The PAID Act one year after implementation

By Mark Popolizio, J.D., Kate Riordan, J.D.

December 9, 2022 / 17 min read

On December 11, 2021, the Provide Accurate Information Directly Act (PAID Act) went live following a year-long implementation roll-out by the Centers for Medicare and Medicaid Services (CMS). Significantly, the PAID Act amended the Medicare secondary payer (MSP) statute to help insurers better identify a claimant’s Medicare enrollment status and provide insurers with certain information, such as Medicare plan(s) and plan type. As we hit the one-year mark from the PAID Act’s implementation, it may be a good time to assess how things are going, what we have seen so far, and refresh on how Verisk can help you take advantage of the PAID Act data to improve your MSP compliance practices.

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Toward these objectives, the authors outline the following:

PAID Act background

President Trump signed the PAID Act into law on December 11, 2020, as part of H.R. 8900 entitled the Further Continuing Appropriations Act 2021 and Other Extensions Act.[1] In general, the PAID Act amended 42 U.S.C. § 1395y(b)(8)(G) to require CMS to expand its Section 111 Query Process[2] to provide Non-Group Health Plan (NGHP) Responsible Reporting Entities (RREs)[3] with information regarding whether a claimant is currently entitled to, or during the preceding 3-year period has been entitled to, Medicare Part C (Medicare Advantage) and/or Medicare Part D (prescription drug) benefits (also referred to as the “Plans” in certain contexts below). If so, CMS is required to provide the names and addresses of any such Medicare plans through the Section 111 Query Process.[4] CMS was tasked with implementing the PAID Act by December 11, 2021, a deadline the agency met. Prior to the PAID Act’s implementation, RREs did not have a centralized system to obtain information regarding a claimant’s Medicare Advantage Plan (MAP) or Part D enrollment status from CMS and were left to request this information directly from the claimant or through discovery.

What information is CMS providing per the PAID Act?

As part of its PAID Act implementation, CMS provides RREs with the following information through the Section 111 Query Response File:

Contract number, contract name, plan number, coordination of benefits (COB) address, and entitlement dates for the last three years (up to 12 instances) of Part C (Medicare Advantage) and Part D coverage; and
The most recent Part A and Part B entitlement dates.[5]

It is interesting to note that CMS is providing RREs with more information than is technically required by the PAID Act. Specifically, the PAID Act only requires CMS to provide the names and addresses of any identified Part C or Part D plan. However, as noted directly above, CMS is also providing additional information regarding the claimant’s Part C and Part D plan, as well as the most recent Part A and B entitlement dates (as may be applicable).

How is the PAID Act going? What are we seeing?

While the PAID Act provides insurers with important data regarding a claimant’s MAP and Part D enrollment, the new law does not provide information regarding potential MAP and/or Part D recovery claims. However, for the reasons discussed more fully in the next section, a major impetus behind the PAID Act was to provide insurers with the data needed for them to then contact the Plan(s), if they so elect, to address any potential recovery actions, especially considering several recent court rulings finding that MAPs can sue for “double damages” as part of their recovery actions.

With a full year of the PAID Act under our belts, it is perhaps a good time to assess how things are going from this perspective. Overall, from our general experience thus far, it has been an interesting mixed bag as the PAID Act continues to take hold and develop. One positive item to report is that the PAID Act is generally working well from a technical perspective in that the flow of information from CMS to RREs via the Section 111 Query process has been seamless. There have been, however, some areas where improvements are necessary.

For example, in some instances, the information provided by the Plans has not been entirely accurate. In an apparent move to help on this front, CMS in April 2022 issued a memo to all Medicare Advantage, Prescription Drug Plan, Medicare-Medicaid Plan, PACE and Cost Organizations entitled Clarification on the Health Plan Management System (HPMS) Coordination of Benefits Contact and the PAID Act. As part of this memo, CMS states, in part, that “[t]his memo clarifies the definition of the HPMS Coordination of Benefits (COB) contact in relation to the Provide Accurate Information Directly (PAID) Act.” In terms of the PAID Act, this memo states: “With regard to the PAID Act, this contact must be able to receive inquiries from Non-Group Health Plan (NGHP) insurers (liability insurance [including self-insurance], no-fault insurance, and workers’ compensation entities) to determine if the plan made conditional payments. In complying with the provisions of the PAID Act, the mailing address will be provided to NGHPs by CMS to contact the organization regarding the recovery of payments that were made either conditionally or mistakenly, given that Medicare is the secondary payer.” As mentioned above, it appears that one of CMS’s objectives in issuing this memo was to help improve the contact information being provided by MAPs and Part D plans to CMS (and ultimately the RRE) per the PAID Act. Of note, since CMS released this notice, we have seen improvement in the Plan COB contact information being provided by the Plans.

From another angle, we have noticed varying degrees of engagement from the Plans thus far in terms of the response to requests for recovery claim information. This, as noted above, may not be too surprising given the number of different MAP and Part D companies/plans[6] and the fact that the PAID Act is still relatively new law. Perhaps also not surprisingly, from our experience so far, the larger national Plans tend (at least at this juncture) to have better processes in place for identifying and communicating potential recovery actions than smaller Plans. Further, we have found that many Plans are utilizing third party collection agents to help them process and manage their recovery claims.

Another interesting finding we have discerned from the data thus far, and one with important practical compliance implications, is the fact that many claimants are shown to switch their MAP and/or Part D plan at various points throughout the life of the claim as part of Medicare’s various open enrollment periods – including some instances where the claimant has had twelve Plans over a three-year period. From a compliance standpoint, the fact Medicare beneficiaries can change Plans, and often do, should be noted as this raises the possibility that there can be multiple recovery claims from different Plans as part of the same case, which underscores the importance of determining all potential recovery actions as part of claims handling and settlement.

PAID Act compliance considerations – keep the big picture in mind

As outlined above, the PAID Act now provides RREs with critical information regarding a claimant’s Medicare Advantage and Part D enrollment. Technically, the PAID Act does not require insurers to receive or do anything with the information CMS is providing. However, from a practical standpoint, insurers may wish to consider using this information to proactively address potential MAP and Part D recovery claims.

In this regard, it is important to keep in mind that the PAID Act was prompted in large part by the wave of recent lawsuits filed by Medicare Advantage Plans (or suits filed on their behalf by assignee entities) asserting recovery rights, including claims for “double damages” under Medicare’s private cause of action (PCA) provision[7] and the insurer’s inability to proactively identify claimants who are Medicare Advantage or Part D enrollees.

On this point, in the several years leading up to the PAID Act’s enactment, the United States Circuit Courts of Appeals for the 3^rd and 11^th Circuits in In re Avandia, 685 F.3d 353 (3rd Cir. 2012) and Humana v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016), ruled, in part, that MAPs had PCA rights under the MSP.[8] As part of the 11^th Circuit’s ruling, the court affirmed a ruling from the United States District Court for the Southern District of Florida levying double damages against an insurer. [9] In addition, prior to the PAID Act becoming law several United States District Courts similarly found that MAPs could sue insurers for “double damages” under the MSP in relation to their recovery claims – including a ruling from the United States District Court for Connecticut which actually awarded double damages against an insurer.[10] Since the PAID Act’s enactment, it is significant to note that the United States Circuit Court of Appeals for the Second Circuit in its recent decision Aetna Life Insurance Company v. Big Y Foods, Inc., 2022 WL 14701256 (2^nd Cir. October 26, 2022)[11] has now joined the 3^rd and 11^th Circuits in ruling that MAPs can sue insurers under the PCA statute. As part of the 2^nd Circuit’s decision the court affirmed the award of double damages by the United States District Court for Connecticut as referenced above.[12]

From another angle, while Part D plans have not been as active as MAPs in asserting recovery claims, certain federal statutes and regulations note, in part, that Part D plans have the same recovery rights as MAPs.[13] It is also noted that the 3^rd Circuit as part of its ruling in Avandia indicated that MAPs have PCA rights under federal law, stating in an endnote that “… our holding on the meaning of the private cause of action will apply equally to private entities that provide prescription drug benefits pursuant to Medicare Part D.” [14]

Given this backdrop, insurers can use the information CMS will be providing to proactively address Medicare Advantage and Part D recovery claims to help avoid potential “double damages” lawsuits. In short, insurers now have access to the information they have long been missing to help get ahead of the curve, reduce costs, and minimize liability regarding Medicare Advantage and Part D recovery claims.

How we can help!

Verisk offers several services to help insurers to take advantage of the information the PAID Act provides.

For example, CP Link is our programmatic solution that automates Medicare conditional payment identification, dispute, and resolution directly from Section 111 data for holistic compliance. With our new CP Link^® PAID Act add-on component, insurers now have the option for a programmatic approach to MAP and Part D compliance. Built on our reliable approach to traditional Medicare recovery claims, the CP Link add-on leverages both Section 111 reporting data and the new PAID Act data in order to address any recovery claims alleged by MAPs or Part D plans. This optional add-on service to our CP Link program can help you take control of Medicare Advantage and Part D recovery claims.

Alternatively, our Medicare Advantage Resolution service can help you address Part C and Part D recovery claims you may receive on an ad hoc (case by case) basis. In addition to Medicare Advantage and Part D claims, keep in mind that we have several services to help you address traditional Medicare (CMS) conditional payment claims, including CP Link, as well as our standard Medicare conditional payment and Treasury Claims services.

In terms of results, these services have consistently provided significant cost savings for our clients. For example, in 2021, we saved our clients approximately $100 million in conditional payment disputes and reduced 60% of conditional payment dispute submissions to zero dollars. Our CP Link solution saved our clients over $14 million in 2020 and approximately $12.6 million in 2021. Finally, we can also help build practical claims protocols to address each of the Medicare compliance areas noted above and provide training for management and staff.

Questions?

Please do not hesitate to contact the authors if you have any questions or would like more information on how Verisk can help you address Medicare Advantage, Part D, and traditional CMS recovery claims.

[1] H.R. 8900, Further Continuing Appropriations Act, 2021, and Other Extensions Act, Title III, Offsets, Sec. 1301, (ii), Transparency of Medicare Secondary Payer Reporting Information.

[2] To help RREs determine a claimant’s Medicare status, CMS has established what it refers to as the Section 111 “Query Process.” Only the RRE can use the Query Process, and as part of this system RREs must submit the following data points to CMS: the claimant’s Medicare beneficiary identifier number (MBI) or social security number (SSN); along with the claimant’s first and last name, date of birth, and gender. See e.g., CMS’s Section 111 NGHP User Guide, Chapter IV (Version 6.9, October 3, 2022), Chapter 8, section 8.1.

[3] Responsible Reporting Entities (RREs) are the parties who are obligated to report under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) (P.L. 110-173). While Section 111 applies to both group health plans (GHP) and non-group health plans (NGHP) (i.e. workers’ compensation, liability, self-insurance, and no-fault insurance), references to Section 111 in this article relate to Section 111 reporting in the NGHP context as codified at 42 § U.S.C. 1395y(b)(8). In general, RREs are insurers and self-insurers, but could involve other entities such as self-insurance pools or assigned claims funds depending on the facts. (See generally, CMS’s Section 111 NGHP User Guide, Chapter III (Version 6.9, October 3, 2022), Chapter 6. Expanding on this concept further, 42 U.S.C. § 1395y(b)(8) provides that the “applicable plan” is the RRE and defines the term “applicable plan” to include liability insurance (including self-insurance), no-fault insurance, and workers’ compensation laws or plans.) However, claimants and their lawyers are not RREs and do not have reporting responsibilities under Section 111. Id

[4] In pertinent part, the text of the PAID Act reads as follows:

(ii) SPECIFIED INFORMATION.— In responding to any query made on or after the date that is 1 year after the date of the enactment of this clause from an applicable plan related to a determination described in subparagraph (A)(i), the Secretary, notwithstanding any other provision of law, shall provide to such applicable plan—

(I) whether a claimant subject to the query is, or during the preceding 3-year period has been, entitled to benefits under the program under this title on any basis; and

(II) to the extent applicable, the plan name and address of any Medicare Advantage plan under part C and any prescription drug plan under part D in which the claimant is enrolled or has been enrolled during such period.

H.R. 8900, Further Continuing Appropriations Act, 2021, and Other Extensions Act, Title III, Offsets, Sec. 1301, (ii), Transparency of Medicare Secondary Payer Reporting Information.

[5] See, CMS’s Section 111 NGHP User Guide, Chapter V, Appendix E (Version 6.9, October 3, 2022).

[6] A recent report from the Henry J. Kaiser Family Foundation reports that there are 3,998 Medicare Advantage plans available nationwide for individual enrollment in 2023 which is a 6% increase in the number of plans (228 more plans) offered in 2022 Meredith Freed, Jennie Fuglesten Biniek, Anthony Damico, and Tricia Neuman, Medicare Advantage 2023 Spotlight: First Look, The Henry J. Kaiser Foundation (November 10, 2022). This same report further indicates that in 2023 the average Medicare beneficiary will be able to choose from 43 Medicare Advantage plans, more than double the average number available in 2018. Id. Further, this study noted that two companies – United Healthcare and Humana – accounted for 46% of total Medicare Advantage enrollment in 2022. Id. Regarding Part D, in 2023 there will be 801 prescription drug plans (PDPs) offered – a 5% increase from 2022. An Overview of the Medicare Part D Prescription Drug Benefit, The Henry J. Kaiser Family Foundation (October 19, 2022).

[7] The MSP’s private cause of action section, codified at 42 U.S.C. § 1395y(b)(3)(A), states as follows: “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”

[8] The 3^rd Circuit has jurisdiction over federal cases originating in Delaware, New Jersey, Pennsylvania, and the U.S. Virgin Islands; while the 11^th Judicial Circuit has jurisdiction over federal cases originating in Alabama, Florida, and Georgia.

[9] The 11^th Circuit’s ruling affirmed the United States District Court for the Southern District of Florida’s decision in Humana Medical Plan, Inc. v. Western Heritage Ins. Co., 94 F.Supp.3d 1285 (S.D. Fla. 2015)

[10] The following United States District courts have ruled (or strongly indicated) that MAPs can sue claims payers for double damages: MAO-MSO Recovery II, LLC v. Mercury Insurance, 2018 WL 3357493 (C.D. Calif. May 23, 2018); MAO-MSO Recovery II, LLC v. Farmers Insurance Exchange, 2018 WL 2106467 (C.D. Calif. May 7, 2018); Aetna v. Guerrera, 300 F.Supp.3d 367 (D. Conn. March 13,2018); MAO-MSO Recovery II, LLC v. State Farm, 2018 WL 340021 (C.D. Ill. January 9, 2018); Collins v. Wellcare Healthcare Plans, Inc., 73 F.Supp.3d 653 (E.D. La. 2014); MSP Recovery Claims Series LLC v. Plymouth Rock Assurance Corporation, 2019 WL 3239277 (D. Massachusetts, July 18, 2019); MSP Recovery Claims, Series LLC v. Phoenix Insurance Company, 2019 WL 6770981 (N.D. Ohio, December 12, 2019); MSP Recovery Claims, Series LLC v. Grange Insurance Company, 2019 WL 6770729 (N.D. Ohio, December 12, 2019); MSP Recovery Claims, Series LLC v. Progressive Corporation, 2019 WL 5448356 (N.D. Ohio, September 17, 2019); Humana Ins. Co. v. Bi-Lo, LLC, 2019 WL 4643582 (D. South Carolina, September 24, 2019); Cariten Health Plan, Inc. v. Mid-Century Ins. Co., No.: 2015 WL 5449221(E.D. Tenn. 2015); Humana Ins. Co. v. Farmers Tex. Cnty. Mut. Ins. Co., 95 F.Supp.3d 983 (W.D. Tex. 2014); Humana v. Shrader, 584 B.R. 658 (S.D. Tex. March 16, 2018); Humana Ins. Co. v. Paris Blank LLP, 187 F. Supp.3d 676 (E.D. Va. 2016).

[11] The Second Circuit has jurisdiction over claims originating from the U.S. District Courts for Connecticut, New York, and Vermont.

[12] The Second Circuit affirmed the ruling of the United States District Court for Connecticut in Aetna v. Guerrera, 300 F.Supp.3d 367 (D. Conn. March 13,2018).

[13] For example, 42 U.S.C. § 1395w-102(4) states that the recovery rights afforded to Medicare Advantage Plans “apply in the same manner” to Part D. Likewise, 42 C.F.R. § 423.462 provides that the same “Medicare secondary payer procedures” that apply to Medicare Advantage Plans under § 422.108 also apply to Part D plans. Under § 422.108, Medicare Advantage Plans may seek reimbursement from insurers and other parties in workers’ compensation, liability, and no-fault cases. This regulation further gives Medicare Advantage Plans the same recovery rights as traditional Medicare under the MSP. Similarly, in 2011, CMS released a policy memo taking the position that Part D plans “have the same MSP rights and responsibilities” as Medicare Advantage Plans. See, CMS memo, Medicare Secondary Payment Subrogation Rights, Medicare Advantage Organizations and Prescription Drug Plan Sponsors (December 5, 2011). For additional resource on Part D, see our article, CMS updates its Medicare prescription drug benefit manual – New changes encourage Part D collection and recovery

[14] See, In re Avandia, 685 F.3d 353, at n.20. The court in this endnote stated “Our decision here unquestionably results in cost savings for the Medicare Trust Fund because our holding on the meaning of the private cause of action will apply equally to private entities that provide prescription drug benefits pursuant to Medicare Part D. See 42 U.S.C § 1395w-151(b) (requiring that provisions relating to the MA program and MAOs be read to include part D plans). Because Part D prescription drug plans explicitly share gains and losses with the federal government, 42 U.S.C. § 1395w-115(e), the Medicare Trust Fund unquestionably loses money if these private entities recover less from primary payers.” Id.