SMART Act Implementation & other Federal Regulatory Issues


On January 10, 2013, President Obama signed into law the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012.  Title II of the law contains the SMART Act provisions advocated by the MARC Coalition.


The Medicare Secondary Payer (MSP) law, enacted by Congress in 1980, establishes “who pays first” when a Medicare beneficiary requires treatment and a third party may be responsible for paying for certain health care costs.  In such cases, the third party pays “first,” and Medicare becomes “secondary.” MSP issues arise when a beneficiary has private health insurance or a third party is responsible to pay for certain health care costs, such as in a settlement or through workers compensation or no-fault (auto) insurance.  These third-party non-group payers are known as “non-group health” (NGHP) claims.

For many years, the MSP laws and regulations were poorly understood and CMS rarely enforced NGHP claims.  In 2007, Congress amended the law requiring companies settling cases to report every settlement, judgment, award, or other payment made to a beneficiary to the Centers for Medicare and Medicaid Services (CMS).  Failure to report properly was subject to a penalty of $1,000 per day per claim.  The system for reporting and repaying claims to Medicare, however, was broken.  As a result, settlements were unnecessarily delayed, which wasted government, beneficiary, and stakeholder resources. Beneficiaries’ claims against third parties became difficult, if not impossible, to settle.  All parties were left confused and frustrated.

Other inefficient rules plagued the system, including: (1) requirements that beneficiaries provide their Social Security Numbers (SSNs) to parties against whom they were pursuing a claim in order to settle; (2) a lack of safe harbors for good-faith efforts to report properly; and (3) low-dollar recovery demands that cost the government more to process than it could collect.

In response, in December 2012,  Congress passed the SMART Act to remedy the major problems within MSP. The SMART Act strengthens Medicare, protects beneficiaries, and improves the MSP process by enabling all parties to settle claims quickly and speed repayments to Medicare.

  • The SMART Act provides a more-affordable and less-intrusive MSP system that protects beneficiaries and the Medicare Trust Fund while minimizing waste among judicial and other resources.
  • The SMART Act does not needlessly confuse parties trying to settle a beneficiary’s injury claim.
  • The SMART Act empowers Medicare to provide settling parties the amount of their repayment obligation during the settlement process, allowing taxpayers to settle quicker and repay Medicare faster.
  • The SMART Act increases Medicare’s efficiency by ensuring the government does not spend more money pursuing a MSP claim than it will actually recover.
  • The SMART Act include safe-harbors to protect stakeholders that make good faith efforts to comply with Medicare’s complex MSP reporting process and safeguards Medicare beneficiaries by eliminating the required use of their SSNs in the MSP reporting process.


While passage of the SMART Act was a major achievement, it represents only half the work needed to fix the MSP system.  Several SMART Act provisions will require regulation to be implemented, while others are self-executing.  More specifically:

  • Section 201 – Timely Final Conditional Payment Demands:  Section 201 of the SMART Act requires Medicare to create an “electronic portal” for the timely exchange of final conditional payment amounts.  The law requires CMS to promulgate regulations by October 10, 2013, defining the use and operation of the portal.  CMS has announced that due to federal electronic privacy requirements the new portal will be operational no later than January 1, 2016.
  • Section 202 – Thresholds:  Section 202 of the SMART Act requires Medicare to publish an annual “settlement threshold” below which settling parties are exempt from the MSP laws, in order to assure that CMS does not spend more on collection than a claim is likely to yield in recovery, and to ease administration of small dollar settlements for all stakeholders.  The law requires CMS to publish an annual threshold each November 15, starting November 2014.  In October 2014, CMS updated its threshold to exempt most liability settlements of $1000 and under from MSP reporting and repayment requirements.
  • Section 203 – Reporting Requirements:  Section 203 of the SMART Act changed the $1,000 per day per claim penalty provisions of the mandatory “Section 111” reporting requirements, to eliminate the strict liability provisions of the penalty, and to create enforcement discretion in permitting penalties to be “up to” $1,000 per day per claim, based upon fault principles.  This significant clarification of the law became effective upon passage, although CMS is expected to issue penalty regulations based upon the 2007 “Section 111” law.  The SMART Act also required CMS to promulgate “safe harbors” from the reporting penalties.  MARC continues to advocate that the Agency quickly publish a proposed and final rule implementing this section.
  • Section 204 – Social Security Numbers:  Section 204 of the SMART Act requires CMS to eliminate the use of full social security numbers from the “Section 111” reporting requirements by July 10, 2014.  In August 2014, CMS eliminated the requirement that full social security numbers be used, and instead required only the “last five digits” to be reported.
  • Section 205 – Statute of Limitations:  Section 205 of the SMART Act imposes a three year limitations period on CMS to pursue MSP recoveries.  The three year limitation period begins once a claim is reported to the Agency.  The Limitations period became effective on July 10, 2013.

The MARC Coalition is committed to working with Centers for Medicare and Medicaid Services and the Congress to ensure that the SMART Act is implemented timely, and correctly.

Issue Brief:

SMART Act Implementation Issue Brief

Reference Documents:

U.S. Senate Letter to CMS Marilyn Tavenner on the Delays Related to the Implementation of the SMART Act
U.S. House Letter to CMS Administrator Marilyn Tavenner on the Delays Related to the Implementation of the SMART Act
MARC Comment Letter: Right of Appeal for MSP Determination
MARC Comment Letter: Calls for Comprehensive Federal Regulation Defining Section 111 Penalty Criteria – Safe Harbor Provisions
Federal Register Notice, CMS Proposed Rule on provisions of the SMART Act Implementation: Right of Appeal for MSP Determination Relating to Liability Insurance, No-Fault Insurance, and Worker’s Compensation Laws and Plans, December 27, 2013
Federal Register Notice, CMS Proposed Rule on MSP and Certain Civil Money Penalties, December 11, 2013
MARC Comment Letter, November 18, 2013 – CMS-6054-IFC; Medicare Program; Obtaining Final Medicare Secondary Payer Conditional Payment Amounts via Web Portal
MARC Comments on CMS Interim Final Rule – Submitted November 18, 2013
U.S. House of Representatives, Energy & Commerce Committee Letter to CMS (September 5, 2013)
SMART Act as Introduced (112th Congress, H.R.1063, S.1718)
SMART Act as Enacted (P.L. 112-242, Title II)