsequently returned to agency (CMS) by Treasury, unless one of the exceptions set forth below exists. Regardless of the existence of an exception, an approval for write off closed will not be granted in all instances.

With the above limitations, debts which can be recommended for write off closed without having first been referred to Treasury for cross-servicing are:

1. Debt less than $25 (principal and interest combined);

2. Debt in which the debtor is deceased. Prior to recommending a write-off closed action the MSPRC shall determine if the estate has been closed, when the beneficiary is the actual debtor;

3. Debt equaling $100 or less (principal and interest) in which there is no Tax

Identification Number (TIN) and development for the TIN has been unsuccessful;

4. Debt discharged/forgiven by the bankruptcy court is to be recommended for write off closed.

Note: Debts excluded from cross-servicing do not qualify for write off closed without

CMS approval.

Additional Instructions Regarding Write-Off Closed Recommendations and Debts

Excluded from Referral to Treasury

Litigation, CMS Identified Exclusion: Debtors currently excluded from consideration for write-off closed due to litigation in which the Department of Health and Human

Services/CMS is a party or debts excluded due to a “CMS Identified Exclusion” will be communicated to the MSPRC from CMS.

Pending Bankruptcy: Debts involved in a pending bankruptcy cannot be recommended or approved for write-off closed. If there are questions about the documentation regarding discharge, the MSRPC shall consult CMS.

MSP Beneficiary Debt Under an Appeal: Before recommending a beneficiary debt for write-off be closed, the MSPRC shall follow appropriate debt referral procedures (see

IOM Chapter 8). In the event the debt is actively being appealed, the MSPRC shall respond to the appeal. After the appeal has been completed, if there remains a balance owing, the MSPRC shall refer the debt to Treasury for cross-servicing after issuance of a proper “intent to refer” letter.

Note: A debt may not be recommended as write-off closed if the amount recommended for write-off is less than the full amount of an outstanding debt.

Attachment J-1

Deliverable Report Documenting the Recommended Debts to be Written-Off Closed

The MSPRC shall submit a report to document debts recommended for write-off closed that will detail the reasons and situations which are prompting the request for write-off closed actions.

The report will be part of the required deliverables and will be submitted to the CMS

MSPRC PO in the timeframe specified on the deliverables listing.

Approval and Additional Acknowledgment of Write-Off Closed Debts and

Recommendations

1. The PO will provide a written decision to the MSPRC upon review of the write-off closed recommendations.

2. The MSPRC shall take appropriate actions necessary to reflect the write-off closed approvals within their AR tracking system(s).

3. In the event the PO does not approve a recommendation for write-off closed, the

MSPRC shall continue collection efforts and maintain the AR on its tracking system.

4. The PO may also supply the MSPRC additionally identified debts to be written off closed. These identified debts may result from Treasury notifications, conclusions to pending litigations, approval of compromise requests, bankruptcy discharges, etc.

The MSPRC shall retain CMS write off closed notifications and approvals and make them available upon request (for the Office of Inspector General or any other internal or external review organization) in accordance with retention procedures.

Financial reporting for MSP write-off closed

The MSPRC shall report on Form CMS-M751 and MC751 the amount that CMS has approved for write-off closed, including principal and interest, on line 6a (M751) and line

4d (MC751), bad debt for all debts not contained and maintained in the HIGLAS system

(i.e., converted ARs).

Section J1.3

FEDERAL BANKRUPTCY/STATE INSURER

LIQUIDATION ACTIONS AND MSP DEBT

Action must be taken to safeguard the Medicare Trust Funds when an MSP debtor files a

Federal bankruptcy petition (voluntary); creditors of an MSP debtor petition the bankruptcy court to order the MSP debtor bankrupt (involuntary); or an MSP debtor is ordered liquidated by a State government.

Types of Federal Bankruptcy Proceedings

1. Chapter 7 – Debtors or creditors file under this chapter to obtain discharge of debtor’s debts (liquidation). Companies generally close that file under this chapter (the debtor ceases operations and disposes of the assets over a period of time). A court-appointed trustee accumulates the assets of the debtor, sells them and distributes the money among those whom the debtor owes (creditors).

2. Chapter 9 - This type of bankruptcy involves municipalities such as a hospital district. This chapter provides for re-organization and debt restructuring to be developed and approved, much like Chapter 11.

3. Chapter 11 – Debtor files under this chapter to re-organize its business. The purpose of this chapter is to restructure company finances so that the debtor can continue to operate. To emerge from Chapter 11, the debtor submits a

“Reorganization Plan.” This Plan indicates the amounts and schedules for payments to creditors. Creditors vote on the Plan and the bankruptcy court must confirm the creditors’ decision. Recovery amounts may vary. The Bankruptcy

Code provides for the discharge of any remaining debts.

4. Chapter 13 – Debtors are individuals (including sole proprietorships) with regular income. Generally, the debtor must file a debt adjustment plan within 15 days after filing (it is better to file a proof of claim as early as possible after the filing date). This chapter allows the debtor to keep property and to pay debts over time, usually from three to five years.

State Ordered Insurer Liquidations

The State may order insurers, incorporated or otherwise organized, that do business in that State to be liquidated under certain circumstances. Generally, this occurs following:

1. A determination by a State agency (e.g., Insurance Commission) that an insurer is insolvent or operating in financially hazardous manner; and

2. An order by a State Court that the insurer be liquidated. The assets of the insurer are sold and the proceeds are used to pay claims against the debtor as ordered by the Court.

Section J1.3

Importance of Various Dates in Bankruptcy/Liquidation Proceedings The filing date (i.e., the date a petition of bankruptcy is filed with the U.S. Bankruptcy

Court or the date a petition for insolvency (liquidation) is filed with the State courts) distinguishes “pre-petition” services from “post-petition” services. Events that occur on or before the petition date are pre-petition. Events that occur after the petition date are post-petition.

Initially, creditors file claims for pre-petition services. Creditors often update their pre-petition claims as additional debts are identified.

At various points during the process, the bankruptcy court may allow creditors to file claims for post-petition service.

Ultimately, a debtor will be discharged (released from the jurisdiction of the bankruptcy court). Generally the discharged entity is fully responsible for the debts arising from post-discharge services, unless the court makes other arrangements.

Difference Among Automatic Stay, Relief, and Discharge The “Automatic Stay” goes into effect when the bankruptcy petition is filed. It gives the debtor/entity a break from the creditors’ collection efforts. The “stay” is not permanent.

In certain circumstances the creditor can ask for “relief” from the stay.

Relief from the stay is petitioned by the creditor and shall be granted only by the court.

The “Discharge” from bankruptcy occurs at the end of the court process and closes the bankruptcy. It voids any judgment to the extent that it is a determination of the liability of a debtor/entity for a pre-petition debt. The effect of the discharge is to totally prohibit debt collection activities against the debtor as specified in the discharge papers by the court.

Affiliates A bankruptcy/liquidation proceeding may involve all affiliates all (the components of a complex business organization) or only certain affiliates. An affiliate is not automatically part of the bankruptcy unless the petition states that the affiliate is part of the bankruptcy.

Section J1.4

Attachment J-1

HANDLING FOIA AND SUBPOENA DUCES TECUM

RECEIVED IN THE MSP UNITS

Written requests for records from members of the public are treated as FOIA requests. In addition, legal requests in the form of non-Federal Court Subpoena Duces Tecum (i.e., Subpoenas for records) also are treated as FOIA requests. The processing of such requests has historically been addressed by Medicare claims processing internal FOIA coordinator/unit.

However, the following kind of requests and non-Federal Court Subpoenas directly received at the MSPRC as the result of MSP recovery activity, shall be processed by the

MSPRC’s staff: 1) written requests and subpoena’s from a beneficiary’s attorney or other representative, both of which must submit a beneficiary’s written and signed authorization to release records.

If the MSPRC receives any other kind of a subpoena or a written request for records, it shall immediately refer the request and all associated documentation to the PO. The PO will make a determination as to how to handle the subpoena and/or the FOIA request.

When the MSPRC receives a verbal request for records from an individual or entity other than the beneficiary’s representative, it shall advise the caller that his/her request must be made in writing and submitted to the PO at CMS.

The MSPRC shall address all beneficiary specific FOIA requests and Subpoenas from a third party as a possible MSP lead and take appropriate action (See Pub. 100-5 Chapter 7, Sections 40 and 50).

Note: Requests made to the MSPRC from a beneficiary’s attorney or other representative must be accompanied by a written and signed beneficiary authorization.

Referral of Cases to Project Officer for Possible Government

Intervention and/or Legal Action The MSPRC shall refer the following situations to the PO:

Any notice from a court that the Government (Medicare) has been made a party to a lawsuit involving a liability claim, or

Any case involving a lawsuit in which CMS’ claim is at issue.

The MSPRC shall include pertinent Medicare claims information if not previously provided to the PO. It also immediately refers a case to the PO if the MSPRC is named in any legal proceeding seeking to define or limit Medicare’s right to recovery. It does not make referrals simply because a lawsuit has been filed between the beneficiary and the liable third party. However, it monitors such lawsuits so that timely referrals can be made to CMS if Medicare’s claim becomes an issue in the lawsuit.

Section J1.5

REOPENINGS AND APPEALS

J1.5.1 Reopening of Medicare Initial Determinations

J1.5.1.1 Reopening

The MSPRC shall reopen an initial determination or a redetermination to review a decision in accordance with 42 Code of Federal Regulations (CFR) 405.980 and Internet-only manual (IOM) Pub. 100-4, Chapter 34 (disregard references to hearing officers and administrative law judge (ALJ) hearings).

Background: The reopening process is separate and distinct from the Medicare fee-for-service (FFS) appeals process.

Generally, a reopening of an initial claim determination or a redetermination is a remedial action taken to correct an initial determination, where appeal rights have been exhausted.

The MSPRC may choose to reopen an initial determination on its own motion or at the request of a party to the initial determination or redetermination. However, the regulations governing reopenings do not permit unrestricted reopenings of determinations and decisions.

Note: In the MSP recovery context, only beneficiary and provider/supplier recovery demand letters or beneficiary 1870 waiver of recovery determinations are “initial determinations” pursuant to 42 CFR 924. Recovery demands with respect to other entities such as employers, insurers, third party administrators, plans or other plan sponsors are not initial determinations under these regulations. The MSPRC refers potential provider/supplier MSP debts to the claims processing contractor for collection and has no responsibility for appeals related to such debts. MSPRC actions pursuant to these reopening regulations are expected to be infrequent. Additionally, when a recovery demand letter is issued to a beneficiary or to another individual/ entity on a beneficiary’s behalf, only the beneficiary is considered a party to the determination. Any individual or entity receiving a copy of the recovery demand letter does not have party status (and may only request a reopening on behalf of the beneficiary if he/she/it is the designated representative of the beneficiary).

J1.5.1.1.1 Reopenings on the MSPRC’s Own Motion

The MSPRC shall conduct reopenings on its own motion in accordance with 42 CFR

405.980 (b).

J1.5.1.1.2 Reopenings on the Request of A Party

The MSPRC shall conduct reopenings on the request of a party to the initial determination or redetermination in accordance with 42 CFR 405.980 (c).

J1.5.1.1.2.1 Redetermination Resolutions for Clerical Errors

The MSPRC shall resolve redetermination requests where the reason for the recovery or the unfavorable 1870 waiver of recovery action involves only a clerical error or omission

Attachment J-1

(for both MSPRC and beneficiary errors) outside of the Medicare claim appeals process in accordance with Medicare Prescription Drug, Improvement and Modernization Act of

2003 (MMA) 937 and 42 CFR 405.980(a)(3).

Background: The MSPRC must use the reopening process instead of the appeals process when an appeal has been requested to resolve recovery claims where the reason for the recovery claim or the unfavorable 1870 waiver of recovery action involves a clerical error or omission. (Examples of clerical errors include, but are not limited to, human and mechanical errors on the part of the beneficiary or the MSPRC such as mathematical or computational mistakes or inaccurate data entry.)

NOTE: Third party payer error does not constitute clerical error.

J1.5.1.1.2.2 Documentation Requests

The MSPRC shall process redetermination requests, where the MSPRC issued a recovery demand or an unfavorable 1870 waiver of recovery determination because requested documentation was not received during the case review process, as reopenings in accordance with 42 CFR 405.980(a)(2).

Background: For the MSPRC, this situation should not be routine but could arise when, for example, the beneficiary or their representative failed to respond to a request for documentation needed to support the pro rata reduction for procurement costs so that no such reduction was provided in the demand letter or the situation could arise where the beneficiary or their representative failed to provide requested documentation in connection with a request for 1870 waiver of recovery.

J1.5.1.1.3 Reopening Appeal Cases

The MSPRC shall reopen appeals cases remanded by the Qualified Independent

Contractor (QIC) to the MSPRC.

Background: If a QIC remands a case to the MSPRC for a redetermination, the MSPRC must reopen the redetermination and issue a revised redetermination. If a party has filed a valid request for a redetermination and subsequently requests a reopening, the MSPRC must conduct the appeal redetermination and cannot conduct the reopening.

J1.5.1.2 Establishing Good Cause for Reopening Initial Determinations and

Redeterminations

The MSPRC shall establish good cause for reopening a determination or decision in accordance with 42 CFR 405.986.

The MSPRC shall deny reopening requests based only on a change of legal interpretation or policy by CMS in a regulation, CMS ruling, or CMS general instruction, whether made in response to a judicial decision or otherwise, or based on a third party payer’s error in making a primary payment determination.

Background: The MSPRC establishes good cause to reopen a decision, either on its own motion or at the request of a party, when there is new or material evidence that may result

Attachment J-1 in a different decision, or when the evidence considered in making the decision clearly shows that an obvious error existed at the time the decision was made.

NOTE: Third party payer error does not constitute new and material evidence; it does not constitute good cause. The MSPRC may only reopen for third party payer error under the “within one year for any reason” standard. This is true for both the MSPRC’s own motion reopenings as well as reopenings requested by a party. All providers, physicians, and other suppliers have a legal obligation to determine the correct primary payer when billing Medicare. Information regarding such error does not constitute “new and material evidence.” A representation that CMS information concerning the primary payer is inaccurate or that the primary payer made an error does not constitute “new and material evidence.”

J1.5.1.3 Reopening Decisions

The MSPRC shall issue its revised determination or decision to the parties to the initial determination or redetermination in accordance with 42 CFR 405.982.

Standard 1 The revised determination or decision is timely when it is issued within 60 calendar days from the date of receipt of request or the date of QIC remand.

J1.5.2 Appeals of Medicare Initial Determinations

J1.5.2.1 Redetermination Requests

The MSPRC shall process requests for redetermination of Medicare “initial determinations” in accordance with 42 Code of Federal Regulations (CFR) 405.940-958 and Internet-only manual (IOM) Pub. 100-4, Chapter 29, section 310.

Background: A beneficiary is a party (herein after called the appellant or the party) to an initial determination may request a redetermination. The redetermination is the first level of the administrative appeal process for initial determinations. The MSPRC is responsible for processing redeterminations with respect to debts transitioned to the

MSPRC and initial determinations made by the MSPRC. The second level of the appeals process is called a reconsideration. Reconsiderations are processed by a separate appeals entities called a QICs.

The rules governing redeterminations are in 42 CFR 405.940-958.

NOTE: For the purposes of MSP post-pay appeals, “initial determinations” are as defined in 42 CFR 405.924 and 405.926. These include, for purposes of the MSPRC contract, recovery demand letters issued to beneficiaries and 1870 waiver of recovery determinations issued to beneficiaries, The MSPRC has responsibility for first level appeals for such initial determinations.

J1.5.2.1.1 Acceptance of Valid Redetermination Requests

Attachment J-1

The MSPRC shall accept valid written redetermination requests filed by a party to an initial determination in the form and manner prescribed in regulation and at 42 CFR

405.944.

Background: The party must submit the redetermination request in writing to the

MSPRC indicated on the initial determination. The requests must be filed within 120 calendar days of the party receiving the notice of initial determination. The initial determination receipt date shall be presumed to be five (5) calendar days after the date of the notice of the initial determination, unless there is evidence to the contrary.

Any written beneficiary communication that indicates disagreement with the initial determination should be treated as a request for redetermination. For example, a written inquiry asking “Why was I overpaid?” or stating that a beneficiary disagrees with the amount of the recovery demand should be considered a request for a redetermination.

J1.5.2.1.2 Misdirected Appeal Requests

The MSPRC shall timely forward misdirected appeal requests to the appropriate claims processing contractor, or other adjudicator (QICs, ALJs, DAB, etc.).

Standard: Misdirected redetermination requests are timely when they are forwarded to the appropriate claims processing contractor or other adjudicator within five (5) calendar days of receipt.

J1.5.2.1.3 Granting of Extensions for Late Redetermination Requests and

Determination of Good Cause

In accordance with 42 CFR 405.92X, the MSPRC shall accept late filed redetermination requests if the party demonstrates good cause for missing the deadline to request a redetermination.

If the 120-calendar-day period for filing a redetermination request has expired, a party to the initial determination may request an extension for filing the redetermination request.

The request for extension must be filed with the redetermination request and must be in writing, state why the request for redetermination was not filed within the required time frame, demonstrate good cause, be filed with the contractor listed on the initial determination notice and meet the requirements of J1.7.2.1.3 above. (See 42 CFR

405.942 (b).)

Good cause is determined after considering:

The circumstances that kept the party from making the request on time;

Whether the contractor’s actions misled the party; and

Whether the party had physical, mental, educational, or linguistic limitations, including lack of facility with the English language that prevented the party from filing a timely request or from understanding or knowing about the need to file a timely request for redetermination.

J1.5.2.1.4 Consolidation of Multiple Requests for Same Claim

Attachment J-1

The MSPRC shall consolidate separate requests for redetermination relating to the same claim into one redetermination proceeding when multiple parties submit requests for redetermination of the same claim, and the additional requests are received before a decision is made on the first request.

If multiple requests for the same claim are received before a decision is issued, the

MSPRC shall issue its decision within sixty (60) days of the latest filed request.

NOTE: This situation should not arise for the MSPRC as it will be dealing with appeals where the beneficiary is the identified debtor unlike appeals of prepayment decisions where both the beneficiary and the provider/supplier may be parties.

J1.5.2.1.5 Withdrawals and Eligibility-Based Dismissals

The MSPRC shall dismiss, and provide a written notice of the dismissal, a request for redetermination in a timely manner. If a debtor without party status (or its representative) submits an appeal request, the appeal shall be dismissed, and the MSPRC shall deal with the correspondence as rebuttal correspondence.

The MSPRC shall provide a written notice of the dismissal of the redetermination request, clearly stating the reasons for the dismissal either in its entirety or as to any stated issue, transmitted to the parties at their last known address under any of the following circumstances:

When the person or entity requesting a redetermination is not a proper party under

42 CFR 405.906(b) or does not otherwise have a right to a redetermination under

§ 1869 (a) of the Social Security Act (the Act);

When the party fails to file the redetermination request within the proper time frames;

When the beneficiary or the beneficiary's representative files a request for redetermination, but the beneficiary dies while the request is pending, and the beneficiary's surviving spouse or estate has no remaining financial interest in the case; no other individual or entity with a financial interest in the case wishes to pursue the appeal; and no other party filed a valid and timely redetermination request;

When the party filing for redetermination submits a timely written request of withdrawal to the MSPRC before a redetermination decision has been issued. A party that files a request for redetermination may withdraw his or her request by filing a written and signed request for withdrawal. The request for withdrawal must contain a clear statement that the appellant is withdrawing the request for redetermination and does not intend to proceed further with the appeal. The request must be received in the MSPRC mail room before a redetermination has been issued (See 42 CFR 405.952 (a)); and

When there has been no initial determination on the matter for which a redetermination is sought.

Attachment J-1

NOTE: In the MSP recovery context, the MSPRC should receive few erroneous requests. The beneficiary (or the beneficiary’s representative on the beneficiary’s behalf) should be the only individual submitting an official appeal request as MSP provider/supplier recoveries will be done by the claims processing contractors.

J1.5.2.1.6 Assistance to Beneficiary

The MSPRC shall assist the beneficiary in obtaining from the provider any additional information needed to process and complete the redetermination.

The MSPRC shall clearly annotate the redetermination case file with any requests for additional information made on behalf of the beneficiary.

NOTE: This situation is not expected to arise in the MSP recovery context. Normally there would be no reason to contact a provider/supplier for further information as they would not have information relevant to the type of issue generally on appeal in connection with an MSP recovery demand.

J1.5.2.1.7 Conduct of the Redetermination

The MSPRC shall make a timely, independent, accurate, supportable decision on each issue in dispute, and issue a decision to dismiss, fully affirm, partially reverse, or fully reverse the initial determination in question, based on the evidence of record including applicable laws, regulations, and policies.

Background: A redetermination is an independent review of an initial determination.

Redeterminations are conducted in accordance with § 1869 of the Act ,42 CFR 405.948–

405.958, and IOM Pub. 100-4, Chapter 29, § 310.

Standard 1 Redeterminations are successful when all redeterminations (where no additional evidence is submitted after the request) are accurately processed and the redetermination decision notice is mailed within sixty (60) calendar days of receipt of the request in the corporate mailroom or within sixty (60) days of the latest filed request for consolidated redetermination requests for the same claim. The sixty (60)-calendar day decision-making time frame may be extended by fourteen (14) calendar days in accordance with 42 CFR 405.946.

NOTE: For the MSPRC, the issues on appeal will be either the existence or amount of the recovery claim and/or the prior 1870 waiver of recovery determination.

J1.5.2.1.8 Documenting the Redetermination Case Files

The MSPRC shall document the redetermination case files with all relevant information, evidence, and supporting documentation and identify the individuals involved in making the initial claims determination and the redetermination.

J1.5.2.1.9 Notice of Redetermination

The MSPRC shall mail, or otherwise transmit, to the beneficiary at his/her last known addresses, a written notice of the redetermination decision that is accurate, clear, concise, Attachment J-1 and is in printed form and written in a manner that is understandable to the individual entitled to notice in accordance with § 1869(a) of the Act and all current, related CMS operating instructions.

Standard 1 Redetermination notices are successful when they are processed and mailed within sixty (60) calendar days of the date the MSPRC receives the valid and timely filed request. (Note: If the appellant submits additional evidence after filing the request for redetermination, the MSPRC’s timeframe for making the decision is extended by fourteen (14) calendar days). The sixty (60) calendar day decision-making time frame may be extended by fourteen (14) calendar days in accordance with 42 CFR 405.946.

Standard 2 All redetermination decisions on recovery claims must be addressed to the debtor with a copy to his/her representative (if applicable). The MSPRC shall not address the determination to the representative.

J1.5.2.2 Appeal Decision Effectuation

The MSPRC shall effectuate all levels of appeal decisions (redeterminations, reconsiderations, ALJ, DAB, and federal court) received from the QIC or AdQIC.

Standard 1: 95% of all of MSPRC redeterminations or subsequent appeal decisions are effectuated by the MSPRC within the same monthly financial reporting period as the date(s) of the decisions.

Section J1.6

MISCELLANEOUS MSP POLICY

Self-Insurance

Liability insurance includes self-insurance. Additionally, 42 U.S.C. 1395y(b)(2)(A)

(Section 1862(b)(2)(A) of the Act) specifically provides that "An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part."

Causation Issues

In liability, no-fault, or workers' compensation situations, the debtor/potential debtor may assert that certain Medicare reimbursed services are not subject to a MSP recovery claim because it has not been established that the accident/illness/injury/incident in question caused the condition requiring the services in question or it has not been established that the accident/illness/injury/incident is related to the services in question. A variation on this is an allegation that certain Medicare reimbursed services are not subject to an MSP recovery claim because a pre-existing condition would have required the services in question regardless of the accident/illness/injury/incident or the accident/ illness/injury/incident simply exacerbated a pre-existing condition.

42 U.S.C. 1395y(b)(2)(B) (§ 1862(b)(2)(B) of the Act) provides for reimbursement to the

Medicare trust funds for conditional payments made by Medicare when it is demonstrated that a primary plan has or had a responsibility to make payment with respect to an item or service. The primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon a recipient's compromise, waiver, or release

(whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.

This means that Medicare looks to whether or not the items or services in question are/were related to what is/was claimed and/or released with respect to a settlement, judgment, award, or other recovery. The MSPRC does not make determinations about whether or not the accident/illness/injury/incident in question caused or is responsible for or related to the need for the Medicare reimbursed services in question.

Where a debtor/potential debtor is challenging the inclusion of a particular item or service included in Medicare’s identified conditional payment amount or recovery claim, the contractor must obtain the beneficiary’s liability, no-fault, or workers’ compensation claim and/or pleading and settlement/judgment/award/recovery documents (i.e., the

Complaint or Settlement Agreement) in order to determine what the beneficiary has claimed or released and whether or not the items or services in question are related to what has been claimed and/or released. The MSPRC shall routinely obtain these documents in product liability situations.

Along this same line, the MSPRC must be aware that statements that “liability has been denied,” “compensability has been denied,” etc. are insufficient to close a pending

Section J1.6

Attachment J-1 liability, no-fault, or workers’ compensation recovery case. If this type of statement is provided, the parties must state in writing that there has been no type of settlement, judgment, award, or other recovery (including a so-called nuisance settlement) and that there is no longer a pending claim.

Conditional Payment Letters Interim conditional payment letters must state that the amount reflected, even if zero, is not a final amount; and that the amount must be updated once there is a settlement judgment or award.

Confidentiality Agreements In some instances a beneficiary/beneficiary’s attorney will assert that the beneficiary cannot provide settlement documents because a confidentiality agreement was signed in conjunction with the settlement.

42 CFR § 411.23(a) requires that a Medicare beneficiary assist Medicare in obtaining information relevant to a payment from a primary plan. 42 CFR § 411.23(a). Further, 42 CFR § 411.24(a) provides that the filing of a Medicare claim by, on, or behalf of the beneficiary constitutes an express authorization for any entity, including State Medicaid and worker compensation agencies, and data depositories, that possesses information pertinent to the Medicare claim to release that information to CMS. A beneficiary’s assertion that he/she has signed a confidentiality agreement does not trump these pre-existing Federal regulatory provisions.