MARC Statement Concerning Section 111 Penalties Proposed Rule

WASHINGTON, DC – The Medicare Advocacy Recovery Coalition (MARC) Chair Re Knack today issued the following statement regarding the Centers for Medicare and Medicaid Services (CMS) release of a proposed rule concerning how it will assess penalties for Medicare Secondary Payer (MSP) late reporting:

“Late last week the Center for Medicare and Medicaid Services released a proposed rule addressing how it will assess penalties for late claims reporting under the Medicare Secondary Payer Act, known as “Section 111.”  This proposed rule has the potential to reach businesses across the country, from the largest corporations to Main Street companies.  MARC is actively engaging with our members and industry stakeholders to review this proposed rule and its impact on the secondary payer community. We believe that stakeholders’ voices should be heard on this important issue and in the coming weeks, we will be submitting detailed commentary to CMS outlining our perspective. We look forward to serving as a resource for the agency as it prepares the final draft of this rule.”

Background on Section 111 Penalties

Congress first established these Section 111 reporting requirements in 2007, when it mandated that any company or organization in America settling or paying a claim involving a Medicare beneficiary file a report to CMS advising the agency about the settlement, judgement or award.

When Congress first enacted the law, it created a “strict liability” failure to report penalty of $1,000 per day per claim regardless of the size of the claim or the reason for the reporting delay. These penalties would have applied even in cases where a failure to report was the result of a clerical or paperwork error as opposed to any ill intent.

In 2012, President Obama signed into law the Strengthening Medicare and Repaying Taxpayers (SMART) Act which helped streamline the MSP reporting process to protect entities that make a good-faith effort to comply with Medicare’s complex MSP reporting processes. This important legislation eliminated the strict liability nature of the late reporting penalties and replaced it with a “sliding scale” penalty regime of “up to” $1,000 in penalties per claim.

Until today, CMS has not developed such sliding scale as mandated by the SMART Act and thus had no mechanism to levy penalties on entities that fail to report – or are simply late in reporting – MSP claims. This proposed rule is an attempt to finally establish this penalty policy – meaning businesses who report and settle claims to CMS may be faced with steep penalties once again.  Unfortunately the proposed rule does not contain an adequate penalty assessment mechanism to accommodate for good faith compliance efforts or other mitigating factors typically found in other Medicare penalty regulations.  Instead, the proposed regulation appears to harness mechanical calculations of compliance with the extensive technical reporting requirement as a proxy for real penalty calculations, which is unfortunate.  MARC will be commenting on these proposals, and urging more flexibility in penalty assessments consistent with the extensive body of other healthcare regulations.

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About MARC

When a beneficiary is injured, and another party is supposed to cover their healthcare expenses – such as in a worker’s compensation or liability claim – Medicare’s legal responsibility to pay is “secondary.” Unfortunately, the current Medicare Secondary Payer (MSP) policy is convoluted and confusing, creating problems and inefficiencies for beneficiaries, settling parties and taxpayers alike. That’s why MARC exists: to support commonsense reforms to fix this broken system. MARC’s membership represents virtually every sector of the MSP regulated community including attorneys, brokers, insureds, insurers, trade associations, self-insureds and third-party administrators. For more information on MARC, please visit

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