New Medicare Secondary Payer Legislation Introduced – Support MARC and the SPARC Act!
Roy Franco
October 18, 2016

The Medicare Advocacy Recovery Coalition (MARC) worked diligently over the past eighteen months to develop and introduce the Secondary Payer Advancement, Rationalization and Clarification Act of 2016 (SPARC). Representatives Tim Murphy (18th District Pennsylvania, Republican) and Ron Kind (3rd District Wisconsin, Democrat) sponsored this bipartisan legislation that was immediately referred to the two committees of jurisdiction over Medicare – House Ways & Means and Energy & Commerce on September 22, 2016.

SPARC’s Purpose: To clarify the ambiguity of subrogation rights by Part D Prescription Drug Plans. If passed, the law will protect a Medicare beneficiary’s right to receive medication from his or her Part D drug plan without interruption, save the U.S. Government enormous expense for reimbursing Part D drug plans their costs for expense no matter the amount recovered, and lastly, provide clear rights for subrogation that defendants understand and can properly respond to. In short, the law saves everyone money.

Why SPARC Makes Sense and Aligns with Legislative Intent: The Medicare Secondary Payer Act (MSP) does not clearly authorize reimbursement for drugs. The MSP law allows Medicare to be reimbursed for “items and services”, but prescription drugs were not defined as an “item” or “service” when it was created under the Medicare Modernization Act of 2003.

The confusion is created because the definitions do not line-up. SPARC is intended to clarify this issue for Prescription Drug Plans (PDPs), in order for such plans to clearly understand their rights with regard to MSP. The legislation amends Secondary Payer provision responsible for the ambiguity and adds four (4) important provisions. Here is a summary of what each provision does in laymen’s terms:

Section 1 – Short Title: The MARC Coalition named this legislation the “Secondary Payer Advancement, Rationalization, and Clarification Act” (SPARC Act). When naming proposed legislation, it is important to achieve two primary goals: 1) To have a name that can be easily remembered as you discuss the legislation with Congress; 2) It is equally important that the title include what to the legislation seeks to achieve. Here, the legislation seeks to clarify the Medicare Secondary Payer law with regard to Part D drugs.

Section 2 – Clarification and Rationalization of Medicare Prescription Drug Secondary Claims Responsibility: This section states that it will amend the current MSP law, specifically at 42 U.S.C. §1395w-102(a)(4) and replace it with new provisions.

Section 2(a) at Subsection (4)(A)(i): Applies the critical secondary position, wherein a Primary Drug Plan would be deemed responsible: the Primary Drug Plan is responsible until such time as the workers’ compensation, no-fault or liability claim is resolved or when ongoing responsibility for medicals are terminated. Absent this provision, Prescription Drug Plans (Part D) could be forced into a primary position if Primary Drug Plans (Primary Plans) through insuring agreement language or by state law.  This specific reference creates a Federal rule of preemption that prevents the burden being shifted to Medicare Part D and limits the exposure by Prescription Drug Plans to not pay or be reimbursed for Primary Prescription Drug Plans’ payments as related to the claim. This reduces the chance that the proposed legislation will score as a cost to the U.S. Government and increases the opportunity to be passed as law.

Section 2(a) at Subsection (4)(A)(ii): This section defines what Primary Drug Plans are covered by the proposed law and prohibits such plans to take into account Prescription Drug Plan coverage as a method to deny eligibility for coverage under the Primary Drug Plan. This protects the Prescription Drug Plan from paying claims that is the responsibility of the Primary Plan. This is a cost saver for the U.S. Government, as protecting these Prescription Drug Plans in this manner ensures that Medicare is reimbursing for cost that is truly related to general health claims unrelated to a workers’ compensation, no-fault or liability claim.

Section 2(a) at Subsection (4)(A)(iii): Prescription Drug Plans are provided by private insurance carriers. Therefore, such private carriers are in the optimal position to coordinate and seek reimbursement for prescription drugs that are related to a Primary Drug Plan workers’ compensation, no-fault or liability claim. This provision instructs the Secretary of Health and Human Services (HHS) to not assert any claim on behalf or against a Prescription Drug Plan, other than through recovery as set forth within this proposed legislation. Private plans managing this issue saves on government resources, which is another key cost saver for this legislation.

Section2 (a) at Subsection (4)(A)(iv): This section defines Primary Drug Plans. This is a new term for purposes of the Medicare Secondary Payer law and such entity is defined in the same manner as a Primary Plan under that law. It includes insurers and self-insurers that are responsible for workers’ compensation, no-fault and liability claims. This definition is important as the current Medicare Secondary Payer law does not clearly extend Primary Plan rights to Part D benefits because of the way it was originally legislated under the Medicare Modernization Act of 2003.  It reduces expense as it removes the ambiguity that exists today.

Section 2(a) at Subsection (4)(B) – Recovery: Prescription Drug Plans are subrogated to the extent any payment has been made prior to any notice received of a Primary Drug Plan involvement. The particulars of the notice are covered in Subsection (4)(D). The subrogation right is good for only 3 years after the date Prescription Drug Plan receives notice, otherwise it is time barred. It makes subrogation the exclusive remedy for these plans and eliminates the cost of recovery as an “administrative expense” that is covered today by Medicare. This provisions saves money and allows for thoughtful subrogation actions for recoveries that exceed the cost to secure it. This statute of limitation is in line with the same statute of limitation imposed upon Medicare for recovery of Medicare Part A and B conditional payments promulgated under the SMART Act.

Section 2(a) at Subsection (4)(C) – Waiver: This provision allows Prescription Drug Plans to choose when to pursue a recovery action. Because it may not make sense to recover against a Primary Drug Plan because of the expense, this section allows the plan to waive their recovery right. This is the same right that Medicare has the right to do today, but it did not translate to Part D plans. As such, Part D plans can be forced to engage in recovery actions that are expensive (which Medicare must pay for) to avoid other liabilities created by Federal law. This is a common sense provision of the proposed legislation.

Section 2(a) at Subsection (4)(D) – Coordination of Benefits Information: Medicare today receives information about Primary Plans through Section 111 Mandatory Insurer Reporting, yet there is no established timeline to deliver that information to Prescription Drug Plans. This provision mandates a 15 day turnaround from the receipt of information to Part D plans. This would allow the Prescription Drug Plans to stop providing benefits because of the Primary Drug Plan’s responsibility to pay under a workers’ compensation, no-fault or liability claim. It will also require the Secretary to provide such reported data to the Prescription Drug Plans in a format convenient and accessible to such plans. Lastly, it requires the Secretary to waive current requirements that Part D plans establish expensive procedures to identify Primary Drug Plan payers.

Section 2(a) at Subsection (4)(E) – Coordination of Benefits: Once notified by Medicare of a Primary Drug Plan’s ongoing responsibility for medicals, the Prescription Drug Plan shall authorize Providers to charge the Primary Drug Plan. This provision removes primary responsibility, as a secondary payer, and directs Providers to bill the correct entity. It stops the expensive “pay and chase” process that exists today and saves money for Part D plans. These savings translate directly into lower costs that Medicare will pay; therefore, this is another cost savings measure of the proposed legislation.

Section 2(a) at Subsection (4)(F)(i) – Use of Website to Determine Final Reimbursement Amount – Notification of Plans: Once the Secretary receives notice of a reimbursement amount by Part D plan, it shall within 10 (ten) days provide that information to the Primary Drug Plan.

Section 2(a) at Subsection (4)(F)(ii) – Statement by Plan:  After receipt of Section 111 Mandatory Insurer Reporting data from Medicare, the Prescription Drug Plan may furnish a statement of benefits owed to Medicare within twenty (20) days. Failure to provide that statement could lead to waiver of the claim. This allows for the timely distribution of recovery information that can be immediately processed for reimbursement by the Primary Drug Plan.

Section 2(a) at Subsection (4)(F)(iii) – Inclusion of Information on Website: The Secretary shall include the recovery information in its current web portal application that is used by the CRC and the BCRC for the recovery of conditional payments.

Section 2(a) at Subsection (4)(F)(iv) – Collection:  The Secretary shall have the power to collect and properly remit to the Part D plans at the appropriate time which adjustments are typically made between Medicare and Part D plans.

Section 2(b) – Clarification: This provision adjusts the language of 42 U.S.C. §1395w-102(b)(4)(D) by striking the term Third-Party Reimbursement and replacing it with “Third-Party Reimbursement – Solely for the purpose of apply this proposed legislation. In other words it re-emphasizes the exclusive remedy rule laid out with the proposed text.

Section 2(c) – Effective Date: The law would take effect six (6) months after it is passed and signed into law. There would be no need for any Medicare regulations to implement the law.

These provisions will improve on prompt MSP compliance. SPARC requires Medicare to send Section 111 MIR data to Part D plans in a timely manner to improve coordination. Rather than “pay and chase,” these Plans can now direct Providers to charge the appropriate Primary Drug Plan. It also allows for an immediate pathway to secure reimbursement for prior mistaken payments from these Primary Drug Plans and a choice to only go after those reimbursements that make sense. Instead of today where the Secretary is involved in Part D plan reimbursement and coordination, it no longer has that responsibility, saving on precious government resources.


Roy Franco

Chief Client Officer, Franco Signor