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January 15, 2008

MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007

On December 29, 2007, President Bush signed into law the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law No: 110-173).¹ The new law:

• Extends the State Children’s Health Insurance Program (SCHIP), which otherwise would have ended on December 31, 2007, through March 31, 2009, and
• Introduces new Medicare Secondary Payer (MSP) data-reporting requirements that will affect employer-sponsored group health plans.

This Capital Checkup summarizes the new MSP data-reporting requirements.

Background on MSP

The MSP law and regulations address which payer pays primary when a person is covered by Medicare and also by a group health plan. Generally, group health plans must pay primary to Medicare (thus making Medicare the secondary payer) when the participant is an active employee, while Medicare pays primary when retirees have both Medicare and group health plan coverage.

Under current MSP law,² employers are required to respond to MSP-related inquiries from Medicare carriers seeking to determine who should pay primary.

The New MSP Data-Reporting Requirements

Starting January 1, 2009, the new MSP data-reporting requirements will require insurers, third party administrators (TPAs) and a plan administrator or fiduciary of a self-insured/self-administered group health plan to:

• Collect from the plan sponsor and plan participants information, as required by the Secretary of Health and Human Services (HHS), to identify where the group health plan is or should be paying primary for medical care, and
• Submit such information to HHS in a form and manner specified by them.³

The penalty for noncompliance will be $1,000 per day for each day of noncompliance for each individual for whom information should have been submitted. Any other applicable MSP penalties would continue to apply.

The Centers for Medicare and Medicaid Services (CMS) continues to work on Medicaid-related data reporting requirements applicable to group health plans under the Deficit Reduction Act of 2005 (DRA), and it is possible that those efforts will be combined with efforts to implement the new MSP-related requirements. Work on the DRA reporting requirements has been slow due to conflicts about how much information is necessary and what format it should take.

Implications for Health Plan Sponsors

Plan sponsors will not be able to comply with these new reporting requirements until HHS issues implementing regulations or other guidance specifying the data elements to be provided and the manner of data submission. As with the proposed reporting under the DRA, it may be difficult to agree on standards and data for reporting, so it may take CMS some time to implement the new law.

Under the new law, the Secretary is also required to share information on entitlement under Medicare Part A and enrollment under Part B with insurers, TPAs and plan administrators/fiduciaries. This aspect of the new law could actually make it easier for plan sponsors to coordinate benefits with Medicare and facilitate retiree enrollment into private Medicare plans (e.g., Prescription Drug Plans and Medicare Advantage plans).

Outlook: Policy Changes for SCHIP Possible

In August 2007, HHS announced controversial policy changes to SCHIP that primarily address efforts to limit SCHIP eligibility to children in families with income below 250 percent of the poverty level and to prevent substitution of SCHIP coverage for private coverage.⁴ As part of the fall legislative process, Congress attempted to respond to and counteract some of the administration’s policy changes. Nevertheless, despite months of negotiations and two presidential vetoes, Congress’ recent extension of SCHIP did not address any of these policy issues.

Congress may attempt to deal with these policy issues this year because affected states must amend their state plans by August 2008 to reflect the August 2007 changes announced by HHS.

As with all issues involving the interpretation or application of laws, plan sponsors should rely on their legal counsel for authoritative advice on the Medicare, Medicaid, and SCHIP Extension Act of 2007. The Segal Company can be retained to work with plan sponsors and their attorneys on coordination of group health plan coverage with public programs, including Medicare, Medicaid and SCHIP.

1	To see the text of the law (S. 2499), click here. At the time this Capital Checkup was published, Public Law No: 110-173 had not been published. (To return to the Capital Checkup text, click here.)
2	Section 1862(b)(5)(C)(ii) of the Social Security Act. (To return to the Capital Checkup text, click here.)
3	See Section 111 of the new law for the MSP provisions. (To return to the Capital Checkup text, click here.)
4	These policy changes are spelled out in a letter to State Health Officials dated August 17, 2007. To see that letter, click here. (To return to the Capital Checkup text, click here.)

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