SECTION 111 PENALTIES - MARC Coalition

SECTION 111 REPORTING PENALTIES

SECTION 111 PENALTIES

BACKGROUND

In 2007, Congress enacted Medicare Secondary Payor (MSP) “Reporting” requirements, known as “Section 111” Reporting. The requirements obligate any party settling or paying a claim involving a Medicare beneficiary to report to Medicare the settlement, payment or judgment, along with other specified information related to the claim. Reporting is difficult, and an entity must be registered with Medicare as a “Responsible Reporting Entity” (or RRE) to be able to report. Although it is estimated that millions of claims are reported each year, millions more may not be.

SMART ACT CHANGES

When Congress enacted the statute, it imposed a severe strict liability penalty of $1,000 per day per claim for failure to report. MARC intervened with Congress and in 2012 the statutory penalty was modified to a sliding scale of “up to $1,000 for each day of noncompliance with respect to each claimant.” Since the enactment of the SMART Act into law in 2013, not a single penalty has been assessed by the government for late reporting. Because the government must now use a sliding scale to assess penalties, notice and comment rulemaking will be required to identify the sliding scale factors that the government will consider in order to assess penalties.

Rulemaking

In 2013, the government took initial steps to begin the rulemaking process by issuing an “Advance Notice of Proposed Rulemaking” (ANPRM) soliciting comments on how the Agency should structure the sliding scale for penalties and otherwise create safe harbors to avoid penalties. Thirty-four comment letters were submitted from interested parties including comments from MARC, insurance trades, health plans, lawyers, beneficiary groups and others.

Seven years later, on February 18, 2020, CMS released the formal notice and comment rulemaking for Section 111 penalties.

MARC’S POLICY POSITION ON THE PROPOSED RULE

As MARC’s comment letter indicates, the current Section 111 Penalty Proposed Rule is unduly focused on penalizing entities that are reporting, rather than those who intentionally refuse to report. Given these fundamental flaws in the proposed regulation, MARC has requested that CMS withdraw the proposed rule and issue a new proposal, explicitly incorporating the standards of 42 C.F.R. § 1003.140, or proposing analogous “sliding scale” standards for the assessment of penalties and refocusing the proposal towards those who are not reporting, rather than penalize technical and non-substantive reporting field mistakes made in good faith.

Further concerns with the Section 111 Penalty Proposed Rule include:

The proposed penalties will violate the Eighth Amendment of the United States Constitution, and if applied to technical violations of CMS reporting requirements, would violate the Supreme Court’s recent ruling in Allina Health v. Azar, and the MSP statute itself.
The proposal fails to follow Congressional direction and implement the sliding scale standard already in CMP regulations and is illegally maintaining the $1,000 penalty limit explicitly modified by Congress.
The proposed penalty regulation related to retroactive terminations of “Ongoing Responsibility for Medicals” (ORM) fields is unreasonable and unworkable.
The proposed penalties for erroneous reporting resulting in a 20% claim rejection rate is similarly arbitrary and capricious.
The proposed “safe harbor” for nonreporting when a beneficiary refuses to provide necessary information is unduly restrictive and intrusive to beneficiaries and should be modified.
CMS adopts the incorrect statute of limitations for penalty collection purposes.