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74–294 PDF 2011

PROTECTING MEDICARE WITH IMPROVEMENTS TO 

THE SECONDARY PAYER REGIME 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JUNE 22, 2011 

Serial No. 112–65 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

SUE WILKINS MYRICK, North Carolina 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

KATHY CASTOR, Florida 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 4 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 6 

Prepared statement .......................................................................................... 8 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 10 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 10 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 12 

Prepared statement .......................................................................................... 14 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 168 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 169 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, prepared statement .......................................................................... 171 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 172 

WITNESSES

Deborah A. Taylor, Chief Financial Officer and Director, Office of Financial 

Managment, Centers for Medicare & Medicaid Services .................................. 16 

Prepared statement .......................................................................................... 19 

Answers to submitted questions ...................................................................... 173 

James Cosgrove, Director, Health Care Issues, Government Accountability 

Office ..................................................................................................................... 27 

Prepared statement .......................................................................................... 29 

Marc Salm, Vice President, Risk Management, Publix Super Markets, Inc. ..... 61 

Prepared statement .......................................................................................... 64 

Additional comments for the record ................................................................ 116 

Scott A. Gilliam, Vice President and Government Relations Officer, The Cincinnati Insurance Companies .............................................................................. 72 

Prepared statement .......................................................................................... 75 

Additional comments for the record ................................................................ 120 

Jason Matzus, Partner, Ratzman Frischman & Matzus, P.C. ............................. 86 

Prepared statement .......................................................................................... 88 

Additional comments for the record ................................................................ 123 

Ilene Stein, Federal Policy Director, Medicare Rights Center ............................. 92 

Prepared statement .......................................................................................... 94 

SUBMITTED MATERIAL

Chart, undated, tracking new claims to Centers for Medicare & Medicaid 

Services, submitted by Mr. Stearns .................................................................... 85 

User Guide, Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation, Version 3.1, Centers for Medicare & 

Medicaid Services, dated July 12, 2010, submitted by Mr. Stearns 1 ..............

‘‘Medicare’s Repo Men,’’ Mother Jones article by Stephanie Mencimer, dated 

October 8, 2009, submitted by Mr. Murphy ....................................................... 109 

Page

IV 

Low-dollar Medicare Secondary Payer recovery claims, submitted by Mr. 

Stearns .................................................................................................................. 129 

1The information is available at http://www.lightspeedclaim.com/docs/ 

NGHPUserGuideV3.1.pdf. 

(1) 

PROTECTING MEDICARE WITH IMPROVEMENTS TO THE SECONDARY PAYER REGIME 

WEDNESDAY, JUNE 22, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, WASHINGTON, DC. 

The subcommittee met, pursuant to call, at 10:01 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Murphy, Burgess, 

Bilbray, Gingrey, Scalise, Griffith, DeGette, Schakowsky, Green, 

Christensen, Dingell, and Waxman (ex officio). 

Staff present: Stacy Cline, Counsel, Oversight; Todd Harrison, 

Chief Counsel, Oversight/Investigations; Sean Hayes, Counsel, 

Oversight/Investigations; Andrew Powaleny, Press Assistant; Alan 

Slobodin, Deputy Chief Counsel, Oversight; John Stone, Associate 

Counsel; Alex Yergin, Legislative Clerk; Kristin Amerling, Democratic Chief Counsel and Oversight Staff Director; Alvin Banks, 

Democratic Assistant Clerk; Stacia Cardille, Democratic Counsel; 

Brian Cohen, Democratic Investigations Staff Director and Senior 

Policy Advisor; and Tim Gronninger, Democratic Senior Professional Staff Member. 

Mr. STEARNS. Good morning, everybody. The subcommittee will 

come to order. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

We convene this hearing of the Oversight and Investigations 

Subcommittee to examine how the Centers for Medicare and Medicare Services (CMS) has been implementing the Medicare Secondary Payment statute. Medicare represents a substantial portion 

of the federal budget. So with our country facing a $1.4 trillion deficit and an impending debt limit ceiling vote, we must ensure that 

CMS is properly guarding the legal and financial interests of Medicare beneficiaries, while protecting the solvency of the program 

itself. 

Generally, Medicare is the ‘‘primary payer’’ for health claims. If 

a beneficiary has other insurance, that insurance may fill in all or 

some of Medicare’s gaps. However, the Medicare Secondary Payment program identifies specific conditions under which another 

party is legally responsible to be the primary payer. In such cases, 

Medicare is only responsible for certain secondary payments. The 

Medicare Secondary Payment statute was enacted to reduce exVerDate Aug 31 2005 14:40 Jun 01, 2012 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\112-06~1\112-65~1 WAYNE
2 

penditures under the Medicare program and ensure that Medicare 

is properly reimbursed for such payments. 

The law prohibits Medicare payments for any item or service 

when payment has been made or can reasonably be expected to be 

made by a third-party payer—such as workers’ compensation, auto 

medical insurance, and all forms of no-fault and liability insurance. 

Medicare Secondary Payer recoveries fall into two main categories: 

post-payment collections for injuries that have occurred and were 

paid out by Medicare, and a set-aside account to cover future medical bills. 

For post-payment collections, there is widespread concern that 

CMS is creating unnecessary roadblocks for parties to reach a settlement agreement. Businesses and injured individuals routinely 

negotiate a settlement but cannot close on the settlement until 

CMS provides a complete list of all medical costs incurred. We have 

heard complaints from a variety of interested parties that CMS is 

not providing this information in a consistent or in a timely manner. CMS’s delays cause lawsuits to drag on, hinders timely payments to injured individuals, and causes uncertainty and increases 

costs for both large and small businesses. 

This raises several questions. Why can’t CMS more quickly and 

accurately track medical costs for covered individuals? And is CMS 

even capable of administering a health payment program for the 

medical community or accurately tracking costs? Based on a hearing in this subcommittee earlier this year, we already know that 

CMS cannot accurately measure the amount lost to fraud and that 

CMS doles out tens of billions of dollars in improper payments 

every year. And we have yet to see reliable estimates on the total 

amount of secondary payment reimbursements that remain uncollected by CMS. 

In addition to post-payment collections, plaintiffs are supposed to 

set aside funds to cover future medical costs relating to the initial 

injury—such as follow-up surgeries or prescription drugs for chronic injuries. However, the reporting requirements are just so weak 

that CMS may not know about the settlement or whether the setaside account has been improperly spent on unrelated, non-medical 

expenses. The result is that CMS continues to pay for an injury 

that was already paid for by a third party. 

CMS now says that they plan to increase education and awareness for the legal community on the requirements of Medicare Secondary Payer, which has been on the books for almost 30 years. 

That CMS needs to educate people on a 30-year-old law brings into 

question what they have been doing for the past 30 years and how 

effective their outreach efforts have been. I think more needs to be 

done, obviously. Whenever retailers, insurance companies, and 

plaintiffs’ attorneys are all sending letters to CMS, anxious to pay 

the Federal Government, and they can’t get a complete or timely 

response about how much they owe, the system is badly broken. 

Hopefully, our witnesses today can help us better understand the 

underlying problems, and we can work in a bipartisan manner to 

fix this. 

With that, I would like to welcome our first panel: Deborah Taylor, Director of Financial Management at CMS; and James CosVerDate Aug 31 2005 14:40 Jun 01, 2012 Jkt 037690 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\112-06~1\112-65~1 WAYNE
3 

grove, Director of Health Care from the Government Accounting 

Office. And I look forward to their testimony. 

And with that, I welcome the Ranking Member Ms. DeGette 

from Colorado for an opening statement. 

[The prepared statement of Mr. Stearns follows:] 

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OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

I am pleased that we are having this hearing today on Medicare 

Secondary Payer issues. We hear over and over again—in fact, I 

had two town hall meetings this last weekend where I heard from 

my constituents about how much they value the Medicare program, 

how important it is to them. Millions of Americans rely on Medicare to pay for visits to their doctors, cover their hospital stays, and 

help with their prescription drug costs. 

This hearing today is very important because the Medicare Secondary Payer program arrangement that you so well described in 

your opening statement saves taxpayers money while making sure 

that recipients get the benefits that they need. The Medicare Secondary Payer rules have saved taxpayers over $50 billion in the 

last decade, but as you said, the program is not perfect. Beneficiaries, insurance companies, lawyers, and retailers assert that 

the way the Medicare Secondary Payer process is handled can create confusion and delay. 

We heard the story of one Medicare beneficiary who brought a 

case against a drunk driver that hit her. The case was ultimately 

settled. The beneficiary was told years later that she had to pay 

Medicare back using the proceeds of her settlement for medical 

costs related to the car accident or that the Treasury Department 

would seize her Social Security checks. Unfortunately, there are 

other seniors with similar stories. 

So, in general, I think that this subcommittee can serve many 

purposes, and one of the important purposes that we serve is to 

have sensible congressional oversight of problems with federal programs, because that will then motivate an agency to move more 

quickly to correct an issue. 

I am glad that we have Deborah Taylor here today, the director 

of Financial Management at CMS because I think it is important 

that we hear from CMS about problems with the program and how 

the Agency is acting to address them. We are really asking the 

Agency to do three things here: first, to protect taxpayer funds; second, to make sure that beneficiaries can fairly get their healthcare 

costs covered; and thirdly, to work with lawyers and insurance 

companies to obtain justice in cases where they have been injured 

or harmed. 

To the extent that this is not happening, I want to hear about 

how the Agency can improve and about whether CMS needs more 

tools from Congress to make sure that the program works better. 

I think we can also have illuminating testimony from GAO and 

representatives from groups that are affected by the Medicare Secondary Payer rules in the second panel today. 

You know, we can go on ad nauseam about the problems with 

this program, but I frankly am most interested in hearing from our 

witnesses about the solutions to these problems. It is not enough 

to say that the program is broken. Instead, we have to think creatively about the steps that the Agency can take and whether congressional action is needed to help. 

7 

One possible solution is H.R. 1063, the Strengthening Medicare 

and Repaying Taxpayers Act introduced by our colleague Tim Murphy who was just here a minute ago. And it is a bipartisan bill of 

which I am a—oh, there he is. They have promoted you—or demoted you as the case may be. This fine legislation would take a 

number of steps to address the problems associated with Medicare 

Secondary Payer rules, establish tight new deadlines for CMS to 

provide information to beneficiaries and their attorneys. 

And so even though this is not a legislative hearing, I would like 

to hear from CMS, GAO, and the other witnesses about whether 

they think that this type of legislation strikes the appropriate balance between the needs of beneficiaries and the needs of taxpayers 

and see if they have any suggestions about how this legislation 

could be improved. 

Congress certainly has a legitimate interest in ensuring our constituents are being treated fairly under Medicare Secondary Payer 

rules. I look forward to today’s hearing and really focusing on the 

solutions to address any problems that remain. 

Thank you, and I yield back. 

[The prepared statement of Ms. DeGette follows:] 

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Mr. STEARNS. The gentlelady yields back. And the gentleman 

from Texas, Mr. Burgess, is recognized for 2 minutes. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman. 

This hearing is an example of what this committee does best in 

exercising its oversight function, in this case, with the Center for 

Medicare & Medicaid Services and to ensure that the process functions as intended, to ensure today that the Medicare Secondary 

Payment system is working as Congress intended and to see where 

improvements can be made if indeed there are problems. And there 

appear to be. 

Now, it should be intuitively obvious to the casual observer that 

CMS and third-party payers would communicate with each other 

about what is owed, what has been paid, and even be able to estimate what future costs when a court case lasts for years. However, 

these communications have only recently been required. Questions, 

disagreements, and difficulties persist, and many have suggested 

that improvements can be made. And while the Medicare Secondary Payment System is only a very small element of Medicare, 

any dollar which is paid that is not Medicare’s primary responsibility, it is a dollar that can’t be recovered and it is a dollar that 

is not available to provide another service for another beneficiary. 

Mr. Chairman, I know our staffs have spoken and I hope we can 

continue similar oversight into the Medicaid program as well. Congress has clearly agreed through the fall statements regarding 

health matters in the Deficit Reduction Act, but State Medicare authorities should always work to assure that Medicaid is the payer 

of last resort. Since 1980, statute has required State Medicaid 

plans to take reasonable measures to avoid medical claims for 

which the beneficiary has other health insurance that is legally primary to Medicaid. In 2003, audits of six Medicaid authorities uncovered problems with between 20 and 36 percent of claims sampled. Extrapolating nationwide, we could be talking about $45 billion per year. I also look forward to the updated information from 

the General Accountability Office on the Medicare Secondary Payment System program. 

At the end of the day, no one wants a medical provider to bill 

a wrong payer and no one wants the wrong payer to pay. We want 

to know that our government programs are ensuring the proper 

and legally responsible payer meets their responsibility. We don’t 

want beneficiaries to be shouldered with an unforeseen bill due to 

lagging communications. 

Mr. Chairman, I will yield back the balance of my time. 

Mr. STEARNS. Thank you. The gentleman from Pennsylvania, Mr. 

Murphy, is recognized for 3 minutes. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Thank you, Mr. Chairman. 

Only in Washington can someone who wants to send money back 

to the Federal Government be ignored. But that is the situation we 

11 

are dealing with now with some of this difficulty we have with this 

problem. We want to preserve Medicare for seniors. It is important. 

It is essential. But it is a mess. What is critically important for our 

seniors’ health is also critically ill itself and bleeding money. 

One aspect of this is that hundreds of millions of dollars that 

should be repaid to the Medicare Trust Fund are sitting in lawyers’ 

accounts because the Center for Medicare & Medicaid Services 

won’t tell those who want to settle a lawsuit how much the medical 

bills must be repaid to the government. 

Under the current law, the Medicare Secondary Payer statute is 

supposed to ensure the taxpayers don’t foot the bill for senior citizens’ medical expenses if the injury resulted from a case involving 

third-party liability. That makes sense, but it loses dollars because 

the system just doesn’t work. Plaintiffs and defense attorneys, retailers, employers, and senior citizens all cry out that the system 

is a mess, but CMS, like Kevin Bacon’s character of Chip Diller in 

Animal House raises his hand and says remain calm; all is well. 

The current MSP system, which we are investigating today, discourages and even prevents companies from settling claims involving Medicare beneficiaries because Medicare won’t tell the settling 

parties how much is owed. That is why I have introduced bipartisan legislation with Representative Ron Kind, the Strengthening 

Medicare and Repaying Taxpayers Act—the SMART Act—that 

would compel CMS to provide the medical bills information so the 

parties can settle within 65 days. This legislation would get money 

to the trust fund and ensure seniors are paid money that is rightfully theirs quickly. 

As Jason Matzus—an attorney from Pittsburgh who is here 

today—will explain, his clients, some of whom are in ill health and 

depending on that settlement to pay bills and their mortgage have 

waited months to hear back from CMS on how much Medicare is 

owed. If we enact the SMART Act, that senior citizen will receive 

what is rightfully hers now. 

The SMART Act will also prevent another kind of horror story. 

These are cases where Medicare has denied medical treatment to 

a senior citizen for breast cancer because she received a settlement 

check related to a chest wall contusion suffered from a slip and fall 

years ago. This year, Medicare may collect an estimated 230 million from cases like auto accidents and slip-and-falls. And if the 

SMART Act were enacted into law, Medicare could see annual collections quadruple to $1 billion per year. 

We will also hear how Medicare spends more money pursuing old 

claims than the amount owed to Medicare. In one example, Medicare spent more in postage notifying the plaintiff of their obligation 

than the $1.59 owed to the trust fund. The SMART Act would reduce these wasteful expenses by ensuring Medicare doesn’t spend 

more money pursuing collections than the amount is actually owed. 

According to a new study by the Rand Corporation, if Medicare 

pursued settlements only greater than $5,000, the Agency would 

still recover 98 percent of the $1 billion I mentioned earlier, but it 

would reduce the number of claims it dithers away resources on by 

43 percent. 

So I thank the chairman for this investigation. We have an opportunity with passing the SMART Act to be responsible stewards 

12 

of the trust fund, because all of us deeply care about protecting the 

Medicare benefits that our constituents—especially our senior citizens—have earned. 

And I yield back. 

Mr. STEARNS. I thank the gentleman. The Ranking Member Mr. 

Waxman from California is recognized for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

The Medicare Secondary Payer program is complex and arcane. 

Few people have heard of this program and even fewer understand 

it, but that does not mean it is insignificant. The program saves 

taxpayers billions of dollars helping to make sure that Medicare is 

not forced to foot the bill in cases where the other insurers should 

be paying. This is a worthy goal and we all have an interest in 

making this program work. 

We have two panels today, and I hope they will help us answer 

one simple question: Is the Medicare Secondary Payer program 

working for taxpayers and Medicare beneficiaries? The problem 

with answering this simple question is that there can be a tension 

between what works for the taxpayer and what works for beneficiaries. From the beneficiary perspective, the key goals are speed, 

simplicity, and certainty. Beneficiaries want Medicare to reduce 

burdens and rapidly give beneficiaries—especially those caught up 

in legal cases with insurers because of accidents—the information 

they need about how much they or their insurer will have to reimburse Medicare. 

Taxpayers have different goals. Taxpayers want the program to 

leave no money on the table, even if that means waiting to be 100 

percent certain that all funds owed to taxpayers are repaid. I don’t 

envy the job of CMS in finding the right balance here. 

Today, we will hear from CMS about how they have chosen to 

run the program and the opportunities they see for improvement. 

We will also hear from GAO about key program areas that need 

investigation. On the second panel, we will have witnesses representing beneficiaries, trial lawyers, and businesses affected by 

the Medicare Secondary Payer rules. They feel that CMS has not 

obtained the correct balance in the way they have chosen to run 

the program. 

This will be a valuable hearing because it can help us determine 

whether we should enact legislative solutions. Our goal should be 

to work with CMS and other interested parties to be sure we are 

appropriately weighing the concerns of beneficiaries and the concerns of taxpayers. Our focus today on making Medicare better, 

however, we need to recognize how important Medicare is to seniors and to our Nation. And we should renounce efforts to end 

Medicare as we know it. 

Many of my Republican colleagues have bashed Medicare and 

supported turning the program over to private insurance companies on the basis that no government program can do an effective 

job compared to the private sector. We hear these arguments. One 

of the key talking points is that Medicare has extremely high erroVerDate Aug 31 2005 14:40 Jun 01, 2012 Jkt 037690 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 F:\112-06~1\112-65~1 WAYNE
13 

neous payment rates. Their implication is clear that Medicare’s 

error rate is higher than error rates of private insurers. But that 

simply is false. Earlier this week, the American Medical Association released their annual report card on insurers. The AMA found 

that Medicare had the highest payment accuracy rate among all 

providers, 96 percent. Private insurers’ payment accuracy rates 

were five times higher than Medicare. This is a great example of 

Medicare leading the way and doing better than the private sector 

when it comes to cutting waste. 

Mr. Chairman, you and other members of your conference voted 

for the budget that would replace Medicare for people under 55 

with a privatized and underfunded voucher system that would cost 

thousands of dollars more in out-of-pocket healthcare costs every 

year. Seniors would face the worst of both worlds: the loss of important guaranteed benefits and higher out-of-pocket costs because of 

the inefficiency of the privatized Medicare model. 

These dramatic changes to Medicare pose a much greater risk to 

seniors than the problems in the Medicare Secondary Payer program. That is why I sent a letter to Chairman Upton last month 

asking for hearings on the Republican budget’s impact on Medicare 

& Medicaid. Now that we have started Medicare work in this subcommittee, I hope our next oversight hearing can look at the impacts of the Republican budget on this key program for seniors and 

the disabled. 

I yield back the balance of my time. 

[The prepared statement of Mr. Waxman follows:] 

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Mr. STEARNS. I thank the gentleman. 

We welcome our first panel. As mentioned, Deborah Taylor is the 

Centers for Medicare & Medicaid Services, CMS, chief financial officer, CFO, and director of the Office of Financial Management, 

OFM. As CMS’s senior financial manager executive, she is accountable and responsible for planning, directing, analyzing, and coordinating the Agency’s comprehensive financial management functions. 

James Cosgrove, a doctor, is a director on the healthcare team 

at the U.S. Government’s accounting office, the GAO, and responsible for GAO studies of healthcare financing and Medicare payment issues with his Ph.D., his doctor’s Ph.D. 

As you know, the testimony you are about to give is subject to 

Title XVIII, Section 1001 of the United States Code. When holding 

an investigative hearing, this committee has a practice of taking 

testimony under oath. Do you have any objection to testifying 

under oath? No? 

The chair then advised you that under the rules of the House 

and the rules of the committee, you are entitled to be advised by 

counsel. Do you desire to be advised by counsel during your testimony today? In that case, please rise and raise your right hand. 

I will swear you in. 

[Witnesses sworn.] 

Mr. STEARNS. Thank you. Now, each of you can give your 5- 

minute opening statement. Ms. Taylor, we will start with you. 

TESTIMONY OF DEBORAH A. TAYLOR, CHIEF FINANCIAL OFFICER AND DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, 

CENTERS FOR MEDICARE & MEDICAID SERVICES, AND 

JAMES COSGROVE, DIRECTOR, HEALTH CARE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE 

TESTIMONY OF DEBORAH A. TAYLOR 

Ms. TAYLOR. Good morning, Chairman Stearns and Ranking 

Member DeGette and members of the subcommittee. 

Mr. STEARNS. I think, Ms. Taylor, you have to push the button 

and bring the mic a little closer. 

Ms. TAYLOR. OK. 

Mr. STEARNS. There you go. 

Ms. TAYLOR. Good morning, Chairman Stearns, Ranking Member 

DeGette, and members of the subcommittee. Thank you for the opportunity to be here today to discuss the Centers for Medicare and 

Medicaid Services’ Medicare Secondary Payer program. The Medicare Secondary Payer program, also known as MSP, is an important program that protects both Medicare beneficiaries and the sustainability of the Medicare program. The purpose of the MSP program is to ensure that Medicare pays primary when appropriate 

and recovers monies when Medicare should pay secondary to another insurer. While MSP is specific to Medicare, all insurance providers, public and private, utilize a system similar to the MSP to 

resolve conflicting coverage issues with other carriers. MSP policies 

establish when certain other insurance payers have primary responsibility for the healthcare services of a person with Medicare. 

17 

The MSP program has traditionally had a high rate of return on 

investment of almost 9 to 1 and over the past decade has returned 

savings, both cost-avoided savings as well as recoveries, in excess 

of $55 billion. There are two types of MSP situations. The vast majority of MSP situations arise when a Medicare beneficiary is covered by an employer’s healthcare insurance. This is a highly automated process that allows beneficiary claims to be automatically 

identified where Medicare is not the primary insurer. In these situations, unnecessary costs are avoided and there is no pay-andchase required to recover these monies. 

The second MSP situation arises when a Medicare beneficiary is 

harmed or injured and receives a settlement payment from another 

insurer, usually an automobile liability or workers’ compensation 

insurer. These cases are often referred to as non-group health plan 

cases. These cases require close communication and coordination 

between CMS, the beneficiary, and their representatives, usually 

an attorney. In order to ensure continuity of care for Medicare 

beneficiaries, Medicare may pay conditionally for the healthcare of 

the beneficiary under these situations. If Medicare makes a conditional payment, Medicare has a statutory right to recover from the 

insurer legally required to pay for this care. 

Prior to 2008, insurers involved in these types of MSP situations 

had a limited requirement to report their settlements to CMS. 

When Congress passed the Medicare/Medicaid and SCHIP Extension Act of 2007, these insurers had a mandatory reporting responsibility to CMS. These mandatory reporting requirements have significantly increased the number of non-group health plan cases and 

have provided recoveries to the Medicare Trust Fund estimated to 

be about $600 million. 

To facilitate a smooth transition of these mandatory reporting requirements, CMS took a transparent, open approach to establishing the requirements. We developed standardized electronic reporting processes and worked collaboratively with the insurance industry to define and test this process. We established a Web site 

where insurers can find all official instructions and guidance related to the mandatory reporting requirements. We held town hall 

conferences with over 34,000 representatives from insurance industry, trade associations, and attorney groups, and we developed computer-based training on MSP policies and mandatory reporting requirements. 

As a result of our efforts, the overall number of MSP records 

posted to CMS’s systems has more than doubled over the past 3 

years. This increased activity represents a potential for even greater savings to the Medicare Trust Fund in coming years. 

We continue to leverage technology to improve our processes and 

further increase our rate of return. We have made Medicare information directly accessible to beneficiaries, their representatives, 

and the industry. We have expanded the MyMedicare.gov Web site 

to provide more information about the MSP program and to assist 

beneficiaries. We also developed mechanisms to automate many of 

the reporting and recovery processes. 

CMS is committed to a transparent MSP process and ensuring 

that Medicare beneficiaries receive the care they need while reducing Medicare payments for claims that are the legal responsibility 

18 

of another insurer or liable party. We remain committed to improving the MSP program and maintaining strong communications 

with our beneficiaries, insurers, and other stakeholders. 

This concludes my statement. I would be happy to answer any 

questions. 

[The prepared statement of Ms. Taylor follows:] 

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Mr. STEARNS. Thank you. Dr. Cosgrove? 

TESTIMONY OF JAMES COSGROVE 

Mr. COSGROVE. Mr. Chairman, Ranking Member DeGette, members of the subcommittee, thank you for inviting me to speak to you 

today as you consider potential improvements to Medicare’s Secondary Payer process. 

As has been discussed this morning, this process is intended to 

protect Medicare’s fiscal integrity when a beneficiary’s Medicare expenses are potentially covered by another insurer. Congress has 

spelled out rules for when other insurers must pay first. In such 

cases, Medicare pays second and is only financially responsible for 

and should only pay for those Medicare items and services that are 

not covered by the primary insurer. For example, Medicare has always been the secondary payer when the beneficiary is covered by 

a workers’ compensation plan. 

In 1980, Congress made Medicare a secondary payer to other 

non-group health plans, which include auto or other liability insurance and no-fault insurance. Shortly thereafter, Congress made 

Medicare the secondary payer in most instances where the beneficiary is currently employed or has a spouse who is currently employed and is covered by an employer-sponsored group health plan. 

Both group and non-group health plans had a legal obligation to 

identify situations where they were the primary payers, notify 

Medicare, and pay appropriately. However, there were concerns 

that this did not always happen and that Medicare sometimes paid 

for care that should have been covered by other insurers. 

The Medicare and Medicaid and SCHIP Extension Act of 2007 

established specific MSP reporting requirements and fines for noncompliance. For example, non-group health plans must inform CMS 

when they have reached a settlement with a beneficiary in an MSP 

situation. The Congressional Budget Office estimated that the law’s 

provisions would help Medicare recover or avoid $1.1 billion in improper payments over 10 years. Mandatory reporting requirements 

for group health plans when into effect January 2009. Mandatory 

reporting for non-group health plans was delayed until January 

2011 for certain types of these plans and until January 2012 for 

the rest. 

My remarks today will describe the 5 major components of the 

MSP process for situations involving non-group health plans. These 

are notification, negotiation, resolution, mandatory reporting, and 

recovery. The order of the components and the details of the process and CMS’s involvement at various stages may vary somewhat 

depending on the circumstances of the case. I think the best way 

to understand how the MSP process works in general is through 

an example, and that is what is included in our written statements. 

We have a graphic, and this is Figure 2 and page 8 in our written statement, but it tries to illustrate graphically how the MSP 

process might work when a Medicare beneficiary is injured in an 

automobile accident. In this simplified example, it begins when an 

injured Medicare beneficiary goes to the hospital. The hospital 

treats the beneficiary and eventually submits a bill to Medicare. 

Notification happens when CMS first learns of the MSP situation. 

In this example, the beneficiary’s attorney notifies CMS and reVerDate Aug 31 2005 14:40 Jun 01, 2012 Jkt 037690 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\112-06~1\112-65~1 WAYNE
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quests a list of payments Medicare made to the hospital. CMS’s 

contractor provides this information, and although notified, Medicare may continue to make payments called ‘‘conditional payments’’ 

so that the beneficiary will have access to necessary medical care 

while the beneficiary’s attorney negotiates with the automobile insurer. 

Negotiation to reach a settlement takes place between the beneficiary’s attorney and the insurer. In this example, the attorney 

uses the information from CMS to help insure that the settlement 

includes funds to reimburse Medicare for payments made related 

to the claim. 

Resolution refers to the settlement reached between the beneficiary’s attorney and the insurer. In a liability case, the insurer 

often provides the beneficiary with a lump-sum payment. Mandatory reporting is what happens at this point when the insurer reports the resolution to CMS. In some cases, mandatory reporting 

may be the first notification that CMS gets of the MSP situation. 

And recovery happens after mandatory reporting when CMS seeks 

to recover payments Medicare made related to the claim. 

While I can describe the key components of the process, I can’t 

tell you how well the process is working. We are aware that concerns have been raised and are currently evaluating certain aspects 

of the process related to non-group health plans. Specifically, our 

study is examining aspects of the MSP process that have presented 

challenges for both non-group health plans and CMS. And it will 

also look at how mandatory reporting by non-group health plans is 

expected to affect CMS’s MSP workload, its costs, and Medicare 

savings. 

We expect to complete our work and report on our findings later 

this year. We look forward to working with you and others in Congress as you consider this very important issue. Mr. Chairman, this 

concludes my prepared remarks. I would be happy to answer any 

questions you or other members may have. 

[The prepared statement of Mr. Cosgrove follows:] 

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Mr. STEARNS. Yes. I will start with my questions. 

Dr. Cosgrove, it looks like in this resolution area of your graph 

is where the main problem is. Do you think Congress should step 

in and make the Medicare payment that is done first, make this 

such that after the insurance companies pay, then Medicare steps 

in? In that one chart dealing with resolution—— 

Mr. COSGROVE. Um-hum. 

Mr. STEARNS [continuing]. Where it seems to be the conflict, is 

there something you would suggest for Congress to do? 

Mr. COSGROVE. It is really premature for me to comment at that 

time. We have certainly heard concerns by the non-group health 

plans raised about how this works right now. But that is part of 

our investigation. 

Mr. STEARNS. So the answer is no. You don’t know? 

Mr. COSGROVE. I don’t know. 

Mr. STEARNS. OK. Ms. Taylor, can you provide information on 

the number of Medicare Secondary Payment cases CMS is handling 

today? 

Ms. TAYLOR. I don’t have the exact number, but I can tell you 

that of the non-group health plan cases, I believe we have about 

413,000. 

Mr. STEARNS. I need you to pull the mic a little closer if you can. 

Ms. TAYLOR. I believe for the non-group health plan cases—— 

Mr. STEARNS. OK. I got that. This would include liability, workmen’s compensation, and no-fault automobile Medicare Secondary 

Payment cases? 

Ms. TAYLOR. Correct. 

Mr. STEARNS. And that is your number is roughly 400? 

Ms. TAYLOR. I believe that is the number that we have right 

now. 

Mr. STEARNS. How many were handled last year? 

Ms. TAYLOR. Last year, probably about the same. 

Mr. STEARNS. OK. Is this typically a number that remains constant every year? Is it roughly about 400? 

Ms. TAYLOR. What I can tell you is that since the Medicare and 

Medicaid SCHIP Extension Act of 2007, our casework, our workload has more than doubled. 

Mr. STEARNS. OK. How long, Ms. Taylor, have you been in this 

position as a CFO? 

Ms. TAYLOR. For about a year and a half. 

Mr. STEARNS. What did you do before that? 

Ms. TAYLOR. I was the deputy to the director of office—— 

Mr. STEARNS. OK. How much money is involved in the Medicare 

Secondary Payment process each year? How much is reimbursed to 

the trust fund. 

Ms. TAYLOR. To the trust fund last year in 2010 we had about 

$8 billion, which includes both the group health plan and the nongroup health plan cases. 

Mr. STEARNS. Does CMS keep track of how much money is reimbursed by class or type? 

Ms. TAYLOR. I believe we have that information but I don’t have 

that—— 

Mr. STEARNS. For example, how much is workers’ comp and, for 

example, how much is auto accident? 

46 

Ms. TAYLOR. I believe we can get that information. I just don’t 

have that with me. 

Mr. STEARNS. In your opinion, is it being reimbursed by class or 

type? Is it distinguished? 

Ms. TAYLOR. I believe it is, yes. I believe our contractor does 

maintain information about which type of insurer they are working 

with, yes. 

Mr. STEARNS. Do you mind submitting that for the record? 

Ms. TAYLOR. Sure. 

Mr. STEARNS. OK. Does CMS ever attempt to estimate the number or amount of secondary payment cases under which CMS does 

not get reimbursed? 

Ms. TAYLOR. I don’t believe we do track that information. 

Mr. STEARNS. Um-hum. Who was in this position before you? 

Ms. TAYLOR. Prior to me Tim Hill had the job that I currently 

have. 

Mr. STEARNS. And how long was he in that position? 

Ms. TAYLOR. I believe 5 years. 

Mr. STEARNS. OK. Does CMS have an idea how much money that 

should be reimbursed that is not? 

Ms. TAYLOR. I don’t think we track it that way, meaning when 

a case is identified to us, we have to wait until there is, in fact, 

a settlement. If there is no settlement, the Medicare beneficiary 

does get paid and they do get their healthcare covered by Medicare. 

Our primary goal is to ensure that Medicare beneficiaries do receive their healthcare. 

Mr. STEARNS. On those 400 cases, do you put a suspense time 

when you go back to staff and say let us hurry up and try to settle 

this? Is there any kind of suspense record that you keep? 

Ms. TAYLOR. We don’t keep any records that say we need to suspend this case. It is a—— 

Mr. STEARNS. I don’t mean suspend but I mean let us say a case 

goes on and on and on and on. Do you as a CFO get a weekly or 

a monthly record that is saying of these 400 cases, 50 of them have 

gone on for 10 months, 3 months? 

Ms. TAYLOR. I believe we do get information about the age of the 

cases. 

Mr. STEARNS. That is what I mean, the age of the case. 

Ms. TAYLOR. What we don’t get is the reason for the age. 

Mr. STEARNS. OK. 

Ms. TAYLOR. So it could sometimes be because the—— 

Mr. STEARNS. Do you physically see this come across your desk, 

the age? 

Ms. TAYLOR. I don’t physically get that, no. 

Mr. STEARNS. Do you have any interest in seeing that so you can 

say to the people, let us get moving? 

Ms. TAYLOR. I have an absolute interest in this MSP recovery 

process, and it is subjected to our audit by our CFO auditors. 

Mr. STEARNS. OK. How much does CMS spend on conditional 

payments for treatment and services, coverage for which is the responsibility of non-group health plans on an annual basis? Do you 

know? 

Ms. TAYLOR. I do not know. I just know what the annual recoveries are. 

47 

Mr. STEARNS. How much does CMS recover annually for these 

claims? 

Ms. TAYLOR. Last year, we recovered about $400 million. 

Mr. STEARNS. My last question is industry experts have told this 

committee’s staff that there is at least $4 billion a year for the nongroup health claims alone that is not making it to the trust fund. 

Do you confirm that? Do you have any idea how much money CMS 

is leaving on the table? 

Ms. TAYLOR. I don’t have any information on that. 

Mr. STEARNS. Does that 4 billion seem reasonable to you? 

Ms. TAYLOR. I honestly couldn’t remark on that. We are relying 

on the individuals to report these cases to us. 

Mr. STEARNS. All right. Thank you. 

Ms. TAYLOR. Um-hum. 

Mr. STEARNS. I recognize Ms. DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. Before I 

begin my questions, I want to welcome these Close Up students 

who have joined us. What you are seeing today is the legislative 

process in action, and oftentimes people from the outside world 

who come in and see us don’t realize that much of what we do is 

in a bipartisan way in Congress. And what we are trying to do in 

this hearing today is figure out how we can both protect taxpayers 

and also Medicare beneficiaries in getting more money recovered 

from these accidents so we can keep our program safe and solvent. 

So this is an Oversight hearing and this is the kind of work this 

committee does, and we are delighted to have you, and we are 

sorry we don’t have seats for more of you. 

I want to ask both of our witnesses, Ms. Taylor, Dr. Cosgrove, 

about some of the key decisions that Congress is facing as we look 

at the effectiveness of these Medicare Secondary Payer rules. 

Ms. Taylor, I think you had said that the Medicare Secondary 

Payer program recovered about $50 billion for taxpayers over the 

last decade. Is that correct? 

Ms. TAYLOR. That is correct. The number is 58 billion. 

Ms. DEGETTE. $58 billion. And so obviously this program is important in making sure that taxpayers are protected and that the 

Medicare program is not paying bills that other insurers should be 

paying. Is that correct? 

Ms. TAYLOR. Yes, that is correct. 

Ms. DEGETTE. And it is also important, though, that the CMS be 

responsive to the needs and the concerns of the beneficiaries because it really doesn’t make sense either in a fiscal way to have 

beneficiaries to have to wait months to get basic information that 

they need to reach settlements in cases. And it frankly seems very 

unfair for beneficiaries to face huge and unexpected demands to 

pay funds back to Medicare years after they have settled. 

You know, I was a lawyer. I practiced law for about 15 years. 

And what I found when I settled these cases was the beneficiaries 

get the settlement and they are so happy about it that they spend 

it right away. And then years later when the government comes 

back and tries to get this money back, they don’t have it anymore 

and it is a real burden on them. And so I think it might be fair 

to say there is a tradeoff here between actions that are good for 

48 

taxpayers, which is recovering these funds, but then that can burden beneficiaries later. 

And so would that be an accurate statement to say sometimes 

there is a tradeoff there between the taxpayers and the beneficiaries? 

Ms. TAYLOR. We are constantly between that delicate balance of 

ensuring that the trust funds recover monies while ensuring that 

our beneficiaries receive the care they need and ensuring that we 

recover monies that are due back to the trust funds. So yes, that 

is absolutely—— 

Ms. DEGETTE. And in a timely fashion, I would say? 

Ms. TAYLOR. Absolutely. 

Ms. DEGETTE. Now, Dr. Cosgrove, can you offer us any insight 

here based on GAO’s work? 

Mr. COSGROVE. Well, our work is just beginning right now. And 

so we starting to talk to the affected parties, which certainly include, you know, the non-group health plans and CMS. And our 

goal in undertaking the study is to understand what the challenges 

are but also to understand what the costs are for CMS in terms 

of implementing the mandatory reporting and what the potential 

savings might be, you know, which could shed light on and maybe 

lead towards potential recommendations about improvements for 

the program, and maybe along such lines as, you know, minimum 

recovery amounts. But, you know, that is far down the road. We 

are going to be continuing our work and issuing our report by the 

end of the year. 

Ms. DEGETTE. By the end of the year. Mr. Chairman, probably 

I can see a follow-up hearing coming along. 

I would ask you, Ms. Taylor, what recent action has CMS taken 

to promote the goals that we talked about here of improving the 

Medicare Secondary Payer program for beneficiaries and for taxpayers? 

Ms. TAYLOR. There are probably two sets of things that we have 

done. One is we are making information more accessible to beneficiaries. So we are providing them education about their responsibilities with MSP, but we are also making it able so that Medicare beneficiaries can see their claims real time and be able to tell 

their attorneys, ‘‘These are the claims that I know have been processed and paid by Medicare.’’ 

The second part is, you know, we have had a huge workload increase because of the mandatory reporting requirements. This is 

not an industry we dealt with routinely, the liability, the casualtytype insurers, and so we learned a lot over the last 3 years, and 

we are working to streamline our processes, look at a way to ensure that our contractor has the right skills, and we will be re-competing our contract for these kinds of activities related to the nongroup health plans this fall. 

Ms. DEGETTE. And do any of these improvements need congressional action that you think would help? 

Ms. TAYLOR. I can’t think of anything off the top of my head, but 

we would certainly be happy to work with you. 

Ms. DEGETTE. Thank you. 

Thank you very much, Mr. Chairman. 

49 

Mr. STEARNS. I thank the gentlelady. The gentleman from Texas, 

Dr. Burgess, recognized for 5 minutes. 

Mr. BURGESS. Thank you, Chairman Stearns. And some of my 

questions are going to follow along the same lines that Chairman 

Stearns was asking. 

Ms. Taylor, how long will you have to wait for a settlement? 

What is a customary period? 

Ms. TAYLOR. So according to our guidelines, we want to work 

with insurers within 65 days to resolve cases. Then we allow them 

30 days for dispute and then another 60 days to sort of resolve that 

dispute. So ideally, it could take 120, 150 days to resolve a case. 

We do have workload issues, so there are cases that have aged beyond that 150 days. We certainly know that working on a lawsuit 

takes time. So it can take anywhere between the ideal of 120 days 

to 6 months to resolve a case. 

Mr. BURGESS. Do any of these cases ever linger for years? 

Ms. TAYLOR. I am not aware of any, but I certainly have heard 

that there are stories out there that have them go on beyond a 

year. 

Mr. BURGESS. Is there ever a statute of limitations beyond which 

you would not try to go back and recover from a beneficiary? 

Ms. TAYLOR. If someone reports something to us, we at least 

have the responsibility to look into it. 

Mr. BURGESS. Having run a medical practice—and I feel your 

pain. I mean, you are having to deal with insurers and lawyers. I 

mean, those are the two worst groups that I had to deal with in 

my professional life. But at the same time, I also know that if the 

bulk of your accounts receivable, if you will—which is what we are 

talking about—if it gets up much past 90 to 120 days, that is 

money that you may just never see. So someone always has to be 

working that or reestablishing why it is that it is taking so long. 

Now, does that happen at the level of Center for Medicare & Medicaid Services or—you mentioned a contractor—is that something 

that is contracted out? 

Ms. TAYLOR. It is something that is contracted out. And as I 

mentioned, this is not an industry we had typically dealt with in 

the past. We know that we need to change our processes. We probably need some different skill sets at our contractor, and we will 

be making some changes in that area. 

Mr. BURGESS. Now, the contractors that you hire, do they have 

any performance guidelines that they are required to meet? 

Ms. TAYLOR. They do, yes, but they did not anticipate some of the 

activities we are seeing now. 

Mr. BURGESS. Well, and how are we overcoming that lack of anticipation now? 

Ms. TAYLOR. We are rewriting a Statement of Work with very 

different metrics and different performance requirements. 

Mr. BURGESS. And these contractors, is this a competitive bidding situation where you put these proposals—— 

Ms. TAYLOR. Yes, it will be going forward. 

Mr. BURGESS. It will be, but currently are these competitively bid 

currently? 

50 

Ms. TAYLOR. The current contractor was not ‘‘competitively bid’’ 

but it was done under all the FAR requirements that the government requires. 

Mr. BURGESS. But going forward, you are actually going to go beyond that? 

Ms. TAYLOR. Yes, absolutely. 

Mr. BURGESS. How long do you anticipate that will require? 

Ms. TAYLOR. We expect to have a Statement of Work on the 

street this fall. 

Mr. BURGESS. And you will share that with the committee, obviously. 

Dr. Cosgrove, let me ask you a question on your Figure 2 illustration on page 8. It seems as if—and maybe I missed the discussion—but at some point in these little block diagrams, the mandatory reporting block diagram, there has got to also be an arrow 

going back to the beneficiary informing them of their responsibilities under this, because what Ms. DeGette said was exactly correct. You have someone who it has been so far removed, the accident, the medical costs, the reimbursement, and now they get this 

nice check because their government loves them and sent them a 

check because they were injured and so it is theirs to spend. I 

mean I understand how that thought process works. How can we 

improve that loop so that the beneficiary has some understanding 

of what their obligations are, what their requirements are under 

the law? 

Mr. COSGROVE. Well, I think that is an excellent point because 

that is critical for the beneficiary to understand their responsibilities. My understanding from the work that we have done so far 

is that partly the responsibility is on CMS to provide information 

to beneficiaries so they know what their responsibilities are. I 

frankly don’t know right now what the non-group health plans’ responsibilities are to do similar when the recovery is—— 

Mr. BURGESS. For notification—— 

Mr. COSGROVE. For notification. But that is something we will 

definitely be looking into. 

Mr. BURGESS. All right. Thank you. 

I yield back, Mr. Chairman. 

Mr. STEARNS. The gentleman yields back. 

The gentleman from Michigan, Mr. Dingell, is recognized for 5 

minutes. 

Mr. DINGELL. Mr. Chairman, you are most courteous. I thank 

you for having this hearing, and I appreciate your concern for the 

questions before us, i.e., how long it takes for us to get the answers 

on the costs and other matters. My questions are for Ms. Taylor. 

For the following questions, please answer yes or no. 

Ms. Taylor, it is my understanding that CMS works with Medicare Secondary Payer recovery contractor that is responsible for determining what MSP payments are subject to recovery, issuing demand letters for this recovery, collection of MSP claims for beneficiaries, making initial determinations for waivers and appeals, 

amongst other responsibilities. So a common complaint is the general delay in communications. Some say days, some say months. 

This delay is frustrating to everybody. 

51 

Now, does CMS currently require the contractor to respond to 

communications, whether by mail, email, written correspondence 

from beneficiaries, or attorneys within a specific timeline? Yes or 

no? 

Ms. TAYLOR. Yes. 

Mr. DINGELL. You do? What is that timeline? 

Ms. TAYLOR. I believe it is 65 days. 

Mr. DINGELL. Is it honored? 

Ms. TAYLOR. We do have workload issues that have created the 

inability for the contractor to get back—— 

Mr. DINGELL. I will be asking some information about that. Does 

CMS or the contractor collect data on the average response time in 

these communications? Yes or no? 

Ms. TAYLOR. I believe they do, yes. 

Mr. DINGELL. Now, can you tell me what the average response 

time is? Submit that for the record, if you please. 

Now, a very similar complaint is the length of time it takes to 

identify the amount of MSP payments owed to CMS. Does CMS or 

the contractor collect data regarding the average time needed to 

identify and recover funds under the MSP program? Yes or no? 

Ms. TAYLOR. That is a difficult one to answer yes or no to. They 

do whatever is based on the information in the system. So yes, they 

do it as quickly as they can. The problem is claims lag. 

Mr. DINGELL. Would you submit that in greater detail for the 

record, please? 

Ms. TAYLOR. Yes. 

Mr. DINGELL. Now, could you tell me what the average time 

might be? 

Ms. TAYLOR. I don’t—— 

Mr. DINGELL. Please submit that for the record. 

Now, a further concern is the length of time it takes for beneficiaries and their attorneys to obtain a demand letter that informs 

the beneficiary and their attorney of the MSP claim. This delay impedes the ability of beneficiaries and their attorneys to move forward towards a settlement, and again, ultimately delays reimbursement to Medicare. Does CMS currently require the contractor 

to issue a demand letter within a specific timeline? Yes or no? 

Ms. TAYLOR. Yes. 

Mr. DINGELL. You do? Now, would you submit for the record 

what that average response time is? 

Ms. TAYLOR. Yes. 

Mr. DINGELL. Now, next question. In your opinion, Director Taylor, what is needed to improve the responsiveness of CMS and its 

contractors to beneficiaries and their attorneys? Is it a new contractor that is better equipped to handle these claims or is it the 

need for additional funding and personnel to manage the caseload? 

Finally, another concern raised by a witness on the second panel, 

Mr. Salm of Publix, is the inefficiency of pursuing smaller claims. 

His testimony cites the example of Medicare pursuing cases as 

small as $1.59. Now, I am just a poor Polish lawyer from Detroit, 

but even I know staff time used to collect a claim here for $1.59 

would far exceed recovery. Question: Does CMS have in place a 

threshold for MSP recovery? 

Ms. TAYLOR. We do not but we are looking at that, yes. 

52 

Mr. DINGELL. Do you think that that is something that you ought 

to do because you may be wasting money and flailing around trying 

to collect money that frankly is far too small to confer any benefit 

on you in view of the costs? 

Ms. TAYLOR. We are looking at that, absolutely. We think we can 

establish a threshold. I will comment, though, that it is an automated process. Once a beneficiary’s case is identified and claims 

are identified associated with that case, it is an automatic generated bill. So it is not a manual process—— 

Mr. DINGELL. I would like to have you make a submission for the 

record on that point. 

Ms. TAYLOR. OK. 

Mr. DINGELL. Next question. Does CMS have in place a threshold 

for MSP recovery? I think you have indicated that it does not, 

meaning that an MSP claim, if it is less than the cost of staff time 

to collect CMS or the contractor would not pursue? Yes or no? 

Ms. TAYLOR. That is correct. 

Mr. DINGELL. All right. Thank you, Mr. Chairman. I note that I 

have gone 19 seconds over. 

Mr. STEARNS. Well, I thank the gentleman emeritus of the full 

committee. And I hope, Ms. Taylor, that Mr. Dingell’s request, that 

you made note of them. I didn’t see you make note of them. Our 

staff did, but he has requested quite a bit of information, which I 

think would be useful for both sides to see. 

Ms. TAYLOR. Um-hum. 

Mr. STEARNS. And I think his point is well taken that the fact that you are continuing to pursue something for $1.30 or something 

like that. After 30 years, it seems like that should have—— 

Mr. DINGELL. $1.59. 

Mr. STEARNS. $1.59—that after all 30 years, it seems like you 

should have thought that out. I would be glad to yield. 

Mr. DINGELL. —to get answers to the questions and see to it that 

they are put into the record and I would ask unanimous consent 

that the record remain open for the purposes of receiving the answers to me that have been requested. 

Mr. STEARNS. By unanimous consent, so ordered. And with the 

emeritus of the full committee’s background on Medicare, it is very 

helpful for the oversight and I appreciate his participation with 

that. 

We recognize Mr. Murphy for 5 minutes. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Ms. Taylor, you are the chief financial officer and director of the 

Office of Financial Management for the Center for Medicare & 

Medicaid Services? 

Ms. TAYLOR. Correct. 

Mr. MURPHY. All right. Now, you cited us 413,000 cases, which 

you said is a large number and has strained the system. Am I correct in that? 

Ms. TAYLOR. That is the number for the non-group health plans. 

Mr. MURPHY. Non-group health plans. And that is the concern 

we have talking about here. What is the median value of those 

413,000 claims? 

Ms. TAYLOR. I don’t have the dollar figures in front of me. I am 

sorry about that. 

53 

Mr. MURPHY. OK. You will get that information to us? Do you 

have any information, for example, of how many might be under 

$50 or $100, $500, $1,000? 

Ms. TAYLOR. I don’t know that off the top of my head but the reporting requirements is at $5,000, so $5,000 for liability and I believe it is 7,500 for workers’ comp. 

Mr. MURPHY. Do you even collect information on things under 

$5,000? I mean you send out letters for $1.59. We have that established. 

Ms. TAYLOR. Correct. 

Mr. MURPHY. But you don’t collect the data on how many cases 

you have of that sort of that 413,000? 

Ms. TAYLOR. We track how much the cases are but I don’t know 

that I have that with me at this moment, no. 

Mr. MURPHY. I am confused because on the one hand you are 

saying you don’t get that information but you can get the information? 

Ms. TAYLOR. If someone reports a case to us, the threshold is 

$5,000 to report a case. So if there is a settlement for $3,000, they 

would not be required to report that case to us. 

Mr. MURPHY. All right. So if you don’t have that information, you 

are going to have difficulty giving us that information. If you don’t 

have the information as a chief financial officer, you don’t have the 

information you need to be the CFO. Just my observation. And I 

would think it is foolish of me to say if I found a coupon that I 

could get a can of tomato soup for 10 cents but I had to drive 100 

miles to the store to get it, somehow in that judgment I would say 

it is probably not worth it for me to do that, which brings us back 

to this information. And then this tags along with what the gentleman from Michigan, Mr. Dingell, said on a number of these 

claims that are a small number, if the actual cash value is so small 

that it would cost us more to pursue than to get it, but I am not 

sure you have the data to do that. It may not be we are able to 

take action. 

But let me ask a couple more things here. So we don’t know the 

median value of these claims. We don’t things about that. Is it true 

that in Section 111 of the statute, it is going to require collection 

of information so long as it is greater than one penny, even if there 

were no medical bills? Am I correct that that is in the—— 

Ms. TAYLOR. I am not aware of that portion of the provision. 

Mr. MURPHY. OK. It would probably be a good thing for the CFO 

to know. My understanding is that is true, and so if there was a 

$25 gift card given out by a store to settle a potential case with 

a senior citizen, you would want to know that, too, as another level 

of settlement? But I understand that that is being asked for. Would 

you get us that information? 

Ms. TAYLOR. Yes. 

Mr. MURPHY. I am frustrated here because we are trying to get 

information on something I am not sure you collect the very data 

that we are trying to find out. I have heard the current reporting 

system is prone to error and that CMS rejects a high percentage 

of the reports when first submitted. Any idea how many reports are 

initially rejected versus completed on the initial submission? 

54 

Ms. TAYLOR. I am not aware of that number. I do know that we 

have reporting requirements and reporting elements that are required so it would be that cases are rejected because data is not 

provided adequately. 

Mr. MURPHY. Are you aware of some I referenced in my opening 

statement here that Rand Corporation just completed a study that 

found if you only looked at settlements greater than $5,000 instead 

of every single settlement, your collections would fall by only 2.4 

percent, but the number of claims you were pursuing would fall by 

43 percent, and you still collect roughly $1 billion from non-group 

health plans if you only looked at claims greater than $5,000. Are 

you familiar with that Rand study? 

Ms. TAYLOR. I am not familiar with that Rand study. 

Mr. MURPHY. Have you looked at putting in a threshold dollar 

level for that, then? 

Ms. TAYLOR. We absolutely are looking at that right now. 

Mr. MURPHY. OK. Is this just in the earliest levels of review of 

this whole issue from your agency? 

Ms. TAYLOR. Yes, it is. 

Mr. MURPHY. I guess it comes down to this, too. It would be very 

beneficial for Congress and obviously for Medicare, which I know 

you care deeply about is financial stability. That is why you are in 

the job you are in. It would help us all—and I think we are on the 

same team—if we could find what kind of saving is in this. With 

Medicare basically going bankrupt and I am sure you are having 

many a nail-biting moment trying to find the dollars for this, it 

would really help us if you could just really open all the drawers 

and lift up all the rugs and find everywhere possible in this to 

make this more efficient. 

And I hope you will also take a look at the SMART Act that a 

number of us on both sides of the aisle have submitted. And finally, 

I might suggest this and ask this: Have you met with the people 

who have a stake in this such as defense attorneys, plaintiffs’ attorneys, retailers, senior citizens to ask for their input on some of this 

information, too? 

Ms. TAYLOR. I, personally, have met with some of those organizations, but folks who work for me have met with many more. 

Mr. MURPHY. Well, I would hope that you will take a look at our 

Act and I hope you will sit around and listen to some of the witnesses today because I think that will be eye-opening for you. 

Ms. TAYLOR. OK. 

Mr. MURPHY. I yield back my time, Mr. Chairman. 

Mr. STEARNS. The gentleman yields back. The gentleman from 

Texas, Mr. Green, is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. And I want to follow my 

colleague from Pennsylvania. You are required by law when you 

put these payment requirements in place, is that correct? 

Ms. TAYLOR. Correct. 

Mr. GREEN. So the first year it is $5,000 and it goes down to 

2,000 and then $600. And he mentioned the Rand study, the Rand 

Institute for Civil Justice study, but for us to be able to let you do 

anything like that, we actually need to change the law. 

Ms. TAYLOR. Correct. 

55 

Mr. GREEN. OK. And I agree with my colleague that, you know, 

we need to make sure we get the reimbursement, you know, instead of double paying. We also need to make sure it is economically feasible—— 

Ms. TAYLOR. Um-hum. 

Mr. GREEN [continuing]. And so whether it be exempting 5,000 

because you spend less than—it be like 43 percent or if, you know, 

you would only lose $24 million, it would seem like it would be 

cost-effective to do that. So maybe that is something our committee 

needs to look at and something we could work on together. 

But my main question is I would like to ask you about contractor 

performance to work recovering funds owed to Medicare under the 

Secondary Payer rules. In 2006, CMS consolidated the Medicare 

Secondary Payer Recovery contracts into a single $200 million costplus contract. CMS awarded the contract on a sole-source basis to 

Chickasaw Nation Industries, a tribally-owned firm based in Oklahoma, the contractor responsible for identifying Medicare payments 

to be recovered, calculating the total amount of the medical payments potentially ripe for recovery, issuing recovery demand letters 

and tracking secondary payer debt. 

In 2009, the Senate Subcommittee on Contracting Oversight initiated an investigation in the Medicare Secondary Payer contractor. 

The investigation revealed there were ongoing problems with the 

contract. For instance, CMS’s independent auditors concluded that 

the combination of controlled efficiencies constitute a significant deficiency. CMS has also found that the contractor failed to comply 

with contractor requirements. The contractor failed to adequately 

manage its cases and had major accounting problems. 

Ms. Taylor, in 2010, the Senate Subcommittee on Contracting 

Oversight called a hearing and at the hearing Rodney Benson, Director of Acquisitions and Grants Management at CMS, testified. 

It is now a year later and what has CMS done to improve their 

performance of that recovery contractor? 

Ms. TAYLOR. I can tell you that we have made several trips to 

that contractor. We have put them on corrective action and, as I 

mentioned before, we are working on a Statement of Work that will 

be released this fall and we will be re-competing that work. 

Mr. GREEN. Is there a way you can get that information to our 

committee? 

And Mr. Chairman, I would appreciate it if we could see what 

the progress has been made with that contractor. 

Do the improvements of CMS and the contractor fully rectify the 

problems in the process? 

Ms. TAYLOR. It has rectified some of the problems, yes, it has. 

Mr. GREEN. How long does that contract run? 

Ms. TAYLOR. I believe it is up middle of 2012, June or July of 

2012. 

Mr. GREEN. What process would you use to select a new contractor? 

Ms. TAYLOR. It would be a competitive process, so we would put 

very specific requirements in a Statement of Work with performance metrics, and we would be accepting bids and we would be reviewing those bids based on that Statement of Work. 

56 

Mr. GREEN. Well, I am concerned with the problems identified 

with the contractor, and this contractor received the contract 

through the sole-source process. And CMS’s internal auditors have 

found that the contractor failed to comply with these contract requirements, and I am hopeful that CMS will continue to address 

the problems with the contractor and continue to improve the recovery process, particularly when the contract is up for renewal. 

Ms. TAYLOR. Yes. 

Mr. GREEN. So we don’t see what has happened. Again, if it is a $200 million contract or $200 million cost-plus contract, do you 

have any idea on how much it has cost us so far for that contractor? 

Ms. TAYLOR. I believe it is a $55 million contract annually, so 

over 4 or 5 years it would be $200 million, but yes. 

Mr. GREEN. OK. Outside of working with the contractor, have 

there been any penalties on their reimbursement based on the 

quality of their work? 

Ms. TAYLOR. I am not aware of any, no. 

Mr. GREEN. OK. Mr. Chairman, if we could also check on that. 

And I know I am almost out of time, so I appreciate you. 

Mr. STEARNS. No, Ms. Taylor, I think Mr. Green has made some 

very good points. I hope you are keeping copious notes. 

The gentleman from Georgia is recognized for 5 minutes. 

Mr. GINGREY. Mr. Chairman, thank you. And I want to thank the 

first panel and very important hearing and the information you 

have given has been straightforward from both of you, and I certainly appreciate that. 

Ms. Taylor, I will direct my first question to you. One of the main 

complaints that we have heard from those involved in the Medicare 

Secondary Payer process is that they are unable to get a clear 

statement from CMS as to the amount that must be repaid to the 

Medicare Trust Fund. 

Your testimony discusses that if there is a disagreement on the 

amount of the money owed to Medicare, an individual can file for 

a waiver or seek an appeal. I think it would be very helpful if you 

could describe that process to us and how long it takes. 

Ms. TAYLOR. Sure. The waiver process typically is where there is 

a small dollar settlement. What happens is our rights are preserved after the settlement occurs. The beneficiary deducts attorney fees or any out-of-pocket costs that the beneficiary incurred as 

a result of any injury or harm they suffered. And so the amount 

that then is in—I won’t call in dispute—but the amount that then 

Medicare can use to recover any is based on the net, the net of the 

settlement minus attorney fees and any out-of-pocket costs to the 

beneficiary. If those amounts are less than out-of-pocket, if the settlement is less than the attorney fees or out-of-pocket costs incurred by the beneficiary, the beneficiary can waive any amounts 

owing to Medicare. 

Mr. GINGREY. OK. Thank you. Second question for you also, Ms. 

Taylor. Members of the committee have been informed that the 

current Medicare Secondary Payer process contains an unfortunate 

paradox, in some cases that CMS takes the position that it cannot 

or will not specify the amount owed to the Medicare Trust Fund 

until after a settlement is reached, but it is that amount that is 

57 

needed before the parties can settle. Why is this? How does that 

happen? 

Ms. TAYLOR. So the issue there is the amount of time it takes 

to process claims. Providers have up to a year to submit a claim. 

If that claim is not submitted, Medicare still preserves the right to 

collect against that claim so—— 

Mr. GINGREY. Is it the official position of CMS that they will not 

provide an amount before settlement? 

Ms. TAYLOR. No. CMS provides an interim amount so we can 

look through the claim’s data and say this is what we believe the 

claims are that have been processed. The problem is we can’t finalize that number until after there is a settlement. Then we can look 

through the claims and there can be a lag in the receipt of those 

claims. 

Mr. GINGREY. OK, thank you. Mr. Cosgrove, I want to direct 

these questions to you. Does the Government Accountability Office 

believe that there are areas of the Medicare Secondary Payer regime that should be fixed and what are those areas? 

Mr. COSGROVE. Well, we don’t know yet. 

Mr. GINGREY. It is a hard question but—— 

Mr. COSGROVE. Right. We don’t know yet but that is exactly the 

intention of the study that we are undertaking right now. Certainly, you know, we have heard concerns that the process may not 

be working as well as it should be. The non-group health plans 

have raised concerns about some of the difficulties that they are 

facing, and so one of the key objectives of the study is to examine 

the challenges for the non-group health plans and for CMS in implementing this process, as well as them also looking at what are 

the potential Medicare savings? What are the costs that CMS is incurring to do this? And what—— 

Mr. GINGREY. Mr. Cosgrove, excuse me for interrupting you, but 

you had I think said earlier in your testimony or in response to a 

member’s question when this study will be completed. Will you tell 

me again when that—— 

Mr. COSGROVE. It is expected by the end of this year. 

Mr. GINGREY. By the end of this year? 

Mr. COSGROVE. Right. We are in the early stages right now. 

Mr. GINGREY. Last question that I had and again it is for you, 

has GAO ever done any work evaluating the public’s knowledge of 

the need to reimburse Medicare? Now, the reason I ask that question is because this whole issue of subrogation comes up. 

Mr. COSGROVE. Um-hum. 

Mr. GINGREY. And I don’t know whether you are aware of the 

fact that I have a medical liability tort reform bill called the 

HEALTH Act, and one of the provisions in that bill says ‘‘collateral 

source disclosure,’’ which in most state courts that is not required 

and neither the defendants nor the plaintiff understands the need 

for that and clearly doesn’t know about this subrogation rule that 

is in law in regard to reimbursing Medicare, whereas most probably private insurance companies don’t have any right to subrogation of that settlement or claim that the plaintiff receives. So the 

question, again, has GAO ever done any work evaluating the 

public’s knowledge of the need to reimburse Medicare? 

Mr. COSGROVE. I am not aware of any such study. 

58 

Mr. GINGREY. Do you think that would be important? 

Mr. COSGROVE. Absolutely. I think it is important. This is important for beneficiaries. It could be a substantial financial liability 

that they face. And they need to be fully informed. 

Mr. GINGREY. Well, I think you are right. And I certainly agree 

with that. I see I have already gone over my time, but thank you 

all. I thank both of you very much. I yield back. 

Mr. STEARNS. I thank the gentleman. Ms. Schakowsky is recognized for 5 minutes. 

Ms. SCHAKOWSKY. Schakowsky. 

Mr. STEARNS. Schakowsky, the gentlelady from Illinois. 

Ms. SCHAKOWSKY. Thank you, my friend, Mr. Chairman. 

I am glad that we, on a bipartisan basis, are looking at ways to 

make Medicare more efficient. I am grateful to the evaluators who 

are looking at it, to you, Director Taylor, and to my colleagues because I believe in Medicare and that we want to make this system 

as strong as possible, the trust fund as strong as possible. 

And when I hear about the problems that we have in collecting 

in a timely way from other party payers, I think about the Republican plan, which would turn over the whole system to private insurers. And now I am picturing lawyers and I am picturing a balkanization of lots of different insurance companies in charge of the 

whole program and the effect that that could have on beneficiaries 

in trying to get paid for the services that they need. 

And I think that making Medicare work better and collecting 

where we should is the focus that we ought to have, not a new system where we say oh, OK, go to private insurance companies, you 

figure out how they are going to pay for in a timely way the 

healthcare that you need because we already have evidence that it 

is difficult. And now we will set these elderly people free on their 

own to try and get that money. So I want this to go right. 

So Director Taylor, we are going to hear from witnesses on the 

second panel that the current Medicare Secondary Payer system is 

‘‘making it extremely difficult to settle claims in a prompt and efficient manner.’’ That is the Gilliam testimony. And ‘‘harming beneficiaries and ironically and unfortunately harming the trust fund as 

well,’’ and that is from the Matzus testimony. So I wonder if you 

would respond to these characterizations. 

Ms. TAYLOR. Sure. I will say that one of the things is we have 

been working very closely with industry to ensure that everyone 

understands their reporting requirements. I think that it is taking 

time for everybody to learn sort of their responsibilities. We have 

put all of our instructions out for industry to understand. Our requirements are automated. We have made it accessible—either 

automated or online ability to report to us. And you know, I think 

we are doing everything we can to work very closely with industry 

to ensure that everyone has an opportunity to improve the process. 

Ms. SCHAKOWSKY. Let me say this. Years ago when I was on the 

Oversight Committee and I worked with Steve Horn on the Government Efficiency Subcommittee, we would bring in agencies, and 

then 6 months later they would come back and we would say well, 

have you made progress? And unfortunately, more often than not 

it hasn’t been made. 

59 

And I would suggest, Mr. Chairman, that we do a follow-up here, 

you know, that we have identified problems, you have identified 

problems that exist, that we hold ourselves and you accountable to 

make sure that we come back and check on that and see if the systems that you have put in place, perhaps and maybe hopefully a 

new contractor—by the way, are we talking again about a single 

contractor—competitive bidding for a single contractor? 

Ms. TAYLOR. Yes, we are. 

Ms. SCHAKOWSKY. And would you speak to that a little? Is that 

the best way to go, do you think, having one contractor handle 

this? 

Ms. TAYLOR. Well, the reason we went to one contractor is we did 

have a study by GAO that said we had misapplication or inconsistent application of our MSP policies across contractors. So we 

did consolidate. Beneficiaries do transition across the country so it 

made it difficult for beneficiaries to navigate different contractors. 

So we do think it made sense to consolidate with one contractor. 

Ms. SCHAKOWSKY. Well, then, how can we deal with the workload 

issue which you have identified as a big problem? Are we going to 

be able to fix that with one contractor? 

Ms. TAYLOR. As part of the Statement of Work, we are looking 

at parts of the contractor specializing in different insurer types of 

reporting that a contractor might have—a unit that deals with just 

the automobile insurers or that may deal with the property and 

casualty insurers or that would just do workers’ comp. so that they 

specialize and operate with certain industries and that they do 

have those skill sets to navigate. 

Ms. SCHAKOWSKY. I am out of time, but let us get it right—— 

Ms. TAYLOR. Um-hum. 

Ms. SCHAKOWSKY [continuing]. And let us make sure. We will 

check back that we have gotten it right. Thank you. 

Ms. TAYLOR. Thank you. 

Mr. STEARNS. I thank Ms. Schakowsky. And now we recognize 

Mr. Griffith from Virginia for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Earlier this year, the President issued an Executive Order requiring agencies to review regulations to determine how they could 

be streamlined to operate in the most effective and efficient manner. Has any part of the Medicare Secondary Payer process been 

identified or reviewed as part of the President’s Executive Order, 

and if so, which parts? 

Ms. TAYLOR. We have reviewed the MSP program and we have 

at least put forward the need to have more transparency into the 

process. So we have looked at issuing regulations surrounding the 

MSP program. 

Mr. GRIFFITH. OK. But specifically regarding the President’s Executive Order, have any parts been identified as part of that Executive Order or as a response to that Executive Order? 

Ms. TAYLOR. The main part is the requirement for mandatory reporting and what the responsibilities are surrounding that. 

Mr. GRIFFITH. And you may not be in a position to answer these 

questions and I understand that, but this is just something I am 

curious about. When you have somebody who is injured, and we 

will use that classic automobile case, how do you separate out the 

60 

settlement as being for medical expenses and for pain and suffering? That would be number one. Number two, when you are 

looking at ongoing expenses, how do you determine, you know, do 

you keep going on the ongoing expenses until you have eaten up 

the entire settlement or is there some division that is made? And 

last but not least along this line of questioning, what provisions are 

made to recognize that in a personal injury case that the plaintiff 

has borne the expense of paying the attorney out of the settlement 

and does, in fact, your process recognize that and give credit for 

those attorneys’ fees as a part of the settlement? 

Ms. TAYLOR. It does. The part that we recover is the net of the 

settlement taking out attorneys’ fees and any out-of-pocket cost for 

the beneficiary. I think it is more difficult to define the pain-andsuffering part of that settlement, and sometimes—we have been 

told at least—that the pain and suffering does sometimes include 

the healthcare costs for that beneficiary or the future healthcare 

costs of that beneficiary. So pain and suffering is defined by what 

their injury is and the cost of those healthcare services that will 

be needed for them. 

Mr. GRIFFITH. Now, I guess that is where we have heard the indication that sometimes it is hard for you all to give folks a number. 

Ms. TAYLOR. Correct. 

Mr. GRIFFITH. But it also makes it hard for the people trying to 

figure out, you know, how to settle a case without going through 

a lengthy litigious process when they don’t know what the lien is 

going to be. 

Ms. TAYLOR. Right. 

Mr. GRIFFITH. All right. I thank you very much and I yield back 

my time, Mr. Chairman. 

Mr. STEARNS. The gentleman yields back. Ms. Taylor, before you 

go I think, as Mr. Dingell and others have pointed out, there is a 

whole list of things we have given you. It seems like there are lots 

of times you did not know. It seems like since you are the CFO, 

the chief financial officer, a lot of the questions we asked you, you 

should have known. For example, number of claims for small dollar 

amounts; two, the response times for getting information and payments to beneficiaries; three, median amount of the money involved with the 413,000 cases; number four, your threshold you 

didn’t seem to be aware of; number five, you had no idea how much 

CMS is failing to collect; number six is asking about the duration 

time for the claims settlement. You didn’t have any idea. So I just 

want to tell you I think the feeling on both sides is that you just 

didn’t seem to know much, and so we caution you that if you come 

back for a second hearing, we expect you to be able to answer these 

questions. I assume you will bring staff with you so that these 

questions—you can certainly ask your staff to help you—but to see 

a CFO know so little was a little disappointing. 

With that, we will have the second panel come up. 

And I hope, Ms. Taylor, you will stick around so you can hear 

some of the serious problems. This will be beneficial to you as the 

CFO to hear the second panel more specifically address some of the 

things we talked about. 

61 

I want to welcome the second panel. Marc Salm is vice president 

of risk management at Publix Super Markets, where he is responsible for claims, consumer litigation, insurance purchase, and risk 

transfer. Scott Gilliam is vice president and government relations 

officer with the Cincinnati Insurance Company. He is responsible 

for representing the company’s interests with state and federal governments, as well as other outside groups. Jason Matzus is a partner in the law firm of Raizman, Frischman, and Matzus where he 

practices tort and injury law representing dozens of Medicare beneficiaries. He is also an adjunct professor of law at the University 

of Pittsburgh School of Law. Ilene Stein is a federal policy director 

for the Medicare Rights Center’s Washington, D.C., office. 

I want to welcome the second panel. As you know, the testimony 

you are about to give is subject to Title XVIII, Section 1001 of the 

United States Code. When holding an investigative hearing, this 

committee has a practice of taking testimony under oath. Do you 

have any objection to taking testimony under oath? No? 

The chair then advised you that under the rules of the House 

and the rules of the committee, you are entitled to be advised by 

counsel. Do you desire to be advised by counsel during your testimony today? In that case, please rise and raise your right hand. 

I will swear you in. 

[Witnesses sworn.] 

Mr. STEARNS. Thank you very much. And now, Mr. Salm, we invite you with your 5-minute summary of your opening statement. 

TESTIMONY OF MARC SALM, VICE PRESIDENT, RISK MANAGEMENT, PUBLIX SUPER MARKETS, INC.; SCOTT A. GILLIAM, 

VICE PRESIDENT AND GOVERNMENT RELATIONS OFFICER, 

THE CINCINNATI INSURANCE COMPANIES; JASON MATZUS, 

PARTNER, RAIZMAN FRISCHMAN & MATZUS, P.C.; AND ILENE 

STEIN, FEDERAL POLICY DIRECTOR, MEDICARE RIGHTS 

CENTER 

TESTIMONY OF MARC SALM 

Mr. SALM. Chairman Stearns, Ranking Member DeGette, and 

distinguished members of the subcommittee, good morning, and 

thank you for holding this hearing today. I am honored to appear 

before the subcommittee to share our experience with Medicare 

Secondary Payer program and to offer several suggestions and 

ways in which the program can be strengthened to the benefit of 

Medicare beneficiaries, affected stakeholders, and taxpayers across 

the United States. 

I am the vice president of risk management for Publix Super 

Markets, one of the Nation’s largest employee-owned supermarket 

chains. In 2010, we employed 148,000 people across 1,036 stores in 

five States. In the chairman’s district alone, Publix operates 38 

stores. We have 4,495 associates living in your district, Mr. Chairman, and 5,160 associates who work in your district. We are proud 

that in the history of Publix Super Markets we have never laid off 

a single employee and that we are consistently ranked as one of 

the best places to work in the United States. I am also appearing 

today as a representative of the MARC Coalition, which is a broadbased group of affected shareholders. 

62 

Let me start by explaining to you what my view is of how the 

MSP process works through the following liability example. Imagine that Mr. Jones, who is a 76-year-old, falls down a flight of 

stairs at the Acme Store and is hospitalized overnight with a broken leg. Mr. Jones is billed $40,000 by the hospital, which Medicare covers and pays at some reduced rate. Let us say for this example $10,000. Two years later, Mr. Jones sues Acme. Acme wants 

to settle, but knowing that Medicare has paid for Mr. Jones’ medical expenses, it knows that Medicare will have to be reimbursed. 

Acme asked Medicare how much it owes for Mr. Jones’ care. Medicare, however, will not tell Acme that figure claiming that it cannot 

do so until the case actually settles. Yet Mr. Jones and Acme cannot settle unless they know Medicare’s numbers. 

This is the untenable paradox mentioned by Congressman 

Gingrey. It is impossible for parties to figure out how much Medicare has actually paid. At best, the parties will typically hold a settlement in escrow for months while the process plays out. And 

sometimes the Medicare demand comes back as a very small 

amount, as we have heard referred to. 

Even if the case does settle, Acme and its insurers have to report 

the settlement to Medicare under the recent 2006 amendments to 

the MSP laws. Now, that might sound straightforward enough, but 

to do so, we will need Mr. Jones’ Social Security number to verify 

that he is a beneficiary and we also have to identify his Health Information Claim Number, or HICN, as well as 200 other pieces of 

information about Mr. Jones, many of which insurers and defendants in cases have never previously collected. If they fail to report, 

Acme and its insurance companies face potential penalties of up to 

$1,000 per day or $365,000 per year. And some of this data is very 

obscure that they have asked us to collect. 

This system hurts the beneficiaries who are unable to receive 

their settlements quickly because Medicare is getting in the way. 

It also hurts the Medicare Trust Fund because the funds are delayed even as we are prepared to pay, and it hurts businesses like 

Publix who have incurred incredible additional cost due to the inefficiency of today’s system. 

I want to share with the committee two recommendations on the 

way Congress can improve the MSP process and to make it work 

more efficiently. First, I recommend that Congress address the 

MSP system and allow CMS, before the final settlement, to provide 

settling parties with the final amount of healthcare costs that CMS 

has previously paid. If Congress does so, the beneficiaries will be 

able to settle faster, the defendants will be able to settle efficiently 

and with certainty, and the trust fund will recover more money 

faster. This is a true win-win-win for all the parties. 

Secondly, I want to recommend a threshold for small-dollar 

claims so that we can be sure that the amount of money that government is pursuing these claims does not exceed the amount of 

money that the government will recover from these claims. And let 

me explain. 

I have seen claims where settlements are being held up because 

Medicare has made demands of $1.59, $2.81, or other such small 

sums. I have a number of examples with me today. This is a waste 

of taxpayer resources and it surely costs the Medicare program 

63 

more money than they are recovering, even 1 or 2 or $50 to process 

these claims. These should all be exempt from the program. 

Now, we heard a reference to the Rand Institute’s study, which 

was just published yesterday, and I have a copy of the study with 

me. And it indicates that if CMS exempted from MSP all liability 

claims below $5,000, they would be reducing the Agency workload 

and save costs on an estimated 43 percent of the claims while only 

sacrificing 2.4 percent of the money. That is $24 million of projected loss on $1 billion to be recovered. It is a waste of taxpayer 

money for the Agency to spend 43 percent of its time pursuing 2.4 

percent of its dollars. And at Publix Super Markets, we settle thousands of claims every year below this $5,000 threshold. 

The subcommittee and Congress can bring common sense to the 

MSP system by introducing a threshold below which MSP should 

not apply. The threshold could be a flat dollar amount such as 

$5,000 as suggested by the Rand Institute, or it could be set prospectively at the amount of settlement is likely to yield an MSP collection at or below the government’s recovery cost. This would not 

only save the government money but would allow Medicare beneficiaries to settle small claims without being subject to the extensive, intrusive, and costly MSP reporting process. 

On behalf of Publix Super Markets, I want to thank you for your 

leadership in addressing these important issues. In partnerships 

with our associates and our customers, we look forward to working 

with Congress to address these issues. Thank you. 

[The prepared statement of Mr. Salm follows:] 

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Mr. STEARNS. Thank you. Mr. Gilliam? 

TESTIMONY OF SCOTT A. GILLIAM 

Mr. GILLIAM. Thank you, Mr. Chairman, Ranking Member 

DeGette, and members of the subcommittee. Good morning and 

thank you for this opportunity to provide testimony on how the 

Medicare Secondary Payer system can be improved to protect Medicare beneficiaries in speed reimbursements to the Medicare Trust 

Fund. 

My name is Scott Gilliam. I am vice president and government 

relations officer with the Cincinnati Insurance Company, one of the 

Nation’s top 25 property casualty insurer groups marketing business, home, auto, and life insurance in 39 States. I am testifying 

today on behalf of my company and the Medicare Advocacy Recovery Coalition, MARC, a group which seeks to bring improvements 

and efficiencies to the MSP system. 

Today, I would like to tell you about the numerous problems the 

current MSP system has caused not only for our company but for 

the innumerable Medicare beneficiaries that we interact with in 

the course of settling thousands of personal injury claims every 

month. To put this aspect of our business in perspective, we settled 

over 40,000 personal injury liability claims last year, paying out 

over $580 million to settle those claims using the services of our 

730 field claim representatives who are located around the country. 

Unfortunately, the current MSP system is making it extremely difficult to settle claims in the prompt and efficient manner we believe injured parties deserve and it is having significant negative 

impact on claimants who are Medicare beneficiaries. 

Mr. Salm has already addressed the problems caused by the 

backwards manner in which CMS collects reimbursements owed to 

the Medicare Trust Fund. In my testimony today, however, I would 

like to focus on several critical problems with the MSP Section 111 

reporting process, which imposes extremely complicated data reporting requirements on those of us who settle claims with Medicare beneficiaries. 

CMS could have implemented the new reporting process through 

formal rulemaking, which would have allowed for stakeholder 

input. Instead, the Agency created a complex and broad-reaching 

system without engaging the affected community. The resulting 

MSP reporting system involves a complex computer submission 

process that requires responsible reporting entities—REEs, those of 

us who settle claims—to submit a significant amount of data to 

CMS alerting the Agency that we have paid a settlement or a judgment to a beneficiary. Unfortunately, we do not have access to 

many of the data elements that CMS requires us to report and 

claimants are often unwilling or even unable to provide the data 

to us. 

To give you an idea of the scope and complexity of the reporting 

system, I have brought with me today the CMS user guide that we 

have to follow to report the data. It is like a telephone book. And 

at my company, we have been spending 2 years trying to implement this, and here is the flowchart we use in our claims department to try and figure out how to report the data. 

73 

The reporting requirements not only impact the claims-pending 

community; they can also have a negative impact on Medicare 

beneficiaries as well. Consider what happens when the Medicare 

computer system decides that a beneficiary’s current injury or ailment is connected to the primary payer who reported an unrelated 

payment in the past. Here is a good example. We settled a claim 

with a woman who was in a car accident and reported the settlement to Medicare. Years later, the woman was diagnosed with 

breast cancer, and Medicare denied coverage for her treatment on 

the grounds that her breast cancer was related to the prior car accident. This may sound absurd, but it is a true story from our claim 

files. 

Mr. STEARNS. Could you move the mic just a little closer? Yes. 

Go ahead. 

Mr. GILLIAM. While these reporting requirements are intended to 

insure that Medicare is made aware of cases where it can assert 

MSP claims, in practice, however, these complex reporting requirements often slow down settlements and in many cases prevent settlements from even happening. In these situations, money that otherwise could have been promptly returned to the Medicare Trust 

Fund is delayed, reduced, or never paid. This is especially true in 

cases where the innumerable claimants who are not represented by 

an attorney and are intimidated by requests to turn over their private personal information in order to settle their claim. 

One of the particularly problematic elements of the Section 111 

reporting process is that it requires insurance carriers to collect Social Security numbers or health insurance claim numbers, HICNs, 

from all parties with which we settle claims. Our claimants are 

loath to provide this information and in many cases flatly refuse. 

And it is little wonder they refuse. Can you imagine having someone who you believe has caused you an injury and who you are now 

considering suing demand that you hand over their Social Security 

number? 

And to make matters worse, the same Agency that requires us 

to collect SSNs or HICNs for Medicare beneficiaries runs advertising campaigns to prevent Medicare fraud by discouraging Medicare beneficiaries to give out those numbers. Shouldn’t this be reason enough for CMS to come up with a better way for us to identify 

Medicare beneficiaries for MSP reporting? Perhaps Congress could 

help the Agency solve this problem so that we can navigate the 

process without requiring disclosure of SS numbers. 

A simple solution would be only to require reporting of the last 

four digits of the Social Security number, a method Medicare already uses to match beneficiaries with their Medicare Part D plan. 

If CMS can use the last four digits of an SS number in the Part 

D program, why can’t they use it in the MSP program? 

Another significant problem with the current system is Draconian penalties. Those of us who pay claims face a mandatory 

$1,000-per-day penalty for failing to properly report a claim. We 

agree that harsh penalties should be used to pursue bad actors who 

purposefully circumvent the system, but we also believe that Medicare should promptly—however, the mandatory penalties for reporting failures mean that even companies like ours that are doing 

their utmost to achieve full compliance can face massive penalties 

74 

for small errors or technical problems that occur through no fault 

of our own. 

Our company has invested 2 years of financial and human resources in developing an information technology system to manage 

MSP reporting, and despite our feverish efforts and full committee 

compliance, we could still face massive penalties if even a single 

data element is entered incorrectly or our computer systems have 

a problem or the CMS problem. 

Mr. STEARNS. Mr. Gilliam, I need you to sum up. 

Mr. GILLIAM. Yes, I will. 

I will wrap up quickly. There is another important issue I want 

to raise to your attention today. And there are a number of claims 

now arising where Medicare is denying coverage for current ailments based on past claims that we have paid that are completely 

unrelated. This is occurring in hospice cases, hospice patients being 

denied care because of an old claim that is not related to their current care. And with that, I will wait for your questions. 

[The prepared statement of Mr. Gilliam follows:] 

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Mr. STEARNS. Thank you. And by unanimous consent, we will put 

in your book and your chart into the record. So done. 

[Some of the information is available at http:// 

www.lightspeedclaim.com/docs/NGHPUserGuideV3.1.pdf. The rest 

of the information follows:] 

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Mr. STEARNS. Mr. Matzus? 

TESTIMONY OF JASON MATZUS 

Mr. MATZUS. Good morning, Chairman Stearns—— 

Mr. STEARNS. I just need you to pull the mic a little closer. 

Mr. MATZUS. Good morning. Can everyone hear me? OK. Good 

morning, Chairman Stearns, Ranking Member DeGette, and members of the subcommittee, thank you for your leadership in holding 

this important hearing. I greatly appreciate the opportunity to testify on how the Medicare Secondary Payer system impacts Medicare beneficiaries. 

My name is Jason Matzus. I am a partner at the law firm of 

Raizman, Frischman, and Matzus. My firm is based in the Pittsburgh area represented by Congressman Tim Murphy of this committee. I have handled hundreds of personal injury claims, including those resulting from auto liability and other personal injury 

claims. In many of these cases, I am representing Medicare beneficiaries in their claims against third parties. In that capacity, I 

have firsthand experience with many of the unintended consequences of the MSP system. I fully support the intent of the MSP 

requirement to make sure Medicare is repaid when someone else 

has accepted liability for a beneficiary’s medical care. But the current MSP system causes many problems for the beneficiaries I represent and delays or even prevents full repayment to the trust 

fund. 

The unfortunate reality is that in practice, the current MSP system harms not only beneficiaries but the trust fund as well. The 

most significant problem my beneficiary clients face is that the current MSP system administered by the Center for Medicare & Medicaid Services is running the process backwards. We cannot get the 

Final Demand explaining how much money is owed to Medicare 

until after a case settles and is reported to CMS. As the prior witnesses on this panel have noted, this is causing many significant 

problems and harms everyone involved, including, ultimately, the 

Medicare Trust Fund itself. 

The backward recovery process is creating significant obstacles 

that make it very difficult for cases to settle. The amount of money 

that will need to be repaid to Medicare is a critical piece of information, a piece of information that we currently cannot get when 

we need it most, during settlement negotiations. This problem, this 

lack of critical information is causing more and more cases to go 

to trial instead of being settled simply because nobody has a reliable final number from Medicare of what the trust fund is owed. 

More cases going to trial rather than settling outside of courtrooms 

necessarily means that ultimately less money will be recovered by 

Medicare. That is obviously contrary to the primary goal of the 

MSP system. Thus, the current recovery process actually works 

against the goal of recovering as much money as possible for the 

trust fund. 

Even if I settle a case without knowing the final number, which 

happens, there are still extreme delays in getting that Final Demand amount from Medicare. Even once the beneficiaries have settled their claims or won their case in Court and the required reporting has been made to Medicare, my client still must wait and 

87 

wait and wait to receive anything from their settlements. It is not 

at all uncommon for it to take 6 months or even a year just to resolve the MSP portion of a claim. My firm alone has had many instances of such cases for beneficiaries when it took that long. Of 

course, my beneficiary clients are not the only ones who are waiting to be paid during this time. The Medicare Trust Fund also does 

not get reimbursed until we are told the Final Demand amount. In 

the aggregate, these delays translate into millions of dollars of lost 

revenue annually for the Medicare Trust Fund. A system that 

harms both the Medicare beneficiaries and the trust fund simply 

cannot be right. 

These long delays are causing significant financial strains for 

many beneficiaries who have been injured. At my firm, we have 

had instances where the Medicare beneficiary faced the prospect of 

foreclosure on their home because of the delay in getting the Medicare reimbursement resolved. This can happen when a Medicare 

beneficiary is counting on the settlement proceeds to reimburse 

them for the out-of-pocket costs associated with their injury such 

as co-pays, uncovered medical services, and lost wages. Fortunately, we have avoided that calamity, but the issues are real. 

Tragically, a colleague of mine has told me of an instance where 

the beneficiary has died during the interim period waiting for the 

MSP portion of the claim to be resolved after the case is settled. 

I strongly urge this committee and Congress to empower Medicare to provide a Final Demand amount before settlements occur 

so that everyone would know how much money is owed and would 

be able to settle accordingly. If that were to occur, the beneficiaries 

that I represent would be far better off than they are today and 

the trust fund would recover many millions of dollars more than 

is the case today. If this simple change occurred, both beneficiaries 

and Medicare could receive their reimbursements much faster than 

they do today. 

Let me be clear. We are ready and able to reimburse the trust 

fund, but we need your help to clear the bureaucracy out of the 

way and make a sensible MSP system that will actually work. One 

month ago, I had the privilege of meeting with Representative Tim 

Murphy along with approximately 30 other lawyers from the Pittsburgh area on this issue, all interested stakeholders on this issue. 

As we asked Congressman Murphy last month, I join with my colleagues in respectfully urging you to allow us to quickly and efficiently resolve MSP claims. I thank you for the opportunity to testify today before the subcommittee and I welcome any questions 

that you have. 

[The prepared statement of Mr. Matzus follows:] 

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Mr. STEARNS. I thank the gentleman. Ms. Stein, welcome, for 

your 5-minute opening statement. 

TESTIMONY OF ILENE STEIN 

Ms. STEIN. Good morning, Chairman Stearns, Ranking Member 

DeGette, and other distinguished members of the subcommittee. I 

thank you for the opportunity to testify today about the current 

Secondary Payer program and the difficulties Medicare beneficiaries face navigating this system. 

I am Ilene Stein, Federal Policy Director for the Medicare Rights 

Center. Medicare Rights is a national, nonprofit consumer service 

organization that works to ensure access to affordable healthcare 

for older adults and people with disabilities. Last year, we assisted 

more than 14,000 Medicare beneficiaries and nearly 4,000 

healthcare professionals through our national helpline. These calls 

inform our public policy efforts and allow Medicare Rights to bring 

the voice of Medicare beneficiaries to the national conversation 

about Medicare. 

For the health and integrity of the Medicare program, a robust 

Secondary Payer regime is necessary. However, the current system 

is flawed in both policy and implementation. The results can be 

devastating for Medicare beneficiaries. Not only do individuals receive demands from Medicare for large amounts of money that, in 

some cases, they do not owe and/or cannot pay, but in certain situations, Medicare will cease coverage because cases were improperly 

closed by CMS and MSPRC. 

Though not all-inclusive nor mutually exclusive, the problems we 

identified with the Secondary Payer process fall into 5 categories. 

The first is untimely collection of Medicare’s share of settlements. 

Currently, there is no established time frame by which Medicare 

must tell individuals what they owe if they have settled a liability 

case. If a beneficiary settles without knowing the Medicare costs, 

Medicare may come back years later and collect a sizeable portion 

of the settlement to Medicare. In some cases, given the lapse in 

time and because the beneficiary is unaware that Medicare is owed 

money, settlement funds may no longer exist. 

The second issue is that CMS and MSPRC often miscalculate the 

amount that Medicare is owed. Frequently, callers to our helpline 

receive notices from MSPRC requesting repayment for treatments 

that are unrelated to injuries associated with a previous accident. 

This is because CMS and the contractor do not properly segregate 

claims related to accidents from other claims completely unrelated 

to those past injuries. 

The third issue concerns beneficiaries’ difficulty in obtaining information about their cases from CMS and MSPRC. Callers experience extremely long hold times, and even when individuals are able 

to reach customer service representatives, they receive inaccurate 

or incomplete information. 

Fourth, beneficiaries who manage to get an explanation often 

find the source of the issue to be that CMS and MSPRC did not 

properly close their case. As a result, even though the insurance 

company has closed the case, the Medicare system believes that 

Medicare is still a secondary payer. Consequently, Medicare conditionally pays, sending demands for reimbursement to beneficiaries 

93 

or stops paying for services altogether. Such a serious matter 

should be resolved quickly but it often can take up to a year to get 

the case closed. 

Finally, notices sent to consumers by MSPRC are not clear. 

While they speak to appeal rights, they do not contain detailed information on how to request an appeal or about the documentation 

necessary to be successful. Notices also fail to elucidate the hardship waiver process available if consumers are unable to pay Medicare the money being requested. 

There are several steps that can be taken legislatively or administratively that would help solve many of the problems that beneficiaries encounter. Ideally, as soon as incidents are reported to 

Medicare, Medicare would then provide the insurer and the beneficiary with an estimate of the conditional payments made by Medicare for treatment related to the injury, as well as an estimate of 

future treatment. 

Medicare collection practices should ensure timely recovery. 

Medicare Secondary Payer claims should not be initiated more 

than 2 years after the settlement has been made. This would also 

help to ensure that in settlement negotiations and legal proceedings, all parties are able to consider Medicare’s claims. CMS 

and its contractors should be required to improve the notices provided to consumers. Specifically, the notices’ language must be 

more consumer-friendly, and the notices should include more detailed information about appeal and hardship waiver rights and 

process. 

MSPRC should be required to maintain a transparent, easy-touse process through which beneficiaries and their representatives 

can obtain information about their cases. This means both ensuring 

shorter call times, and more importantly, assigning a specific staff 

member to cases who can be reached directly. 

CMS and its contractors should develop a better process for separating claims that are and are not related to an accident. CMS and 

the contractor should also be required to make decisions expediently when beneficiaries dispute the inclusion of claims because 

they do not believe that they relate back to an accident. 

Thank you again for the opportunity to testify today. I would be 

happy to respond to any questions from the committee. 

[The prepared statement of Ms. Stein follows:] 

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Mr. STEARNS. I thank Ms. Stein. Mr. Gilliam, looking at that report, have there been other versions of this? I understand there has 

been three versions of this 200-plus-page report that is guidance? 

Is that true? 

Mr. GILLIAM. Yes, Mr. Chairman. The copy I have is Version 3.1. 

Mr. STEARNS. OK. So there has been at least three versions. 

Now, has this provided you with any kind of guidance? Just yes or 

no. 

Mr. GILLIAM. Kind of. 

Mr. STEARNS. Not really, OK. Mr. Salm, I just want to quickly 

take us through the recovery process here for liability insurance, 

no-fault insurance, and workmen’s compensation just to make sure 

all of us understand it correctly. 

The first step in the MSP recovery process is that you report 

your case to a contractor at CMS, correct? 

Mr. SALM. Well, no, sir. 

Mr. STEARNS. OK. 

Mr. SALM. You have to understand that especially from a liability 

standpoint we have a tremendous amount of process, the American 

legal system, that goes on before we ever get to this. 

Mr. STEARNS. So that is not the first step? 

Mr. SALM. No. Well, the first step as far as the Agency is concerned is that they want us to report the settlement to the Agency. 

OK? But before we go through that, we would go through an entire 

claims operation, a litigation operation. Understand that from our 

standpoint, this is coming very near the end of the process. And 

speed is a great priority at the end of the process because frequently we don’t get to this number until we are actually facing a 

trial date. 

Mr. STEARNS. So once a case has been established, then you receive a Rights and Responsibilities letter about protecting Medicare’s interest in the settlement negotiations, is that correct? 

Mr. SALM. There is a Rights and Responsibilities letter, right, 

that talks about that. 

Mr. STEARNS. Then you are supposed to receive a conditional 

payment letter? Is that right? 

Mr. SALM. At some point you are supposed to receive a conditional payment letter. I can tell you that in the times that my adjusters have requested the conditional payment letter, including 

the appropriate release from claimants, we have never received a 

conditional payment letter. 

Mr. STEARNS. Well, isn’t that the law that you are supposed to 

receive a conditional payment letter? 

Mr. SALM. Well, we can get the amount of the payments made 

by Medicare but we can’t get a letter that actually indicates how 

much money we owe Medicare until after we report to them how 

much we have settled the lawsuit for. 

Mr. STEARNS. And how long does it generally take CMS to provide you with a conditional payment amount? 

Mr. SALM. The conditional payment amount, once we make the 

request, I have never seen one less than 90 days, and more likely 

it is more like 6 months. 

Also, Mr. Chairman, if I note when we get the conditional payment amount from Medicare, it says right on the letter that we get, 

103 

and I have a copy of it, it says, ‘‘This is not a bill. Do not send a 

payment at this time’’—right on the document. 

Mr. STEARNS. Can we get a copy of that? 

Mr. SALM. Absolutely. 

Mr. STEARNS. And make it part of the record? 

Mr. SALM. Absolutely. 

Mr. STEARNS. And this is prior to settlement, right? 

Mr. SALM. This would be prior to settlement, yes, sir. 

Mr. STEARNS. How and when are changes in this amount, as well 

as the amount of future payments you are responsible for communicated to you and other parties in the lawsuit? 

Mr. SALM. I don’t know. 

Mr. STEARNS. Let me ask each of you. You describe this bureaucratic inefficiency, and I think you have touched on it. What is the 

number one thing—we will just go from my left to right—that you 

would like to see changed immediately? 

Mr. SALM. I would like to be able to get the amount that we owe 

Medicare before we settle the claim. 

Mr. STEARNS. And what would that duration be generally, just 

average? 

Mr. SALM. How long would it take us? I think the timeline set 

forth in H.R. 1063, which would be either 65 or 95 days would be 

sufficiently quick so we could resolve lawsuits. 

Mr. STEARNS. OK. Mr. Gilliam, name one thing that you would 

like to see fixed. 

Mr. GILLIAM. What he said plus responsiveness from MSPRC. 

We are waiting for Final Demand letters from them for 11 months, 

12 months, 14 months, 18 months, 6 months, 6 months, 7 months, 

7, 7, and 8. They never send letters. We are on hold for 56 minutes 

or an hour or 90 minutes when we are trying to call them. 

Mr. STEARNS. Now, Ms. Taylor said that there are 413,000 cases 

and she couldn’t even answer the duration time, but you are giving 

us some pretty dramatic long durations here of even trying to get 

information. 

Mr. GILLIAM. And many of these are after seven to ten attempts 

at phone calls—— 

Mr. STEARNS. And you are on the phone for an hour? 

Mr. GILLIAM. Ninety minutes. 

Mr. STEARNS. Ninety minutes? 

Mr. GILLIAM. One time they hung up, then they transferred us, 

and then we were on hold for 90 minutes. 

Mr. STEARNS. And is there music going on? 

Mr. GILLIAM. I don’t know. 

Mr. STEARNS. I hope the people you are talking to are people in 

the United States. 

Mr. GILLIAM. Pardon? 

Mr. STEARNS. Are the people you are talking to in the United 

States? 

Mr. GILLIAM. Yes. 

Mr. STEARNS. They don’t farm it out to India, do they? 

Mr. GILLIAM. No. 

Mr. STEARNS. OK. Mr. Matzus, what is the number one thing 

that you think? 

104 

Mr. MATZUS. Mr. Chairman, the number one priority would be 

to get the Final Demand number from Medicare prior to the settlement. 

Mr. STEARNS. OK. And Ms. Stein? 

Ms. STEIN. Well, kind of two. I have got the statute of limitations 

on how long it would take for Medicare to collect their share, as 

well as more transparency with the contractor. We also experienced 

long wait times and have difficulty resolving cases. It requires us 

to resend documentation over and over again. We have cases that 

have lasted over a year to close. 

Mr. STEARNS. Have you had the experience as Mr. Gilliam to talk 

about 90 minutes on the phone? 

Ms. STEIN. Yes. I would say the least amount of time we have 

to wait on the phone is about 30 minutes. We have had to wait up 

for over an hour, I think an hour and 20 minutes. 

Mr. STEARNS. So you have waited an hour and 20 minutes. So 

you have one of your employees just putting it on speaker and 

waiting there all during that period of time? 

Ms. STEIN. Indeed. I actually have personally waited on the 

phone for—— 

Mr. STEARNS. You personally have waited? 

Ms. STEIN. Yes, sir. 

Mr. STEARNS. And during that time, is there somebody that 

comes in during those hour and 20 minutes that says thank you 

for holding? Or is it just a dead phone or what is it? 

Ms. STEIN. The case I handled is probably 2 years old. It is mostly just music, I think. 

Mr. STEARNS. Just music? 

Ms. STEIN. But I do have to say that once we do actually reach 

an operator, we will have maybe a several-minute conversation 

where they say please resend your documentation. It isn’t on file. 

And then you have to call back again. 

Mr. STEARNS. I will just close. When you do this, do you have to 

put things through like they want information keyboarded in that 

you have to put in a lot of documentation before they even talk to 

you? 

Ms. STEIN. In some cases, yes. It depends on the case. 

Mr. STEARNS. You have got to put the case number, dates, and 

things like that in before they even go further? But you can’t talk 

to anybody first. You are talking to a computer, right? 

Ms. STEIN. Right. Well, and also if somebody has a representative, they have to submit the documentation, the Appointment of 

Representative form as well, which often gets lost. 

Mr. STEARNS. OK. My time has expired. The gentlelady is recognized. 

Ms. DEGETTE. Thanks. To follow up on that, Mr. Gilliam, the 

other problem is people don’t have one customer service agent assigned to them, so let us say you have 10 cases, you have to call 

back each time with each separate case, right? You can’t just call 

someone up and go, OK, here are the 10 issues I want to talk to 

you about. 

Mr. GILLIAM. That is correct. Every time we call, and if we are 

lucky enough to get through, it starts over with somebody new, and 

they won’t even accept emails. 

105 

Ms. DEGETTE. Right. 

Mr. GILLIAM. It has to be phone calls or in writing. 

Ms. DEGETTE. Yes. Mr. Matzus, I have a question for you. In the 

earlier panel, somebody was talking about the medical costs vis-avis the settlements of these lawsuits. They are talking about the 

medical costs versus the pain and suffering. And I wasn’t a personal injury lawyer but I hung around with a bunch of them, and 

my understanding of the way these cases are usually settled you 

have got a clear statement of the medical costs and then you may 

have pain and suffering or whatever else, but the medical costs 

aren’t normally the pain and suffering, correct? 

Mr. MATZUS. No, Congresswoman. 

Ms. DEGETTE. I mean, normally those are two different areas. 

Mr. MATZUS. That is correct. 

Ms. DEGETTE. Especially in the settlement, right? 

Mr. MATZUS. Medical costs are a separate silo. 

Ms. DEGETTE. That is correct. 

Mr. MATZUS. Separate and distinct from the recovery for noneconomic damages—— 

Ms. DEGETTE. Right. 

Mr. MATZUS [continuing]. Such as pain and suffering. 

Ms. DEGETTE. Right. 

Mr. MATZUS. That is correct. 

Ms. DEGETTE. And so that is why you need to have the medical 

cost information up front at settlement so we can accurately figure 

out how much the victims needed to be compensated and then how 

much needed to be reimbursed to Medicare out of that settlement, 

right? 

Mr. MATZUS. It is a necessary and critical part of the equation 

to figure out what is a fair value at which to agree to settle. 

Ms. DEGETTE. I have got to say we rarely ever see the grocery 

stores and the trial lawyers sitting at the same table agreeing on 

an issue. So I wish those Close Up kids were still here to see this. 

Mr. SALM. Mark this day on the calendar, I think, Mr. Chairman. 

Ms. DEGETTE. Yes, right. Exactly. 

Ms. Stein, I wanted to ask you about a little bit of what you were 

talking about and what I mentioned in my opening statement 

about the program’s beneficiaries because we keep hearing these 

stories about Medicare coming after beneficiaries years after the 

cases have been settled for reimbursement for medical expenses. 

And the case I talked about in my opening statement was an 81- 

year-old woman who got hit by a drunk driver. She got $20,000 

from automobile insurance in a settlement and then 13 years later, 

so add that up, 94 she is now, Medicare sends her a letter demanding repayments of medical services over a decade old. Have you 

heard similar stories about beneficiaries being contacted by Medicare years after settlement demanding payment? 

Ms. STEIN. Yes, we have heard cases like that. And this kind of 

speaks to the hardship waiver process. It is pretty difficult to get 

a waiver. The process is burdensome to consumers and the situations that hardship waivers apply to are somewhat arbitrary. For 

example, somebody who is on SSI, which is obviously low income, 

that doesn’t necessarily automatically make them eligible for some 

type of waiver, either full or partial waiver. 

106 

In my written testimony I talked about—and this speaks back to 

the idea that claims aren’t properly segregated—that individuals 

who were in car accidents, you know, 5 to 10 years ago suddenly 

receive bills from Medicare or no longer able to receive Medicare 

coverage going forward because they claim that, you know, a broken hip that they received in their kitchen relates back to a car accident that happened, you know, over 5 to 10 years ago. 

Ms. DEGETTE. So there needs to some kind of a time frame. 

Claims shouldn’t be initiated maybe 2 years after settlement or 

something like that, correct? 

Ms. STEIN. Yes. 

Ms. DEGETTE. But that does lead us to a question, and I am 

wondering if any of you have an opinion on this is it makes perfect 

sense to me to have all of the data at settlement or shortly thereafter, but you have a little tension here because if you have medical claims that continue to come in, we want to assure that the 

taxpayer gets reimbursed for those expenses, but on the other 

hand, you want to have a quick settlement. So what can we do to 

make that system work better so we have some closure early on at 

settlement or soon after but at the same time we are not leaving 

medical costs out there that could be recaptured? 

Mr. GILLIAM. If I could jump in there. In probably 95 percent of 

the cases, when we are ready for the Medicare number, the treatment is basically done. It is typical that when we try and settle 

claims—and Jason knows this—we want to get all the numbers together. In most cases, the plaintiff is done treating and so we have 

all the data, and that is when we need to know what Medicare 

owes. And at that point, all of the Medicare-paid treatment has 

been completed and we don’t understand why they can’t tell us 

what that number is. 

Ms. DEGETTE. Does everybody else pretty much agree with that 

statement? 

Mr. SALM. Yes, we very much agree with this. Plaintiffs’ lawyers 

don’t bring cases to resolution or settlement until they know what 

the total medical care is that they want to get reimbursed for. And 

another point is made that in the normal practice of subrogation, 

what normal insurance companies, corporations do all the time, if 

you are ever going to get your money, you have to make a decision 

to cut off, sort of chasing the dollars at some point because you are 

just not going to get enough money to justify the effort you put into 

it. 

So Mr. Gilliam and I make decisions on subrogation every day 

and we say OK, we will take X number of dollars now because we 

don’t think we are going to get X plus 20 later or it is just going 

to take too much time. 

Ms. DEGETTE. Thank you. 

Thank you, Mr. Chairman. 

Mr. STEARNS. The gentleman from Pennsylvania is recognized for 

5 minutes, Mr. Murphy. 

Mr. MURPHY. Thank you, Mr. Chairman. 

I think the more I hear, the more it boggles the mind and breaks 

the heart when we hear of what happens to seniors. 

A couple of things first. Mr. Gilliam, in retail settings, I understand that sometimes someone may get injured but they said, look, 

107 

I am not going to sue the store or anything. Accidents happen, but 

I need you to make sure my medical expenses are taken care of. 

And sometimes stores say we still want to show good faith effort. 

Here is a gift card to use at our store, things like that. That happens, am I correct? 

Mr. GILLIAM. Yes, that happens thousands of times a year. 

Mr. MURPHY. Do you have to report that number yet? 

Mr. GILLIAM. We don’t have to report that number yet, but we 

will have to—— 

Mr. MURPHY. But you will? 

Mr. GILLIAM [continuing]. Report that number in 3 years. 

Mr. MURPHY. So if someone gets a $25 or $50 gift card off their 

groceries, will Medicare, according to the new rules, come after 

them and say you owe us that money to reimburse for medical expenses? 

Mr. GILLIAM. Absolutely. We will have to report that under the 

new rules. We will have to report that under the process and Medicare—we become a primary payer in that case. 

Mr. MURPHY. So you have someone who is living off Social Security and they think, my goodness, I get basically a half a bag of 

groceries for free here. Now, Medicare is going to come back and 

say we want that food back. We need that 25 or $50 back. That 

is what you are telling me? 

Mr. GILLIAM. That is what I am telling you, yes, sir. 

Mr. MURPHY. Breaks the heart. 

Mr. Matzus, when you were describing this case of someone who 

died before—while someone is waiting for this claim, does it actually impose other hardships upon the seniors on a couple levels? 

Number one, do you know of any cases out there where, because 

of the amount of money that is kind of in the air, or in the claims 

to be made my Medicare against someone to come up with some 

reimbursements, that seniors may actually delay other healthcare 

because they don’t have the money to take care of themselves? 

Mr. MATZUS. Congressman Murphy, I think—as everybody on 

the panel can appreciate—most Medicare beneficiaries have limited 

financial resources. A small change in their monthly costs can push 

them very quickly beyond the financial tipping point from which 

they cannot or will have a very difficult time recovering. And oftentimes, when you have to make a decision between paying for current uncovered Medicare services that you need versus paying 

other bills, people choose to pay for the necessary uncovered medical services and in essence are robbing Peter to pay Paul. 

Mr. MURPHY. And on this, I am assuming while you are working 

on a case, they are also accruing other legal expenses which, because of the delays and people having to sit on the phone and wait 

for calls, am I correct on that, too? 

Mr. MATZUS. Congressman Murphy, the way our firm operates, 

it is a contingency-fee basis, so we don’t bill our clients based upon 

an hourly rate. 

Mr. MURPHY. Some may do that? 

Mr. MATZUS. Some firms may. 

Mr. MURPHY. So in some cases it may cost the seniors even 

more? So the delay is costing seniors not only they are delaying 

108 

some care, maybe not getting some care, maybe having to pay back 

grocery money, et cetera. 

If the parties settle without the Final Demand letter, what happens to the seniors’ settlement money? Anybody know? 

Mr. MATZUS. If I may, typically, the settlement money is held in 

a law firm’s client trust account or escrow account pending final 

notice from Medicare of what amount is owed. And then distribution is only made after the Final Demand figure. 

Mr. MURPHY. What if that Final Demand figure is much higher 

than the conditional payment? Who pays the difference? Has that 

happened? 

Mr. MATZUS. It can happen. Colleagues have reported that happening. It has not been my personal experience where there has 

been a significant difference, but in theory, you know, the beneficiary and/or the law firm and/or the liability carrier is potentially 

responsible. We don’t have the opportunity to go back in time and 

get a second bite at the apple in a liability settlement. Once a case 

is settled, it is settled. The money that is received is the only 

money that will be received. 

Mr. MURPHY. Does it take as long if you are dealing with private 

insurance companies as it takes with Medicare? 

Mr. MATZUS. To get the final lien figure? No. 

Mr. MURPHY. How long would they typically take? 

Mr. MATZUS. We always have the final lien figure in advance 

of—— 

Mr. MURPHY. So it is humanly possible to do this? 

Mr. MATZUS. It is. By way of example, Medicaid—— 

Mr. MURPHY. Now, I know that the CFO of CMS has other 

things to do today, but I would hope in something that would save 

taxpayers billions, save seniors a lot of headache, and maybe save 

some lives here, I hope that that information is getting to her. 

One other thing I want to read briefly—and this is from a magazine called Mother Jones—not my usual reading, but I found it interesting that it talks about a case here—and I would like to submit this for the record, too, Mr. Chairman—— 

Mr. STEARNS. By unanimous consent, so ordered. 

Mr. MURPHY [continuing]. Where someone actually got snared by 

Medicare twice. It says the first time in 2002 when the Agency 

began seizing her only income of $498 monthly Social Security 

check for nearly 3 years until she repaid more than $16,000, her 

settlement minus legal fees. After that, she thought her troubles 

were over, but in 2008, Medicare returned for more. That $66,000 

bill not only failed to recognize that Coury had already repaid what 

she owed, it also far exceeded the $20,000 she had received from 

her daughter’s insurance company in the first place. And eventually, this person, a former accountant, discovered that Medicare 

had included every procedure Mollie had undergone since her accident, including unrelated care like open-heart surgery and treatment for emphysema. And, of course, cases like this abound. 

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Mr. MURPHY. And I am hoping that one of the outcomes of this 

hearing, Mr. Chairman, is that we hear from cases throughout the 

country. We have just got to fix this problem. It is hurting too 

many seniors and hurting the taxpayers. And I join my colleague 

from Colorado in saying when you have retailers, plaintiffs’ attorneys, defense attorneys, those advocates of senior citizens all agreeing this has to be fixed, it is time to fix it. And I yield back my 

time. Thank you. 

Mr. STEARNS. The gentleman yields back his time. We recognize 

the chairman emeritus of the Energy and Commerce Committee, 

Mr. Dingell from Michigan, for 5 minutes. 

Mr. DINGELL. Mr. Matzus, the issues will be directed at you. It 

sounds like the Medicare Secondary Payer reimbursement process 

is lengthy, burdensome, and complex for beneficiaries and attorneys to navigate. Why doesn’t Medicare pursue reimbursement 

from the primary payer directly? 

Mr. MATZUS. Congressman Dingell, my hunch on that would be 

from a cost-efficiency standpoint, it is more cost effective for Medicare to recover money in a passive manner as opposed to direct 

intervention in pursuit of claims. 

Mr. DINGELL. All right. Now, what happens if beneficiaries decide they don’t want to pursue claims? For example, if an 89-yearold woman broke her leg in a car accident and then decided not to 

file an insurance claim or pursue any other form of recompense, 

wouldn’t Medicare then be stuck with all the bills without any form 

of reimbursement? 

Mr. MATZUS. In practical reality—— 

Mr. DINGELL. That is a very real problem, isn’t it? 

Mr. MATZUS. It is. 

Mr. DINGELL. All right. And I am sorry to hurry you, but time 

here is limited. 

It is my understanding from your testimony that if you are unable to reimburse Medicare until after the parties have reached a 

settlement, you have a Final Demand letter from CMS and those 

often take many months or even years to get. Is this is the case? 

Yes or no? 

Mr. MATZUS. Yes. 

Mr. DINGELL. OK. Now, what happens to the beneficiary’s settlement money in the intervening time? Is the beneficiary able to access the money? 

Mr. MATZUS. No. 

Mr. DINGELL. In your experience from working on such cases, 

how long is the settlement money typically in limbo before Medicare is reimbursed? 

Mr. MATZUS. A short period of time would be 3 or 4 months. A 

typical period of time is probably 6 to 9 months or longer. 

Mr. DINGELL. Now, you and I are both attorneys and I am sort 

of curious. As a fellow attorney, how does this affect the attorneyclient relationship? 

Mr. MATZUS. It creates significant problems with the attorney-client relationship. 

Mr. DINGELL. Now, the next question is to you again, Mr. 

Matzus, Mr. Salm, and Mr. Gilliam. Mr. Matzus, Mr. Salm, and 

Mr. Gilliam, has your business or other businesses similar to yours 

114 

incurred additional costs as a result of lengthy and burdensome 

Medicare Secondary Payment reimbursement process? Yes or no? 

Mr. SALM. A big yes. Yes, we have. 

Mr. DINGELL. OK. Mr. Matzus? 

Mr. MATZUS. Yes. 

Mr. DINGELL. Mr. Gilliam? 

Mr. GILLIAM. Yes. 

Mr. DINGELL. OK. Now, what effects have these costs had on 

your business? Starting with Mr. Salm, Mr. Gilliam, and then Mr. 

Matzus. 

Mr. SALM. The first effect we have had is we have spent hundreds of thousands of dollars in an attempt to get Medicare the 

data that they need in the workers’ comp setting. The second effect 

it has had is delayed the resolution of liability claims while we 

have been waiting to figure out what Medicare’s number is and get 

the money to Medicare. The longer a case stays open, the more the 

case costs somebody like Publix Super Markets and the slower it 

is to get to the beneficiaries. 

Mr. DINGELL. So it hurts most everybody involved? 

Mr. SALM. Yes, it absolutely hurts the primary company like 

Publix, it hurts an insurance company like Cincinnati, it hurts the 

plaintiff’s attorney, who is waiting to get his money and to deal 

with client, and of course it hurts the person that we are all talking about here, the beneficiary, because these are people who are 

waiting for their money in a liability claim situation. 

Mr. DINGELL. All right. Mr. Gilliam, your additional comments? 

Mr. GILLIAM. Yes, we have incurred hundreds of thousands if not 

millions, complying with this reporting manual trying to collect the 

data and keep it safe from hackers so we can report it. It so delays 

the claims settlement process, and at my company, we have a philosophy. We are in the claims-paying business. We like to speedily 

end claims. We don’t like to have people upset that they are waiting, and the longer we have to keep a file open, the more it costs 

us and takes our adjusters away from handling current claims as 

they shepherd these old claims. 

Mr. DINGELL. Mr. Matzus? 

Mr. MATZUS. Congressman, more important than the costs to our 

firm are the costs and the financial consequences as well as the 

emotional consequences to Medicare beneficiaries. While putting 

more work and time into a case does increase our cost, most importantly, the significant costs by the delay are borne by the Medicare 

beneficiaries. 

Mr. DINGELL. Thank you. Now, last question, gentlemen. What 

expectations do you have for the future if costs associated with 

Medicare Secondary Payment reimbursements remain the same or 

increase? In other words, what does the future hold if costs remain 

the same or increase? And don’t be shy. 

Mr. MATZUS. The nightmare continues and gets worse. We end 

up spending all of our time dealing with computers and being on 

the phone for an hour and a half when we could be helping people. 

Mr. DINGELL. Now, we also have reason to think that it will 

probably increase over time, do we not? And that means there will 

be a multiplier effect take place, does it not? 

115 

Mr. GILLIAM. If they would simply start over and ask us what 

kind of data do we already collect, we might already have the data 

they want but they ask us to collect all this ridiculous data that 

doesn’t really help them identify who owes them money. Talk to us 

about what we already have and maybe we already have it. 

Mr. DINGELL. My time has expired and I thank the chair for it, 

but would you each submit to us for purposes of the record your 

suggestions about what should be done to correct this intolerable 

situation and to make it better from your standpoint, from the 

standpoint of the patients and the beneficiaries, and from the 

standpoint of the government, if you please. 

And I would ask, Mr. Chairman, that the record remain open for 

that purpose. 

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Mr. STEARNS. All right. The gentleman’s request is obliged with. 

And the gentleman from Georgia, Mr. Gingrey, is recognized for 5 

minutes. 

Mr. GINGREY. Mr. Chairman, thank you. 

Mr. Matzus, you had, in responding to Mr. Dingell in regard to 

the amount of time, the so-called limbo period I think you said 3 

to 4 months but typically 6 to 9 months, let us reference a medical 

malpractice tort case where there is a settlement or a judgment in 

fact. During that period of time, that limbo period, who actually 

controls the proceeds? 

Mr. MATZUS. The proceeds are typically provided to the law firm, 

the plaintiff’s law firm, and the money is held in the plaintiff’s 

firm’s escrow account. 

Mr. GINGREY. All right. And thank you for that answer. So the 

money is controlled during that limbo period by plaintiff’s attorney, 

by the law firm. And you say it is placed in escrow. Are there limitations in regard to what you can do with that escrow account? Let 

us say can you put it in a money market fund? Can you put it in 

a local bank? And if there is interest generated on that money during that interim, who does that interest go to? Does it go to the 

plaintiff, the injured party, or does it go the law firm? 

Mr. MATZUS. It goes to neither as I understand it. 

Mr. GINGREY. Well, who does it go to? Does it go to charity? 

Mr. MATZUS. If there is interest occur, that is a good question, 

I don’t exactly know. Typically, if the money is held in a client-ontrust account, the interest would, I guess, ultimately in the aggregate go to the particular State’s Client Trust program. 

Mr. GINGREY. Well, in my humble opinion, I would think it 

should go to the injured party, to the plaintiff ultimately. 

Mr. MATZUS. I agree. 

Mr. GINGREY. Let me ask this question of Ms. Stein. 

You are an advocate for Medicare beneficiaries and we appreciate 

that. In regard to this requirement to pay back Medicare for the 

cost that they have incurred and this subrogation requirement that 

is in the law, if the injured party is still living and it has been 2 

years later that they get this demand letter from Medicare, does 

Medicare have the authority within the law to put a lien on Social 

Security benefits as an example if that happens to be their only 

asset? 

Ms. STEIN. Yes, they could actually begin to deduct money from 

the Social Security benefits. 

Mr. GINGREY. And if the individual is deceased by the time they 

get the demand letter, the lien would be against their estate if they 

have any value there? 

Ms. STEIN. Yes, I believe that is the case. 

Mr. GINGREY. All right, thank you. Let me ask one quick question of everybody. We heard Ms. Taylor testify that CMS does provide Medicare Secondary Payment reimbursement amount in a 

timely manner. However, the testimony of this panel, the four of 

you seem to contradict that statement. Let me just ask you one by 

one starting with Mr. Salm. Does CMS consistently provide the 

amount owed to Medicare in a timely fashion before the case is settled, yes or no? 

128 

Mr. SALM. No. They can’t. The regulations prohibit them from 

giving us the final payout amount before the case is settled. 

Mr. GINGREY. Do they provide you—I will add to is—a reasonable 

estimate of what the costs are? 

Mr. SALM. They provide a conditional payment letter. The time 

that it takes to get the conditional payment letter ranges between—for a party like mine—never and 6 months. But we make 

an awful lot of requests for these and they frequently respond back 

we have no record of this file. 

Mr. GINGREY. And again, I wanted all of you to answer this and 

I am expanding the question a bit. But if they make an estimate, 

would it be reasonable to say that then the maximum amount that 

they could eventually recover would be within a certain percentage 

point above that estimate and no more? 

Mr. SALM. I think that is fair. 

Mr. GINGREY. Let us go ahead, Mr. Gilliam. 

Mr. GILLIAM. We never get timely numbers. I don’t know of any 

instance where we got a timely number. I think Ms. Taylor talked 

about 65 days. If they gave us a number at 65 days, we would be 

dancing in the street and back home in Cincinnati and not here in 

Washington. 

Mr. GINGREY. Mr. Matzus? 

Mr. MATZUS. The CPL letters, the conditional payment letters, 

are not generally provided timely within the 65-day period. In regard to your last point about if Medicare was limited in the amount 

that they could recover by percentage above the figure in the CPL, 

that would be very, very helpful. Currently, there is no such limitation. So from a practical perspective, the CPL number is meaningless because it is not a final number. 

Mr. GINGREY. Right. And finally, Ms. Stein? 

Ms. STEIN. I agree. I think that it would extremely helpful to 

limit it. I think it would also help in closing cases in a timely manner. So, again, when claims aren’t properly segregated, individuals 

aren’t receiving notices, you know, 10 years later or they are not 

able to access Medicare coverage because there has been a lien 

against them. 

Mr. GINGREY. Right, thank you. 

Thank you, Mr. Chairman, for your patience with us. 

Mr. STEARNS. Well, thank you. And I just want to follow up with 

what you had indicated. Actually, this Mother Jones article, Ms. 

Coury, who got into an automobile accident in 1995, Medicare actually confiscated her Social Security check of $498 in 2002, so she 

was 88 years old and Medicare came in and confiscated it for 3 

years until she repaid more than $16,000, her settlement minus 

some legal fees. So I mean that is an egregious example. 

In closing, I just want to put into the record—I have in my hand 

MSP demands for $1.59, $2.81, and $4.82. I ask unanimous consent 

that they be made part of the record. 

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Mr. STEARNS. And Mr. Salm, is this a frequent instance of where 

Medicare is spending, you know, 43 percent of its time for pursuing 

2 percent of its dollars? 

Mr. SALM. It is impossible for me to tell how frequent it is given 

the difficulty of collecting information, but I have additional claims 

with me for $36.75, $42.50, $44.83, and I think the biggest one I 

have is $69.62. When you consider that there is $1 billion at stake, 

it seems to me that this is not a good use of our government’s time. 

Mr. STEARNS. On the $36, how long did it take? 

Mr. SALM. I can’t tell you. I am sorry. 

Mr. STEARNS. Yes, OK. 

Mr. GILLIAM. Mr. Chairman, if I could jump in, we have a claim 

that we have been waiting for 14 months for Medicare to accept 

our payment of $16.54. 

Mr. STEARNS. $16? 

Mr. GILLIAM. Yes. We have called them. We have written them, 

and so 14 months later, a file is still open waiting for a release 

from Medicare and they haven’t even cashed our check for $16.54. 

Mr. STEARNS. I wonder why they haven’t cashed your check? 

Part of the bureaucracy. 

Mr. Matzus, is this sort of typical of the frequency? Or how frequent does this occur in your litigation? 

Mr. MATZUS. It doesn’t occur in our litigation. 

Mr. STEARNS. Do you have your mic on? It doesn’t occur? 

Mr. MATZUS. It doesn’t occur—— 

Mr. STEARNS. OK. 

Mr. MATZUS [continuing]. In our practice. 

Mr. STEARNS. OK. Ms. Stein, is this—— 

Ms. STEIN. Mostly the clients that call us tend to have Medicare 

claims higher amounts, above $5,000, but we did have a case recently that was $35. 

Mr. GILLIAM. And to make you more angry, 24 months for a $91 

payment. We are waiting 24 months. 

Mr. STEARNS. Twenty-four months for a $91 payment. 

Mr. GILLIAM. To be accepted. 

Mr. STEARNS. Wow. Well, I think we have finished our hearing. 

Ms. DeGette, is there anything you would like to add? 

With that, I think we will close the hearing. I want to thank you 

for your forbearance, for waiting as the second panelists. I think 

clearly this agency, Medicare, has not worked well with the Secondary Payment and we, as Members of Congress, are going to 

have a second hearing if possible on this, and we look forward to 

trying to solve these problems. And thank you for your interest. 

[Whereupon, at 12:26 p.m., the subcommittee was adjourned.] 

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