CMS Announces Settlement Recovery Threshold for Liability Insurance (including Self-Insurance) to remain $1000
Heather Sanderson
November 18, 2015

As part of Section 202 of the SMART Act, CMS is required to annually compute a threshold amount in which liability insurance (including self-insurance) settlements are exempt from MMSEA Section 111 reporting requirements, as well as from the requirement to reimburse conditional payments to Medicare. In 2013, CMS announced that the threshold would be $1000 effective January 1, 2014. CMS was to re-review this annual threshold amount by November 15th of each year, with the new threshold to become effective January 1 of the following year.

CMS recently released an alert stating that the threshold amount will remain $1000. The alert can be found here.

The alert provides the computation methodology that CMS utilized to ensure that Medicare’s recovery exceeds its costs in collecting the claim. More specifically, the alert states that “Medicare incurs costs to perform these activities. These costs include compiling related claims, calculating conditional payments, applying reductions, sending demands, providing customer service, etc. In addition to CMS’ costs associated with pursuing recovery, Medicare does not usually recover the full amount of the conditional payments. For example, there may be reductions to the demand to account for procurement costs (attorney fees and costs) or for full or partial waiver of recovery if certain criteria are met. Implementing a threshold allows CMS to use its resources wisely.”

CMS’ computation found that the average cost of collection was $420 per case. Additionally, the settlement amount range that had the demand amount closest to the $420 cost of collection was for settlements above $750 and less than or equal to $1000. The average demand amount for this range of settlements was $436. Therefore, CMS determined that it should maintain the $1000 threshold.

Franco Signor Commentary: We applaud CMS taking the time to review and calculate the threshold to ensure that its recovery exceeds its costs and look forward to future annual calculations. While we may have hoped that this threshold would increase due to inflation over the past two years, it appears that the calculations that CMS undertook wholly make sense. At some point in the near future, it would make sense that this $1000 threshold amount would increase.

What’s next? While technically not required by the SMART Act, it would be beneficial for the workers’ compensation and no-fault insurance industry if CMS released a threshold that would apply to those settlements as well. Additionally, the industry still awaits the issuance of Safe Harbors from MMSEA Section 111 penalties. CMS finalized collecting comments from the industry on the ANPRM in February 2014 and we await the finalization of that rule-making.

Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP
Chief Legal Officer
Franco Signor LLC