Medicare, Medicaid, and SCHIP Extension Act of 2007 have hidden impact on health plans

May 1, 2008

On Dec. 29, 2007, President George W. Bush signed the multi-faceted Medicare, Medicaid, and SCHIP Extension Act of 2007. Section 111 of the bill, titled, Medicare Secondary Payor (MSP), mandated that effective Jan. 1, 2009, all Group Health Plans (GHP) or any related entity (i.e. insurer or third party administrator) serving on behalf of the GHP will be responsible for identifying and submitting "situations where the group health plan is or has been a primary plan to the program," according to Medicare.

On Dec. 29, 2007, President George W. Bush signed the multi-faceted Medicare, Medicaid, and SCHIP Extension Act of 2007. Within this bill, Section 111 titled Medicare Secondary Payor (MSP) mandated that effective Jan. 1, 2009, all Group Health Plans (GHP) or any related entity (i.e. insurer or third party administrator) serving on behalf of the GHP will be responsible for identifying and submitting "situations where the group health plan is or has been a primary plan to the program," according to Medicare.

Following are key bill highlights:

This change will significantly impact health plans financially and operationally. Prior to enactment of this law, health plans were only required to submit a notice to Medicare when the health plan identified a situation where Medicare mistakenly paid primary (411.25 notice). The notice requirement did not contain a specific penalty for noncompliance and did not require a health plan to submit to HHS a report that identified all Medicare secondary members. The result of these changes is estimated to shift $100 million to $200 million annually from Medicare to private health plans. Additionally, HHS has the ability to levy large fines to health plans that do not identify and report members who are primary to Medicare.

Impact on health plans

Identification and order of benefit determination

Health plans need to have adequate processes and internal controls to identify Medicare eligible members and make the appropriate benefit determination. The new law would allow CMS to penalize health plans $1,000 per member per day in those situations for not properly reporting Medicare secondary members to CMS. To mitigate this risk, most plans should consider a comprehensive revamping of the processes they use to identify each and every Medicare eligible member within their plan (particularly Medicare eligibles under age 65) and increase the diligence and timeliness of order of benefits determinations.

Systems modification

With new information received on a daily basis, dual eligible members may be added on a daily basis and members' primary determinations may change as quickly. In addition to the new information, there may be gaps in the COB information required to make the necessary primary determinations. Plans will have to ensure all information is uploaded into the various systems (membership, claims, etc.) and the necessary outputs are achieved.