BILL ANALYSIS Ó
AJR 12
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AJR 12 (Solorio) - As Introduced: May 17, 2011
SUBJECT : Strengthening Medicare and Repaying Taxpayers Act of
2011.
SUMMARY : Makes specified legislative findings and declarations
regarding H.R. 1063, (the federal Medicare Secondary Payer
Enhancement Act of 2011) and requests that the Congress and the
President of the United States enact the measure. Specifically,
this resolution states:
1)California residents who are eligible for the Medicare Program
periodically seek compensation for personal injuries that are
the liability of other parties and seek benefits through
California's worker's compensation system.
2)California is periodically found liable for industrial
injuries to individuals who are eligible for the Medicare
Program and, as an employer, California pays benefits to those
injured individuals under the worker's compensation system.
3)The way the secondary payer law is currently being
administered with respect to claims involving individuals who
are eligible for the Medicare Program has caused considerable
delay and unfairness in the settlement of those claims.
4)The delays in the settlement of claims and the uncertainty of
the scope of responsibility of the Medicare Program as the
secondary payer has increased settlement costs, and the delay
and uncertainty caused by the Medicare secondary payer law has
increased costs to the state and to local jurisdictions.
5)The federal Strengthening Medicare and Repaying Taxpayers Act
of 2011 (Act) has been introduced in Congress, has bipartisan
support, and is supported by a broad spectrum of organizations
with an interest in ensuring that the Medicare secondary payer
law is administered fairly and efficiently to the benefit of
the Medicare Trust Fund and individuals and payers who have an
interest in the prompt settlement of claims for damages or
benefits.
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EXISTING FEDERAL LAW :
1)Establishes the Medicare program which provides health care
regardless of income or health status to individuals ages 65
and older and for younger people with permanent disabilities.
2)Establishes that Medicare is precluded from paying for a
beneficiary's medical expenses when payment has been made or
can reasonably be expected to be made under a workers'
compensation plan, an automobile or liability insurance policy
or plan (including a self-insured plan), or under no-fault
insurance, also referred to as "secondary payer."
3)Establishes "conditional payments" or Medicare payments for
services for which another payer is responsible, made under
certain circumstances, as specified, or because the
intermediary or carrier did not know that the other coverage
existed.
4)Establishes that Medicare has a priority right of recovery
over any other entity to the proceeds of any settlement. To
the extent that Medicare has made any conditional payments,
Medicare will recover those payments pursuant to federal law.
5)Establishes that the burden of future medical expenses in
workers compensation cases may not be shifted to Medicare and
that Medicare's interest must be considered in workers'
compensation settlements, when future medical expenses are a
component of the settlement.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS RESOLUTION . This resolution has been
introduced to express support from the California Legislature
for the Act, with the objective of fairly and efficiently
settling workers' compensation and injuries from others'
liabilities for individuals whose health care is covered
through the federal Medicare Program.
2)MEDICARE . According to a primer published by the Kaiser
Family Foundation, Medicare, established in 1965, is a social
insurance program that provides health and financial security
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for individuals ages 65 and older and for younger people with
permanent disabilities. Medicare provided health insurance
coverage to 47 million people in 2010: 39 million people ages
65 and older and eight million people with permanent
disabilities who are under age 65. The program helps to pay
for many important health care services, including
hospitalizations, physician services, and prescription drugs.
Individuals contribute payroll taxes to Medicare throughout
their working lives and generally become eligible for Medicare
when they reach age 65, regardless of income or health status.
Of California's population, 13% (approximately 4.8 million)
are on Medicare. According to a chart published by the
Department of Industrial Relations, Workers' Compensation
division, 2% (11,000 out of 531,000 claims) of claims in 2009
were from individuals over 65 years of age.
Medicare comprised an estimated 12% of the federal budget and
more than one-fifth of total national health expenditures in
2010. Medicare is a federally funded program (through general
federal revenues, payroll taxes, and premiums paid by
beneficiaries) and in general, state General Funds do not
support the program administration or health services provided
to Californian's on Medicare.
3)MEDICARE AND WORKERS' COMPENSATION . According to the Centers
for Medicare and Medicaid Services (CMS), the federal agency
which administers Medicare, because Medicare does not pay for
an individual's workers' compensation related medical services
when the individual receives a workers' compensation
settlement that includes funds for future medical expenses, it
is in the best interest of the individual to consider Medicare
at the time of settlement. For this reason, the CMS
recommends that parties to a worker's compensation settlement
set aside funds, otherwise known as Workers' Compensation
Medicare Set-aside Arrangements for all future medical
services related to the Workers' Compensation injury or
illness/disease that would otherwise be reimbursable by
Medicare. If Medicare's interests are not considered, CMS has
a priority right of recovery against any entity that received
a portion of a third party payment either directly or
indirectly. Medicare may also refuse to pay for medical
expenses related to the workers' compensation injury until the
entire settlement is exhausted. To avoid future overpayment
negotiations and to protect the injured worker's future
Medicare benefits, it is in the best interests of all parties
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to work together, including Medicare, the workers'
compensation agencies, attorneys, workers compensation
carriers, and claimants.
4)THE STRENGTHENING MEDICARE AND REPAYING TAXPAYERS ACT . The
Strengthening Medicare and Repaying Taxpayers Act (SMART Act)
or H.R. 1063 is sponsored by the Medicare Advocacy Recovery
Coalition (MARC) comprised of insurers, employers, third party
administrators, and trade associations. According to MARC,
the Medicare Secondary Payer laws and regulations were poorly
understood and rarely enforced for many years. A provision in
the Medicare, Medicaid, and State Children's Health Insurance
Program Extension Act of 2007 requires insurers to report to
CMS every settlement or other payment made to a beneficiary.
A penalty of $1,000 per day per claim applies for failure to
report properly. Because the reporting and reimbursement
obligations are so complicated, and CMS does not provide a
repayment amount until after parties have settled, cases
involving beneficiaries are difficult if not impossible to
settle. Beneficiaries and other stakeholders are left confused
and frustrated. The SMART Act attempts to correct this by
doing the following:
a) Creating a process for Medicare to advise parties in the
process of settling, before settlement, of how much is
owed, so that parties can appropriately allocate and
resolve their Medicare obligations during the settlement;
b) Establishing a threshold amount to be set annually by
CMS at the amount of settlement likely to yield a Medicare
Secondary Payer collection at or below the government's
recovery cost;
c) Creating enforcement discretion of up to $1,000 per day
per claim in penalties, and directing the federal
Department of Health and Human Services to establish safe
harbors that will provide companies with protection for
good faith compliance efforts;
d) Directing Medicare to identify an alternative method of
identifying individuals (such as the last four digits of a
Social Security Number) rather than Social Security Numbers
or Health Insurance Claims Numbers for the purpose of
Medicare Secondary Payer reporting; and,
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e) Creating a three-year statute of limitations (measured
from the date of reporting) covering all Medicare Secondary
Payer claims.
5)PRIOR LEGISLATION . AJR 42 (Solorio), Chapter 92, Statutes of
2010, was substantially similar to this resolution and made
specified legislative findings and declarations regarding and
requested that the Congress and the President of the United
States enact H.R. 4796, the Medicare Secondary Payer
Enhancement Act of 2010. According to proponents, H.R. 4796
was scheduled for committee but never heard.
6)SUPPORT . This resolution is supported by workers'
compensation and liability insurance carriers because they
believe the federal legislation will bring clarity and
certainty to the process by which Medicare seeks to enforce
its rights under Medicare Secondary Payer laws. According to
proponents, under the current system Medicare beneficiaries
and third parties are having significant problems settling
industrial liability and workers' compensation claims because
they cannot determine the amount owed to Medicare in a timely
manner. The carriers assert that this current situation wastes
limited judicial and other resources and needlessly delays
settlements, and that H.R. 1063 will address these problems.
REGISTERED SUPPORT / OPPOSITION :
Support
Acclamation Insurance Management Services
Allied Managed Care
Pacific Compensation Insurance Company
Opposition
None on file.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097