Medicare Secondary Payer Year in Review: Notable developments in 2024 and what to watch for in 2025

                               

Medicare Secondary Payer Year in Review: Notable developments in 2024 and what to watch for in 2025 

Each year brings significant changes to Medicare Secondary Payer (MSP) compliance, and 2024 was no exception. In this recap we will take a deep dive into some of the MSP compliance developments this past year that will likely have an impact in 2025, and I will detail how insurance carriers, self-insureds and claims/risk professionals can face them with confidence. 

Section 111 Civil Money Penalties & Looking Ahead to Enforcement  

By way of background, Sec. 111 is federally mandated electronic reporting required of primary payers (known as Responsible Reporting Entities or RREs in the parlance). RREs include insurance carriers and self-insureds. The purpose of Sec. 111 is to allow for proper coordination of benefits (COB), recovery of Medicare conditional payments, and (as of April 4, 2025) for post-settlement COB of Workers’ Compensation Medicare Set Asides (MSAs).  

Since its inception in the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007, Sec. 111 has contemplated Civil Money Penalties (CMPs) for noncompliance. The 2012 Strengthening Medicare & Repaying Taxpayers (SMART) Act required, among other things, that the Centers for Medicare & Medicaid Services (CMS) promulgate rules relative to when and how the agency would issue a potential CMP with respect to Sec. 111 reporting non-compliance.  

It wasn’t until October 11, 2023, that the CMP final rule posted to the Federal Register. As of October 11, 2024, federal regulations related to Sec. 111 CMPs were applicable and this year they will be enforced as of October 11, 2025. CMS will view non-compliance for purposes of CMPs in relation to lack of timeliness in reporting a record. “[A] a ‘record’ is defined as any individual occurrence of a Total Payment Obligation to Claimant (TPOC) or Ongoing Responsibility for Medicals (ORM) for a Medicare beneficiary that must be submitted via the Section 111 reporting process… If a particular case has both an ORM and a TPOC component, this will constitute two records.” See CMS’ NGHP Civil Money Penalties website [accessed 01/07/2025].  

Sec. 111 records will be considered reported in a timely manner if they are successfully submitted and accepted by CMS within 365 days of:  

• “The date of settlement, judgement, award, or other payment (TPOC date or funding beyond TPOC date, whichever is later), or 

• The effective date where ongoing payment responsibility for medical care has been assumed by the entity. (The date ORM was assumed, the date of incident (DOI), or the date the beneficiary became entitled to Medicare, whichever is later.)” 

See CMS’ NGHP Webinar, October 17, 2024 (updated December 17, 2024).   

Any records reported after October 11, 2024, must be reported within 365 days as they are subject to review by CMS. Thereafter, beginning in “January 2026, and continuing on a quarterly basis, CMS will randomly select 250 MSP records to audit for Section 111 reporting compliance. This sample of 250 will be selected across the entire universe of accepted new Section 111 records received during the specific review period, as well as records Medicare received from non-Section 111 sources such as providers or beneficiaries.” See CMS’ NGHP Civil Money Penalties website. After collecting this sample, CMS will audit the records to identify possible instances of noncompliance.  

Currently, potential penalties will be applied on a tiered basis as follows:  

• Greater than 1 year, but less than 2 years late: $250 per day, per record 

• Greater than 2 years, but less than 3 years late: $500 per day, per record 

• Greater than 3 years late: $1,000 per day, per record 

Of note, annual inflation rates will apply (the 2024 inflation-adjusted rates relative to the above are $357, $714, and $1,428) and the total penalty for a single instance of noncompliance will not exceed $365,000 ($521,220 adjusted for inflation).  

The following are procedures (as articulated by CMS here and here) related to the imposition of a CMP in the event of identified noncompliance in a quarterly audit:  

Step 1 - Informal Notice  

• “Informal Notice - Intention to Impose a Civil Money Penalty”   

• This is an initial letter mailed to the RRE identifying a noncompliant record(s) 

• A CMP is not yet being assessed and the RRE has 30 days of receipt of this notice to respond with mitigating information as to why the CMP should not be imposed  

• If no mitigating information is provided, CMS will move to Step 3   

Step 2 – CMS Review & Decision of Mitigating Information  

• RRE submits mitigating information as to why a CMP shouldn’t be imposed 

• CMS has indicated extensions beyond the 30-day response requirement will not be granted but that the agency may request clarification of the submitted information and afford the RRE one additional opportunity to submit information following this request  

• If the agency determines the submitted information is sufficient to support the RRE’s defense, a CMP will not be issued. However, if CMS finds the information was insufficient or not submitted timely, the initial finding of noncompliance will continue and move to Step 3  

Step 3 – Notice of Proposed Determination  

• If there’s no response to the Informal Notice or if CMS determines there was insufficient mitigating evidence, CMS will issue a Notice of Proposed Determination to Impose a Civil Money Penalty via certified mail 

• An appeals process is available to the RRE and they can request a hearing within 60 day of receipt of this Notice and a subsequent appeals procedure is available to the RRE depending on the initial Administrative Law Judge’s (ALJ) decision  

Step 4 – Final Notice of Determination  

• If the RRE foregoes an appeal from Step 3 or exhausts their administrative appeal remedies and the CMP is upheld, a Notice of Final Determination to Impose a Civil Money Penalty is sent to the RRE via certified mail with payment instructions 

• Of note, there is an applicable 5-year statute of limitations  

In 2025, it is imperative for an RRE to ensure their Sec. 111 house is in order so they are not exposed to a CMP. While not exhaustive, the following are suggestions for maximizing mitigation against CMPs.  

Understanding Obligations 

• Ensure familiarity with Sec. 111 guidelines and requirements as outlined in the NGHP Sec. 111 User Guide and keep up with any changes.  

• CMS has been great about providing educational webinars and materials on CMPs. RREs should continue to attend those session, seek guidance from MSP experts who are versed in Sec. 111 reporting, ask questions of their reporting agent (if applicable), request assistance from their EDI representative at the Benefits Coordination & Recovery Center (BCRC), or engage the agency at Sec111CMP@cms.hhs.gov.    

Independent Audit Function  

• Whether you’re an RRE that self-reports or uses a reporting agent, it is prudent to have an independent audit conducted by a third-party to ensure accuracy, quality and timeliness – in addition to validating processes and rules associated with existing Sec. 111 reporting.  

• An independent audit function can ensure compliance, increase accuracy, mitigate against CMPs and other risks, identify gaps and inefficiencies, and demonstrate credibility and trust by having independent third-party review involved.  

Documentation  

• It will be vital for RREs to develop procedures to maintain mitigating evidence / information related to records that are potentially noncompliant.  

• There are often events that are out of the RRE’s control or unique claim situations that have not been accounted for by CMS which may make it difficult for an RRE to comply and these should be thoroughly documented and archived.  

• While it may not be as applicable in workers’ compensation, there is a “safe harbor” relative to CMPs relating to the inability in obtaining beneficiary information necessary for reporting. RREs must make three good faith attempts to obtain information so they can report via Sec. 111. A minimum of two attempts must be mailed or e-mailed to the beneficiary and their attorney (if represented) and a third attempt can be made by either phone, mail, or e-mail. If a refusal to provide the information is made by the beneficiary or their authorized representative, no further attempts are required. CMS indicates that “RREs are required to maintain accurate records reflecting each communication attempt made with the beneficiary.” See CMS’ NGHP Webinar, October 17, 2024 (updated December 17, 2024).   

Don’t Forget the Fundamentals  

• While many RREs are rightfully focused on timely reporting to avoid late records, they shouldn’t forget the basics to ensure other aspects of MSP compliance are not negatively impacted.  

• Ensure data quality and accuracy.  

• Maintain an accurate Profile Report and ensure Profile Report annual recertification. 

Seek Guidance  

• Difficult and complex claim scenarios frequently arise which fall outside of the scope of guidance provided in the NGHP User Guide and often require the advice and counsel of an attorney versed in Sec. 111 and MSP compliance.  

• If an RRE receives any type of notice by CMS about a possible late record or CMP, they should immediately contact their internal subject matter expert (if applicable) point of contact and/or an attorney versed in Sec. 111 and MSP compliance prior to responding.  

WCMSA TPOC Reporting & Potential Impact  

Sec. 111 reporting, as covered in detail above, is a Medicare Secondary Payer (MSP) compliance obligation associated with electronic reporting of beneficiary and claims data. However, it is also an integral part of the overall MSP program and is primarily associated with coordination of benefits and Medicare conditional payment recovery. However, this changed in November of 2023, when CMS held a webinar announcing that in 2025 they would be expanding the Sec. 111 reporting process to include Medicare Set Aside (MSA) data related to workers’ compensation Total Payment Obligation to Claimant (TPOC) events (i.e., settlements).   

As of April 4, 2025, RREs are required to report certain data surrounding MSAs associated with workers’ compensation settlements. CMS indicated the reason for this upcoming change is, “…to assist Medicare in making appropriate determinations concerning coordination of benefits… since Medicare should not be a primary payer for future medical services related to a [workers’ compensation] injury as specified in the [workers’ compensation] settlement...” See CMS’ Technical Alert: Change to Workers’ Compensation Reporting (February 23, 2024).  

Of note, submission of this data will be required regardless of whether the workers’ compensation settlement involved an MSA that did not meet CMS’ voluntary review thresholds, whether it was in fact submitted to the agency’s contractor for review/approval, whether it otherwise met voluntary review thresholds but was not submitted (i.e., a non-submit), or if ongoing responsibility for Medicals (ORM) is continuing for some of the related injuries but not others. Moreover, the data must be submitted for all workers’ compensation settlements, regardless of the settlement amount (notwithstanding applicable TPOC reporting thresholds).  

A complete list and details of the required data elements can be found here, but they include the MSA amount (if there is a workers’ compensation TPOC without an MSA this is identified as well), the length of time the MSA covers the beneficiary, whether it is funded via lump-sum or structured annuity, and who the professional administrator is (if applicable).  

The purpose of an MSA is to pay for post-settlement Medicare-covered healthcare items, services and prescription drugs related to the underlying workers’ compensation injury/ies or illness to avoid a cost-shift to the Medicare program. Coordination of benefits must occur to ensure there is not a post-settlement cost-shift and that the MSA is utilized. The agency admits that it, “historically has had limited or incomplete information on MSAs” to properly coordination of benefits (COB) post-settlement.  

To accomplish post-settlement COB with a workers’ compensation MSA, a Medicare beneficiary’s Common Working File (CWF) is flagged with a specific code (or “W” record/marker). The CWF is a single data source where Medicare Administrative Contractors (MACs) can verify eligibility and COB for approval or denial of claims. See Medicare Claims Processing Manual, Chapter 27 - Contractor Instructions for CWF. When the W code is present (MSA funds are available), Medicare should deny claims presented for treatment associated with the underlying workers’ compensation MSA. “That marker is removed once the beneficiary can demonstrate the appropriate exhaustion...” and Medicare will pay primary. See WCMSA Reference Guide, v4.1, Sec. 18.  

Medicare obtains information on the availability of the MSA funds and the appropriateness of MSA spend from the beneficiary or their administrator through “annual attestation.” Annual attestation is reporting required by the self-administering beneficiary or the professional administrator every year, within 30 days of the anniversary date of the settlement, and includes information such as the total spend for medical services / prescription drugs, and balance of the account at the end of that calendar year. See Self-Administration Toolkit for WCMSA Arrangements, v. 1.6, Sec. 8. “The WCMSA administrator must send annual attestations summarizing the account transactions to the contractor responsible for monitoring the case. The contractor is then responsible for verifying that the funds from the WCMSA were spent on medical services for Medicare-covered services…” See WCMSA Reference Guide, v4.1, Sec. 18. 

Potential Impact & Focus Points  

CMS will have unprecedented insight into all workers’ compensation settlements involving an MSA and visibility into whether those MSAs were submitted via the voluntary review process or not – and even whether an MSA was incorporated at all. The workers’ compensation and MSP industry will have a keen eye on any potential action and/or enforcement CMS takes in 2025 and beyond.   

The agency’s stated objective for these changes has been to ensure proper coordination of benefits post-settlement and mitigating the chance there is an unnecessary cost-shift to the Medicare program. This will place additional focus on the importance of post-settlement administration. Parties to a settlement should consider the use of a professional administrator to ensure compliance and that reporting obligations are met to avoid a potential denial of benefits or other negative consequences.  

Additionally, Sec. 4.3 of the WCMSA Reference Guide looms in the background in relation to these new reporting requirements as, “CMS treats the use of non-CMS-approved products as a potential attempt to shift financial burden by improperly giving reasonable recognition to both medical expenses and income replacement… [and] [a]s a matter of policy and practice, CMS may at its sole discretion deny payment for medical services related to the [workers’ compensation] injuries or illness, requiring attestation of appropriate exhaustion equal to the total settlement… unless it is shown, at the time of exhaustion of the MSA funds, that both the initial funding of the MSA was sufficient, and utilization of MSA funds was appropriate. This will result in the claimant needing to demonstrate complete exhaustion of the net settlement amount, rather than a CMS-approved WCMSA amount.” Notwithstanding this, as evidenced by the release of WCMSA 2024 FY data, “counter-higher” amounts over the last five years in the aggregate totaled approximately $920 Million, approaching the billion-dollar mark. A counter higher is when the agency’s contractor renders a decision on a voluntarily submitted MSA with a recommendation/approval for an amount higher than initially proposed. While counter-highers have decreased slightly from FY2023 to FY2024 (22% to 21%), it is notable that this figure averaged 14% from FY 2020 – FY 2022 and saw a jump in FY2023 to 22%. Non-submission practices and product offerings have increased and will likely continue to do so because of costly counter-highers even in light of the upcoming MSA reporting requirements. It is yet to be seen if CMS invokes enforcement action (i.e., denying payment) or makes determinations of MSA allocation insufficiency relative to non-submitted MSAs pursuant to Sec. 4.3 of the Reference Guide. Regardless, it will remain vital that workers’ compensation payers develop protocols and procedures ensuring Medicare’s interests are adequately considered in settlements. Whether submitted or not, there’s an opportunity to balance cost-containment with allocation accuracy and adequacy to ensure an MSA is not susceptible to contentions of insufficiency. Lastly, settlements in controverted claims where no money is being set aside should also be given MSP legal attention to ensure future risk is mitigated.  

Potential Implications of Loper Bright v. Raimondo  

Prior to June of 2024, federal courts deferred to a federal agency’s reasonable interpretation of an otherwise ambiguous statutory framework. This deference was known as “Chevron Deference,” named after Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).  

However, Chevron Deference was upended this past summer in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024). Without delving into the underlying facts in Loper Bright, this US Supreme Court decision stands for the proposition that federal courts must now exercise their own independent judgment when reviewing agency interpretations of law, without the mandate to provide deference to that agency.  

To illustrate how this might affect a scenario under the MSP - if CMS paid scrutiny to the adequacy or sufficiency of a non-submitted MSA through some enforcement action (such a denial of benefits), thus affording a party legal standing to exercise their appeal or other legal rights, it is possible Loper Bright principles may ultimately apply. For example, a denial of benefits here would permit an aggrieved beneficiary to exercise their administrative appeal rights. Assuming a beneficiary exhausted these remedies, the controversy could wind up in federal court.  

The MSA program, while rooted in the MSP statute and based upon a specific federal regulation (42 CFR 411.46), is still grounded in administrative policy and interpretation of and by CMS. In addition to this, “[t]here are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” See WCMSA Reference Guide, v4.1, Sec. 1.0 (emphasis provided in original).  

Under Loper Bright, the potential judicial analysis of a controversy surrounding an MSA vis-à-vis agency policy interpretation may come down to a court’s independent judgment versus deferring to CMS. The MSA program has evolved from the initial Patel Memo in 2001 to a collection policies consolidated in the WCMSA Reference Guide. While efforts have been made to codify MSAs statutorily or through the rulemaking process, MSAs remain sub-regulatory creatures of administrative policy and agency interpretation and thus susceptible to a court’s independent judgment under Loper Bright.  

Other areas of the MSP appear clearer with respect to the applicability of Loper Bright. For example, CMS mandating that RREs submit MSA TPOC data would likely be found permissible if challenged, as congress granted broad authority to the agency to require “…other information as the Secretary shall specify in order to enable the Secretary to make an appropriate determination concerning coordination of benefits…” See 42 USC 1395y(b)(8)(ii). See also Loper Bright Enterprises v. Raimondo, 603 U.S. 369 at 395 (2024).  

While the potential implications of Loper Bright in relation to the MSP are speculative, it will be worth following any challenges and/or court cases closely.  

Focus on Medicare Advantage with new Presidential Administration  

Dr. Mehmet Oz, president-elect Donald Trump’s pick to oversee the Centers for Medicare & Medicaid Services (CMS) is “a vocal champion for expanding the private sector’s role in Medicare.” In Dr. Oz’s 2022 Pennsylvania Senate run he also committed to expanding Medicare Advantage.  

Medicare Advantage (Part C) continues to grow, accounting for more than half (54%) of Medicare enrollees. See KFF Enrollment Updates and Key Trends. The reason for this growth is due to several factors, including low premiums and additional coverage traditional Medicare doesn’t provide for - such as hearing, vision, and dental.  

With the growth of Medicare Advantage (including Part D prescription drug coverage) comes with it the intersection of Medicare Secondary Payer (MSP). It has been a focus with respect to recovery ever since the decision in In re Avandia Mktg., Sales Pracs. & Prods. Liab. Litig., 685 F.3d 353 (3d Cir. 2012) and its progeny, and following that with the company MSP Recovery, and the passage and implementation of the Provide Accurate Information Directly (PAID) Act of 2020.  

However, recently, there’s been additional focus in the realm of workers’ compensation Medicare Set Asides (MSAs). On August 1, 2024, CMS issued an updated WCMSA Reference Guide “with details about WCMSA coordination with other health insurers…” i.e., Medicare Part C and D prescription drug plans. See WCMSA Reference Guide, v4.1, Sec. 1.1. In this updated guide, at Sec. 4.1.3, CMS provided, in part, that:  

“CMS notifies Part C and D plan sponsors that a WCMSA has been approved and instructs plan sponsors to conduct Medicare Secondary Payer (MSP) investigations. However, CMS does not relay WCMSA details to plan sponsors. Instead, CMS instructs plan sponsors to seek WCMSA coverage details from the WCMSA administrator as part of the plan sponsor’s investigation. When possible, Part C and D plan sponsors are required to avoid paying for expenses that should be covered by a WCMSA. When a settlement is reached, the settlement details dictate who is responsible for ensuring Medicare (Parts A, B, C, and/or D) is repaid for any conditional payments associated with the [workers’ compensation] illness or injury. If the settlement does not identify funds for past debt, CMS considers those debts up to the date of settlement to belong to the WC insurer. Recovery may be sought from any party receiving inappropriate payment on behalf of the beneficiary. The administrator must provide details concerning treatments and medications used exclusively to treat a related illness or injury to the plan sponsor so the sponsor may avoid making primary payment in the future.”  

Given Part C & D’s continued growth, the attention it will get with the incoming administration, and the increased data sharing between CMS and the plans, this author suspects there will be more active recovery and coordination of benefit activities in 2025 – including those involving MSAs. Claims payers should ensure their MSP program accounts for not only traditional Medicare (Part A & B) conditional payment identification and resolution, but also for Part C & D. In addition to this, RREs should ensure their Sec. 111 query data is operationalized to support these efforts. Lastly, proper MSA administration for those beneficiaries with Part C & D plans will also be vital.  

Wrap Up  

2025 will likely eclipse 2024 for notable events in Medicare Secondary Payer (MSP) compliance – but so it goes with each passing year. The MSP Act’s purpose is to protect the solvency of the Medicare Trust Fund. A trust fund that is eroding. The 2024 Medicare Board of Trustees’ report projects that total Part A spending will exceed incoming revenues by 2030 and by 2036 there will be insufficient funds to pay full benefits for that year. Thus, the MSP program is a vital element to the fiscal integrity of the Medicare program, and we will therefore continue to see changes and reforms to keep pace with its mission and the evolving insurance and healthcare industries.  

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Author Bio  

Shawn Deane  

General Counsel & Vice President of Claims Solutions | J29  

Shawn.Deane@j29inc.com      

(866) 529-6771  

www.j29inc.com    

As General Counsel & Vice President of Claims Solutions, Shawn Deane leads J29’s legal and Medicare Secondary Payer (MSP) services team. Shawn is a practicing attorney and has over 17 years of experience in Medicare compliance, workers’ compensation, and insurance claims. He was previously General Counsel & Senior Vice President of Risk Management & Compliance at the nation’s largest professional administrator of Medicare Set Asides. Prior to that he was Vice President of Medicare Compliance & Policy at one of the country’s largest Medicare Set Aside vendors. He’s an industry expert and thought leader in workers’ compensation, Medicare Set Asides (MSAs) and Medicare compliance.   

About J29  

J29 is a women-owned business that offers Medicare Secondary Payer (MSP) compliance services providing Medicare Set Asides (MSAs), conditional payment / lien services and related solutions to all workers’ compensation stakeholders – including carriers, self-insureds, third-party administrators, and attorneys.