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[Federal Register Volume 80, Number 39 (Friday, February 27, 2015)]
[Rules and Regulations]
[Pages 10611-10618]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-04143]

[[Page 10611]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-6055-F]
RIN 0938-AS03

Medicare Program; Right of Appeal for Medicare Secondary Payer 
Determinations Relating to Liability Insurance (Including Self-
Insurance), No-Fault Insurance, and Workers' Compensation Laws and 
Plans

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements provisions of the Strengthening 
Medicare and Repaying Taxpayers Act of 2012 (SMART Act) which require 
us to provide a right of appeal and an appeal process for liability 
insurance (including self-insurance), no-fault insurance, and workers' 
compensation laws or plans when Medicare pursues a Medicare Secondary 
Payer (MSP) recovery claim directly from the liability insurance 
(including self-insurance), no-fault insurance, or workers' 
compensation law or plan.

DATES: Effective Date: These regulations are effective on April 28, 
2015.
    Applicability Date: Applicable plans are parties to initial 
determinations issued on or after April 28, 2015 where CMS pursues 
recovery directly from an applicable plan.

FOR FURTHER INFORMATION CONTACT: Barbara Wright, (410) 786-4292. 
Cynthia Ginsburg, (410) 786-2579.

SUPPLEMENTARY INFORMATION:

I. General Overview and Background

A. General Overview

    When the Medicare program was enacted in 1965, Medicare was the 
primary payer for all medically necessary covered and otherwise 
reimbursable items and services, with the exception of those items and 
services covered and payable by workers' compensation. In 1980, the 
Congress enacted the Medicare Secondary Payer (MSP) provisions of the 
Social Security Act (the Act), which added section 1862(b) to the Act 
and established Medicare as the secondary payer to certain primary 
plans. Primary plan, as defined in section 1862(b)(2)(A) of the Act, 
means a group health plan or large group health plan, workers' 
compensation law or plan, automobile or liability insurance policy or 
plan (including self-insured plan) or no-fault insurance.
    Section 1862(b)(2) of the Act, in part, prohibits Medicare from 
making payment where payment has been made or can reasonably be 
expected to be made by a primary plan. If payment has not been made or 
cannot reasonably be expected to be made by a primary plan, Medicare 
may make conditional payments with the expectation that the payments 
will be reimbursed to the appropriate Medicare Trust Fund. That is, 
Medicare may pay for medical claims with the expectation that it will 
be repaid if the beneficiary obtains a settlement, judgment, award, or 
other payment. A primary plan and any entity that receives payment from 
a primary plan shall reimburse the appropriate Medicare Trust Fund for 
Medicare's payments for items and services if it is demonstrated that 
such primary plan has or had responsibility to make payment with 
respect to such items and services.
    The responsibility for payment on the part of workers' 
compensation, liability insurance (including self-insurance), and no-
fault insurance is generally demonstrated by a settlement, judgment, 
award, or other payment (including, for example, assuming ongoing 
responsibility for medicals (ORM)). When such occurs, the settlement, 
judgment, award or other payment is subject to the Act's MSP provisions 
because a ``payment has been made'' with respect to medical care of a 
beneficiary related to that settlement, judgment, award or other 
payment. Section 1862(b)(2)(B)(iv) of the Act provides the federal 
government subrogation rights to any right under MSP of an individual 
or any other entity to payment for items or services under a primary 
plan, to the extent Medicare payments were made for such medical items 
and services. Moreover, section 1862(b)(2)(B)(iii) of the Act provides 
the federal government a direct right of action to recover conditional 
payments made by Medicare. This direct right of action, which is 
separate and independent from Medicare's statutory subrogation rights, 
may be brought to recover conditional payments against any or all 
entities that are or were responsible for making payment for the items 
and services under a primary plan. Under the direct right of action, 
the federal government may also recover from any entity that has 
received payment from a primary plan or the proceeds of a primary 
plan's payment to any entity.
    Moreover, the MSP statute requires a ``demonstration of primary 
payment responsibility;'' it does not require that CMS prove that the 
alleged incident or injury caused particular medical care. A primary 
plan's responsibility for payment may be demonstrated by a judgment, a 
payment conditioned upon the recipient's compromise, waiver, or release 
(whether or not there is a determination of liability) of payment or 
otherwise. A settlement, judgment, award, or other payment (including, 
for example, an assumption of ORM) is sufficient to demonstrate primary 
payment responsibility for what has been claimed, released, or released 
in effect.

B. Background

    The Strengthening Medicare and Repaying Taxpayers Act of 2012 (the 
SMART Act) was signed into law by President Obama on January 10, 2013, 
and amends the Act's MSP provisions (found at 42 U.S.C. 1395y(b)). 
Specifically, section 201 of the SMART Act added paragraph (viii) to 
section 1862(b)(2)(B) of the Act. This new clause requires Medicare to 
promulgate regulations establishing a right of appeal and an appeals 
process, with respect to any determination for which the Secretary is 
seeking to recover payments from an applicable plan (as defined in the 
MSP provisions), under which the applicable plan involved, or an 
attorney, agent, or third-party administrator on behalf of the 
applicable plan, may appeal such a determination. Further, the 
individual furnished such an item and/or service shall be notified of 
the applicable plan's intent to appeal such a determination. For 
purposes of this provision, the term applicable plan refers to 
liability insurance (including self-insurance), no-fault insurance, or 
a workers' compensation law or plan, as defined at section 
1862(b)(8)(F) of the Act.
    Currently, if an MSP recovery demand is issued to the beneficiary 
as the identified debtor, the beneficiary has formal administrative 
appeal rights and eventual judicial review as set forth in subpart I of 
part 405. If the recovery demand is issued to the applicable plan as 
the identified debtor, currently the applicable plan has no formal 
administrative appeal rights or judicial review. CMS' recovery 
contractor addresses any dispute raised by the applicable plan, but 
there is no multilevel formal appeal process.
    Subpart I of part 405, provides for a multilevel process including 
a redetermination by the contractor issuing the recovery demand, a 
reconsideration by a Qualified Independent Contractor (QIC), an 
Administrative Law Judge (ALJ) hearing,

[[Page 10612]]

a review by the Departmental Appeals Board's (DAB) Medicare Appeals 
Council (MAC), and eventual judicial review, and sets forth details on 
the process including standing to request an appeal, filing 
requirements, amount in controversy requirements, and other 
requirements. The December 27, 2013 proposed rule (78 FR 78802) would 
add appeals for applicable plans where Medicare is pursuing recovery 
directly from the applicable plan. The debts at issue involve recovery 
of the same conditional payments that would be at issue if recovery 
were directed at the beneficiary. Given this, we believe it is 
appropriate to utilize the same multilevel appeals process for 
applicable plans.

II. Provisions of the Proposed Regulations and Analysis of and 
Responses to Public Comments

A. Introduction

    In the December 27, 2013 Federal Register (78 FR 78802), we 
published a proposed rule that would implement section 201 of the SMART 
Act which required us to promulgate regulations establishing a right of 
appeal and an appeals process with respect to any determination for 
which the Secretary is seeking to recover payments from an applicable 
plan. Our proposals would add appeal rights for applicable plans where 
Medicare is pursuing recovery directly from the applicable plan 
utilizing the existing appeals procedures in part 405 subpart I 
applicable to appeals filed by beneficiaries when Medicare seeks 
recovery of conditional payments directly from the beneficiary.
    We received approximately 19 timely pieces of public correspondence 
on the December 27, 2013 proposed rule. Commenters included insurance 
industry associations and organizations, beneficiary and other advocacy 
groups, entities offering MSP compliance services, and health insurance 
plans. The commenters generally supported our proposals.
    Because of the type of comments received, we are using the 
following approach to structure this section of the final rule:
     Presenting the proposed provision(s) based on topic 
area(s) of the public comments.
     Providing the proposed provisions for which we did not 
received public comments.
     Providing and responding to the public comments that do 
not ``fit'' in the topic areas noted previously. The following is a 
list of the regulatory provisions that would be revised or added in 
accordance with the December 13, 2013 proposed rule:
     Sec.  405.900 Basis and scope
     Sec.  405.902 Definitions
     Sec.  405.906 Parties to the initial determinations, 
redeterminations, reconsiderations, hearings, and reviews
     Sec.  405.910 Appointed representatives
     Sec.  405.921 Notice of initial determination
     Sec.  405.924 Actions that are initial determinations
     Sec.  405.926 Actions that are not initial determinations
     Proposed Sec.  405.947 Notice to the beneficiary of 
applicable plan's request for a redetermination

B. Discussion of the Provisions of the Proposed Rule by Public Comment 
Topic

    In this section of the final rule we provide a general overview and 
a response to the public comments received, grouped under the following 
topics:
 Definition of Applicable Plan
 Issues Subject to Appeal/Not Subject to Appeal
 Party Status/Who Can Appeal and When
 Use of an Attorney or Other Representative; Assignment of 
Appeal Rights
 Notice
 Appeal Processes/Determining the Identified Debtor
 Interest and Penalties
 Applicability of the Proposed Rule to Medicare Part C and/or 
Medicare Part D
 Other
1. Definition of Applicable Plan
    We proposed adding the following definition for ``applicable plan'' 
in Sec.  405.902, Definitions: ``Applicable plan means liability 
insurance (including self-insurance), no-fault insurance, or a workers' 
compensation law or plan.'' This is the statutory definition of 
``applicable plan'' in section 1862(b)(8)(F) of the Act.
    Comment: A commenter requested that CMS revise the definition of 
applicable plan in the proposed rule to read: Applicable plan means 
liability insurance (including self-insurance), no-fault insurance, or 
a workers' compensation law or plan where payment has been made or can 
reasonably be expected to be made under a workmen's compensation law or 
plan of the United States or a state or under an automobile or 
liability insurance policy or plan (including a self-insured plan) or 
under no-fault insurance.
    Response: We disagree with the recommended revision. The definition 
of the term ``applicable plan'' is the definition set forth in section 
1862(b)(8) of the Act. The reference to ``. . . applicable plan under 
[section 1862(b)(2)(A)(ii) of the Act]'' (pursuant to the SMART Act and 
as codified now in section 1862(b)(2)(B)(viii) of the Act) is a 
reference to when CMS would pursue recovery with respect to liability 
insurance (including self-insurance), no-fault insurance, or workers' 
compensation law or plan recoveries where primary payment 
responsibility has been demonstrated, and is not a part of the 
definition of the term ``applicable plan'' itself. The term 
``applicable plan'' as referred to in the SMART Act has a pre-existing 
definition in the same section of the Medicare statute (that is, in 
section 1862(b) of the Act). Therefore, we are finalizing the 
definition of the term ``applicable plan'' as proposed.
2. Issues Subject To Appeal/Not Subject To Appeal
    In order for an action to be subject to the appeal process set 
forth in subpart I of 42 CFR part 405, there must be an ``initial 
determination.'' Section 405.924, Actions that are initial 
determinations, addresses actions that are initial determinations (and 
thus subject to appeal) for purposes of part 405 subpart I. We proposed 
adding paragraph (b)(15) to this section to specifically provide that 
where Medicare is pursuing recovery directly from an applicable plan, 
there is an initial determination with respect to the amount and the 
existence of the recovery claim. This addition would generally parallel 
the existing provisions of Sec.  405.924(b)(14) addressing pursuing MSP 
recovery claims from a beneficiary, provider, or supplier. In addition 
to these changes, for consistency, we proposed a number of technical 
and formatting changes.
    Paragraph (a) of Sec.  405.926, Actions that are not initial 
determinations, addresses actions that are not initial determinations 
(and thus not subject to appeal) for purposes of part 405 subpart I 
because such determinations are the sole responsibility of CMS. 
Generally under Sec.  405.926(k) initial determinations with respect to 
primary payers are not initial determinations. In conjunction with the 
proposed addition of Sec.  405.924(b)(15), we proposed adding an 
exception to Sec.  405.926(k) for initial determinations set forth in 
Sec.  405.924(b)(15). Additionally, we proposed to add a new paragraph 
Sec.  405.926(a)(3) to clarify that a determination of the debtor for a 
particular MSP recovery claim is not an

[[Page 10613]]

initial determination for purposes of part 405 subpart I. Because 
Medicare has the right to recover conditional payments from the 
beneficiary, the primary payer, or any other entity that has received 
the proceeds from payment by the primary plan, Medicare's decision 
regarding who or what entity it is pursuing recovery from is not 
subject to appeal. We also proposed to add the word ``facilitates'' to 
the existing ``sponsors or contributes to'' language in Sec.  
405.926(k) in recognition of our longstanding position that the concept 
of employer sponsorship or contribution has always included 
facilitation efforts. Finally, for consistency, we proposed making 
several technical changes.
    Comment: A number of commenters believe that the issue of who or 
which entity CMS pursues an MSP recovery from should be subject to 
appeal. Some commenters requested that CMS always pursue recovery from 
the beneficiary first. Others believe that if the applicable plan has 
paid the beneficiary, recovery should be limited to the beneficiary. A 
commenter stated that the parties to a settlement, judgment, award, or 
other payment should be allowed to designate who CMS pursues or, at 
least who CMS pursues first.
    Response: We decline these requests. Pursuant to section 
1862(b)(2)(B)(ii) of the Act and 42 CFR 411.24 of the regulations, we 
have the right to pursue recovery from the beneficiary, the primary 
payer or any other entity receiving proceeds from the payment by the 
primary plan. We may recover from the applicable plan even if the 
applicable plan has already reimbursed the beneficiary or other party. 
Under our existing regulations under part 405 subpart I, beneficiaries 
have formal appeal rights; applicable plans do not have such rights. 
The SMART Act's provisions codified in section 1862(b)(2)(B)(viii) of 
the Act require us to provide formal appeal rights and a formal appeal 
process for applicable plans, but these provisions do not change 
Medicare's underlying recovery rights.
    Comment: Some commenters would like to be able to appeal who is the 
identified debtor in a situation where there are multiple entities 
which are primary payers to Medicare (a beneficiary with multiple types 
of coverage or multiple settlements, or both). That is, they would like 
to be able to appeal whether CMS recovers from ``applicable plan #1'' 
rather than ``applicable plan #2'' in a situation where both applicable 
plans are primary to Medicare.
    Response: We disagree. In accordance with section 1862(b)(2)(B)(ii) 
of the Act and 42 CFR 411.24 of the regulations, we have the right to 
pursue recovery from the beneficiary, the primary payer or any other 
entity receiving proceeds from the payment by the primary plan. Section 
411.24(e) states that we have a direct right of action to recover from 
any primary payer.
    Comment: A commenter requested that CMS remove any restrictions on 
the applicable plan, including the right to seek recovery from the 
beneficiary, service provider or other entity. Another commenter stated 
that the proposed rule did not address whether the applicable plan may 
seek recovery from another entity.
    Response: We decline this request. The commenter is requesting that 
we provide a statement of the applicable plan's rights against Medicare 
beneficiaries, providers/suppliers, or other entities which is outside 
the scope of this rule.
    After review and consideration of comments related to Sec.  405.924 
and Sec.  405.926, we are finalizing the changes to these sections with 
modifications. In order to address the addition of a new paragraph 
(b)(15) to Sec.  405.924 via the CY 2015 Physician Fee Schedule final 
rule with comment period (79 FR 68001), we will need to add proposed 
paragraph (b)(15) as paragraph (b)(16) and make conforming cross-
references changes in Sec.  405.906 and Sec.  405.926(k).
3. Party Status/Who Can Appeal and When
    We proposed to add paragraph (a)(4) to Sec.  405.906, Parties to 
the initial determinations, redeterminations, reconsiderations, 
hearings, and reviews, to specify that an applicable plan is a party to 
an initial determination under proposed Sec.  405.924(b)(15) where 
Medicare is pursuing recovery directly from the applicable plan. The 
applicable plan is the sole party to an initial determination when an 
applicable plan is a party. By ``pursuing recovery directly from the 
applicable plan,'' we mean that the applicable plan would be the 
identified debtor, with a recovery demand letter issued to the 
applicable plan (or its agent or representative) requiring repayment. 
If or when an applicable plan receives a courtesy copy of a recovery 
demand letter issued to a beneficiary, this does not qualify as 
``pursuing recovery directly from the applicable plan'' and does not 
confer party status on the applicable plan. Making the applicable plan 
the sole party to the initial determination means that the applicable 
plan would also be the sole party to a redetermination or subsequent 
level of appeal with respect to that initial determination. We are also 
making a technical change in the section heading for Sec.  405.906 
(adding a comma before the phrase ``and reviews'').
    Comment: Several commenters requested that (1) either the 
applicable plan, or the beneficiary, or both be allowed to participate 
in any appeal where the identified debtor is either the applicable plan 
or the beneficiary; (2) any appeal consolidate the appeal process and 
appeal rights of the applicable plan and the beneficiary; (3) either 
the applicable plan or the beneficiary has the right to appeal at any 
point prior to resolution of the appeals process or full payment 
(whichever occurs first); or (4) appeal rights be given to any entity 
potentially liable for repayment.
    Response: We decline these requests. This final rule makes appeal 
rights available to the identified debtor, not potential identified 
debtors. An identified debtor and a potential identified debtor do not 
always have the same interests or present the same issues on appeal. 
For example, where a demand is issued, the identified debtor may elect 
to make payment in full and not appeal, in which case furnishing appeal 
rights to a potential debtor is unnecessary.
    If we issue a demand to an identified debtor and later determine 
that it is appropriate to pursue recovery of some or all of the 
conditional payments at issue from a different identified debtor, a new 
separate demand will be issued, with appeal rights appropriate to the 
identified debtor in the new recovery demand.
    Comment: A commenter requested that the provision making the 
applicable plan the sole party to a recovery pursued directly from the 
applicable plan be modified to state that the applicable plan is the 
sole party unless the applicable plan has previously made payment, in 
which circumstance any individual or entity which accepted payment 
would be a party to the initial determination and subsequent actions.
    Response: We decline this request. In accordance with section 
1862(b)(2)(B)(ii) of the Act and 42 CFR 411.24 of the regulations, we 
have the right to pursue recovery from the beneficiary, the primary 
payer or any other entity receiving proceeds from the payment by the 
primary plan. We may recover from the applicable plan even if the 
applicable plan has already reimbursed the beneficiary or other party.
    Comment: Some commenters requested that CMS always pursue recovery 
from the individual or entity to whom/which the applicable plan has 
made payment (or, at minimum, pursue

[[Page 10614]]

recovery from that individual or entity before pursuing recovery from 
the applicable plan). A commenter suggested that CMS should have to 
inform an applicable plan regarding whether recovery had been sought 
from the beneficiary first.
    Response: We decline these requests. The determination of who to 
pursue is our sole responsibility and, consequently, is not subject to 
appeal (see Sec.  405.926(a)). We have the right to pursue recovery 
from the primary payer, the beneficiary, or any other entity receiving 
proceeds from the payment by the primary plan, and we may recover from 
the applicable plan even if the applicable plan has already reimbursed 
the beneficiary or other party.
    After review and consideration of all comments related to Sec.  
405.906, we are finalizing the changes to this section with the 
modifications to the cross-references to Sec.  405.924(b)(15) noted in 
section II.B.2. of this final rule.
4. Use of an Attorney or Other Representative; Assignment of Appeal 
Rights
    We proposed adding paragraph (e)(4) to Sec.  405.910, Appointed 
representatives, in order to provide applicable plans with the benefit 
of the existing rule for MSP regarding the duration of appointment for 
an appointed representative. We also proposed revising Sec.  
405.910(i)(4) to ensure that the special provision that beneficiaries 
as well as their representatives must receive notices or requests in an 
MSP case continues to apply only to beneficiaries. For all other 
parties, including an applicable plan, we continue to follow the 
regulatory provisions in Sec.  405.910(i)(1) through (3). We did not 
propose any changes to Sec.  405.912 which addresses the assignment of 
appeal rights.
    Comment: Commenters requested that applicable plans be able to 
appoint third parties/agents as representatives in the appeal process.
    Response: Applicable plans have this ability under the existing 
provisions in Sec.  405.910. Section 405.910 does not limit who a party 
may appoint as a representative other than to state that ``[a] party 
may not name as an appointed representative, an individual who is 
disqualified, suspended or otherwise prohibited by law from acting as a 
representative in any proceedings before DHHS, or in entitlement 
appeals, before SSA.''
    Furthermore, we are specifying when a party appointing a 
representative must include the beneficiary's Medicare health insurance 
claim number (HICN) on the appointment of representation. We believe 
that it is not necessary for non-beneficiary parties to include the 
HICN as part of a valid appointment because an applicable plan or other 
non-beneficiary party seeking to appoint a representative under Sec.  
405.910 is not a beneficiary, and would thus not have a beneficiary 
HICN to provide on an appointment of representation. Accordingly, we 
are amending the existing Sec.  405.910(c)(5) to state that an 
appointment of representation must identify the beneficiary's HICN when 
the beneficiary (or someone, such as an authorized representative or 
representative payee, acting on behalf of a beneficiary) is the party 
appointing a representative.
    Comment: Some commenters requested that beneficiaries be able to 
assign their appeal rights to the applicable plan; other commenters 
requested that applicable plans be able to assign their appeal rights 
to the beneficiary.
    Response: We decline these requests. Both beneficiaries and 
applicable plans have the option of an agreement for representation 
when it is mutually agreed to. However, the assignment of appeal rights 
is controlled by section 1869(b)(1)(C) of the Act which limits the 
assignment of appeal rights to assignment by a beneficiary to a 
provider/supplier with respect to an item or service furnished by the 
provider/supplier in question.
    After review and consideration of comments related to Sec.  
405.910, we are finalizing the changes to this section as proposed and 
with the specification to paragraph (c)(5) explained previously.
5. Notice
    We proposed adding a new paragraph (c) to Sec.  405.921, Notice of 
initial determination, to provide specific language regarding 
requirements for notice to an applicable plan. Proposed Sec.  
405.921(c)(iv) states that in addition to other stated requirements in 
Sec.  405.921(c), the requisite notice must contain ``any other 
requirements specified by CMS.'' We also proposed to add Sec.  405.947, 
Notice to the beneficiary of applicable plan's request for a 
redetermination, to add language satisfying the requirement at section 
1862(b)(2)(B)(viii) of the Act that the beneficiary receive notice of 
the applicable plan's intent to appeal where Medicare is pursuing 
recovery from the applicable plan. As the beneficiary would not be a 
party to the appeal at the redetermination level or subsequent levels 
of appeal, we believe that a single notice at the redetermination level 
satisfies the intent of this provision. We also proposed that the 
required notice be issued by a CMS contractor in order to ensure 
clarity and consistency in the wording of the notice. In addition to 
these changes, for consistency we proposed a number of technical and 
formatting changes.
    Comment: Several commenter stated that the requisite notice must 
contain ``any other requirements specified by CMS'' in proposed Sec.  
405.921(c)(iv) is too broad and/or gives CMS too much authority.
    Response: We are finalizing Sec.  405.921(c) as proposed. The 
proposed language in Sec.  405.921(c) is designed to set forth the 
minimum requirements for notice of an initial determination. Proposed 
Sec.  405.921(c)(iv) simply provides flexibility for CMS to include 
additional information appropriate for the efficient operation of the 
appeals process; it does not eliminate any obligations set forth in 
proposed Sec.  405.921(c). Additionally, we note that the same language 
is a longstanding provision in Sec.  405.921(a) and (b) as well as 
certain other sections within part 405 subpart I regarding ``notice.''
    Comment: Commenters presented a range of concerns regarding 
whether--(1) the applicable plan should be copied on a recovery demand 
with the beneficiary as the identified debtor; and (2) all potential 
debtors should be copied on all actions (that is, recovery demands, 
appeal requests, all notices or decisions).
    Response: Given that the proposed rule provides that the applicable 
plan will be the sole party to an initial determination if CMS pursues 
recovery directly from the applicable plan, we have determined that any 
notice beyond the notice we have proposed in Sec.  405.947 is 
unnecessary, would cause an increase in administrative costs and would 
cause confusion in many instances, particularly where beneficiaries 
would receive copies of demands issued to applicable plans.
    Comment: A commenter stated that the Notice of Initial 
Determination sent to an applicable plan must include specific 
statutory authority for determinations and notification of appeal 
rights.
    Response: It is our routine practice to include the basis for our 
recovery rights as well as information on applicable appeal rights in 
the recovery demand letter. Moreover, we believe that the commenter's 
concerns are adequately addressed by proposed Sec.  405.921(c)(i) and 
(iii) (which require the reason for the determination as well as 
information on appeal rights).
    Comment: A commenter requested that we apply the ``mailbox rule'' 
(also known as the ``postal rule'' or

[[Page 10615]]

``deposited acceptance rule'') regarding receipt of a document.
    Response: We decline this request. The appeals process set forth in 
part 405 subpart I already has rules regarding receipt of documents for 
the purpose of determining the timeliness of an appeal request. See, 
for example, Sec.  405.942(a)(1) (date of receipt for an initial 
determination), Sec.  405.962(a)(1) (date of receipt for a 
redetermination), and Sec.  405.1002(a)(3) (date of receipt for a 
reconsideration).
    Comment: A commenter requested that language be added to 
beneficiary correspondence requiring beneficiaries to cooperate with 
the applicable plan and CMS' contractor.
    Response: Because we are not involved in the interactions between a 
beneficiary and an applicable plan, we are not adding the requested 
language.
    Comment: A commenter was concerned that an applicable plan might 
lose its opportunity to appeal if the recovery demand to the applicable 
plan was addressed incorrectly.
    Response: Section 405.942, Sec.  405.962, Sec.  405.1014, and Sec.  
405.1102 all contain provisions for extending the time for filing for a 
particular level of appeal upon establishing good cause. An applicable 
plan, as a party, is entitled to request an extension of the filing 
timeframe consistent with the previously referenced sections should 
there be good cause to extend such timeframes.
    Comment: A commenter requested that notice to the beneficiary of 
the applicable plan's appeal explicitly state in plain language that 
the applicable plan's appeal does not affect the beneficiary (that is, 
that the applicable plan is the sole party to the appeal).
    Response: We agree, however, the content of model notices is more 
appropriately included in our operational instructions for contractors. 
We will address this issue when we draft language for the notice CMS' 
contractor will issue in accordance with Sec.  405.947.
    Comment: A commenter requested clarification regarding ``notice'' 
for purposes of the statute of limitations provision set forth in 
section 205 of the SMART Act.
    Response: This comment is outside the scope of this rule.
    After review and consideration of all comments regarding Sec.  
405.921 and Sec.  405.947, we are finalizing these provisions as 
proposed with one modification. We are revising Sec.  405.947(a) to 
read: ``A CMS contractor must send notice of the applicable plan's 
appeal to the beneficiary.'' We are eliminating the reference to ``the 
contractor adjudicating the redetermination request'' issuing the 
notice in order to allow for operational efficiencies, where 
applicable. Section 405.947(b) will continue to read: ``(b) Issuance 
and content of the notice must comply with CMS instructions.''
6. Appeal Processes/Determining the Identified Debtor
    Comment: Commenters requested we clarify that initial 
determinations (recovery demands) involving liability insurance 
(including self-insurance), no-fault insurance, or workers' 
compensation benefits are made only after there is a settlement with a 
beneficiary.
    Response: Recovery demands are appropriate once primary payment 
responsibility has been demonstrated. Primary payment responsibility 
can be demonstrated based upon a settlement, judgment, award, or other 
payment. See section 1862(b)(2)(B)(ii) of the Act and 42 CFR 411.22 of 
the regulations.
    Comment: A commenter indicated an understanding that issues of 
medical necessity, beneficiary eligibility, and payment would be 
decided simultaneously with issues of MSP recovery under the proposed 
rule.
    Response: The commenter's understanding is incorrect because these 
issues arise at different points in time. Medicare has rules in place 
to permit conditional payment when a beneficiary has a pending 
liability insurance (including self-insurance), no-fault insurance, or 
workers' compensation claim. Our claims processing contractors utilize 
normal claims processing considerations (including medical necessity 
rules) in processing such claims. MSP recovery claims come into play 
once we have information that primary payment responsibility has been 
demonstrated, which often occurs after items or services have been 
reimbursed by Medicare.
    Comment: A commenter stated that there should be a clear statement 
regarding the availability of judicial review for applicable plans and 
requested that such a statement be added in 42 CFR 405.904.
    Response: We believe that this clarification is unnecessary. 
Section 405.904(b) already addresses nonbeneficiary appellants. 
Additionally, Sec.  405.1136 explains that judicial review is available 
as authorized by statute. (See sections 1869, 1876, and 1879(d) of the 
Act.)
    Comment: Several commenters requested that CMS consider an appeals 
process other than the process in part 405 subpart I. Requests ranged 
from suggesting fewer levels of appeal, using a separate team of 
experts, to a separate docket and group of ALJs for MSP appeals. 
Multiple comments noted concern with the current backlog of claims-
based appeals at the ALJ level of appeal.
    Response: We decline this request. The existing appeals process in 
42 CFR part 405 subpart I addresses claims-based Part A and Part B MSP 
and non-MSP appeals for beneficiaries, providers and suppliers, 
including appeals of pre-pay denials as well as overpayments. The 
proposed rule would give party status to a new party (the applicable 
plan) with respect to specific initial determinations. As the existing 
process at 42 CFR part 405 subpart I, is currently used for Part A and 
Part B MSP appeals by beneficiaries, we believe it is an appropriate 
process for resolving similar disputes with applicable plans.
    Comment: A commenter requested that CMS clarify how it determines 
who/which entity is the identified debtor and whether the identified 
debtor will generally be the beneficiary.
    Response: This question is outside the scope of this rule. (See, 
section 1862(b)(2)(B)(ii) and (iii) of the Act as well as 42 CFR 411.24 
of the regulations regarding who we may pursue for recovery.)
    Comment: Several commenters questioned whether: (1) CMS could 
pursue concurrent claims against the beneficiary and the applicable 
plan; (2) a claim against a beneficiary rendered a claim against the 
applicable plan moot (and vice versa); and (3) a demand to the 
beneficiary (or to the applicable plan) rendered a subsequent claim 
with respect to the same matter moot against the beneficiary (or the 
applicable plan, as appropriate).
    Response: These comments are outside the scope of this rule as they 
do not relate to the proposed appeal process. Please note that we will 
not recover twice for the same item or service. Appeal rights will be 
given to the beneficiary or applicable plan receiving the demand.
    Comment: Commenters stated that applicable plans should have access 
to beneficiary medical records, including an ability to unmask data on 
CMS' web portal.
    Response: These comments are outside the scope of this rule as they 
are not related to the proposed appeal process. If we pursue recovery 
directly from the applicable plan, the applicable plan will be provided 
with all information related to the demand.
7. Interest and Penalties
    Comment: Several commenters requested that penalties (such as civil

[[Page 10616]]

monetary penalties (CMPs)) and interest be tolled entirely during an 
appeal, during a good faith appeal, or for some set period of time 
during an appeal.
    Response: The statutory and regulatory provisions for interest and 
CMPs are outside the scope of this rule. However, we note that a debtor 
may eliminate the possibility of interest by submitting repayment 
within the timeframe specified in the demand letter. Such repayment 
does not eliminate existing appeal rights.
8. Applicability of the Proposed Rule to Medicare Part C and Medicare 
Part D
    Comment: Some commenters requested that the proposed rule be 
revised to include appeal rights for applicable plans when a Medicare 
Part C organization or Part D plan pursues an MSP based recovery from 
the applicable plan.
    Response: This request is outside of the scope of this rule. The 
SMART Act provision for applicable plan appeals amended only the MSP 
provisions for Medicare Part A and Part B (section 1862(b) of the Act).

C. Other Proposals

    In this section of the final rule, we note the proposed rule 
included a provision for which we did not receive any public comment. 
We proposed to amend Sec.  405.900, Basis and scope, by revising 
paragraph (a) to add section 1862(b)(2)(B)(viii) of the Act as part of 
the statutory basis or Subpart I. Section 1862(b)(2)(B)(viii) requires 
an appeals process for applicable plans when Medicare pursues recovery 
directly from the applicable plan. We received no comments on this 
proposal; and therefore, are finalizing this provision without 
modification.

D. General and Other Comments

    This section of the final rule responds to public comments that are 
not specific to topics described in section II.B. of this final rule.
    Comment: A commenter stated that the amount in controversy 
requirement should be consistent with the dollar threshold provided for 
by the SMART Act in section 1862(b)(9) of the Act.
    Response: We do not accept this recommendation as the amount in 
controversy jurisdictional threshold for the appeals process is 
unrelated to the threshold set in section 1862(b)(9) of the Act. The 
section 1862(b)(9) of the Act threshold is a dollar threshold regarding 
the size of the settlement, where, in certain situations, MSP reporting 
and repayment is not required. The jurisdictional amount in controversy 
requirements for the appeals process are already set forth in Sec.  
405.1006 for ALJ hearings and judicial review. We see no basis for 
changing the existing thresholds at various levels of appeal based upon 
the addition of an applicable plan as the party for certain appeals.
    Comment: A commenter stated that the proposed rule was inconsistent 
with the SMART Act requirement for an 11-day web portal response 
timeframe for ``redeterminations and discrepancy resolution.''
    Response: The SMART Act provisions concerning a web portal are 
outside the scope of this rule. Moreover, the provisions concerning the 
web portal discrepancy resolution process (section 
1862(b)(2)(B)(vii)(IV) of the Act) specifically state that: (1) The 
provisions do not establish a right of appeal or set forth an appeal 
process; and (2) there shall be no administrative or judicial review of 
the Secretary's determination under section 1862(b)(2)(B)(vii)(IV) of 
the Act.
    Comment: A commenter stated that the proposed rule should address 
appeals related to the determination of a proposed Workers' 
Compensation Medicare Set-Aside Arrangement (WCMSA) amount for future 
medicals.
    Response: This issue is outside the scope of this rule. As stated 
in the preamble to the proposed rule, this issue will be addressed 
separately.

III. Provisions of the Final Regulations

    This rule incorporates all of the provisions of the December 27, 
2013 proposed rule with the following exceptions:
     In Sec.  405.910(c)(5), we are revising the language to 
specify when an HICN is needed.
     In Sec.  405.924, finalizing the addition of proposed 
paragraph (b)(15) as paragraph (b)(16). As a result of this change, we 
are also making conforming changes to the cross-references to this 
paragraph in Sec. Sec.  405.906(a)(4) and (c), 405.921(c)(1), and 
405.926(k).
     In Sec.  405.947(a), we are removing the reference to 
``the contractor adjudicating the redetermination request'' issuing the 
notice in order to allow for operational efficiencies, where 
applicable. Therefore, paragraph (a) will read ``A CMS contractor must 
send notice of the applicable plan's appeal to the beneficiary.''
     In Sec.  405.980, we are making a grammatical change to 
the section heading to match the grammatical change made to the section 
heading of Sec.  405.906.

IV. Collection of Information Requirements

    This document does not impose information collection requirements, 
that is, reporting, recordkeeping or third-party disclosure 
requirements. Consequently, there is no need for review by the Office 
of Management and Budget under the authority of the Paperwork Reduction 
Act of 1995 (44 U.S.C. 35).

V. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(February 2, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999) and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We have determined that the effect of this rule on the economy and the 
Medicare program is not economically significant. The rule provides a 
formal administrative appeal process for MSP recovery claims where the 
applicable plan is the identified debtor, as opposed to the current 
process which requires a CMS contractor to consider any defense 
submitted by an applicable plan but does not provide formal 
administrative appeal rights.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individuals and 
states are not included in the definition of a small entity. We have 
determined and we certify that this rule would not have a significant 
economic impact on

[[Page 10617]]

a substantial number of small entities because there is and will be no 
change in the administration of the MSP provisions. The changes would 
simply expand or formalize existing rights with respect to MSP recovery 
claims pursued directly from an applicable plan. Therefore, we are not 
preparing an analysis for the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis (RIA) if a rule may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area for Medicare payment regulations and has 
fewer than 100 beds. We have determined that this rule would not have a 
significant effect on the operations of a substantial number of small 
rural hospitals because it would simply expand and/or formalize 
existing rights with respect to MSP recovery claims pursued directly 
from an applicable plan. Therefore, we are not preparing an analysis 
for section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2014, that 
threshold is approximately $141 million. This rule has no consequential 
effect on State, local, or tribal governments or on the private sector 
because it would simply expand and/or formalize existing rights with 
respect to MSP recovery claims pursued directly from an applicable 
plan.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR part 405 as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

    Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, 1886(k) of the Social Security Act (42 U.S.C. 405(a), 1302, 
1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 1395ww(k)), and 
sec. 353 of the Public Health Service Act (42 U.S.C. 263a).

0
2. Amend Sec.  405.900 by revising paragraph (a) to read as follows:

Sec.  405.900  Basis and scope.

    (a) Statutory basis. This subpart is based on the following 
provisions of the Act:
    (1) Section 1869(a) through (e) and (g) of the Act.
    (2) Section 1862(b)(2)(B)(viii) of the Act.
* * * * *

0
3. Amend Sec.  405.902 by adding the definition ``Applicable plan'' in 
alphabetical order to read as follows:

Sec.  405.902  Definitions.

* * * * *
    Applicable plan means liability insurance (including self-
insurance), no-fault insurance, or a workers' compensation law or plan.
* * * * *

0
4. Amend Sec.  405.906 by:
0
A. Revising the section heading.
0
B. Adding new paragraph (a)(4).
0
C. Amending paragraph (c) by adding a sentence at the end of the 
paragraph.
    The additions and revision read as follows:

Sec.  405.906  Parties to the initial determinations, redeterminations, 
reconsiderations, hearings, and reviews.

    (a) * * *
    (4) An applicable plan for an initial determination under Sec.  
405.924(b)(16) where Medicare is pursuing recovery directly from the 
applicable plan. The applicable plan is the sole party to an initial 
determination under Sec.  405.924(b)(16) (that is, where Medicare is 
pursuing recovery directly from the applicable plan).
* * * * *
    (c) * * *. This paragraph (c) does not apply to an initial 
determination with respect to an applicable plan under Sec.  
405.924(b)(16).

0
4. Amend Sec.  405.910 by:
0
A. Revising paragraph (c)(5).
0
B. Adding paragraph (e)(4).
0
C. Revising paragraph (i)(4).
    The revisions and addition read as follows:

Sec.  405.910  Appointed representatives.

* * * * *
    (c) * * *
    (5) Identify the beneficiary's Medicare health insurance claim 
number when the beneficiary is the party appointing a representative;
* * * * *
    (e) * * *
    (4) For an initial determination of a Medicare Secondary Payer 
recovery claim, an appointment signed by an applicable plan which has 
party status in accordance with Sec.  405.906(a)(1)(iv) is valid from 
the date that appointment is signed for the duration of any subsequent 
appeal, unless the appointment is specifically revoked.
* * * * *
    (i) * * *
    (4) For initial determinations and appeals involving Medicare 
Secondary Payer recovery claims where the beneficiary is a party, the 
adjudicator sends notices and requests to both the beneficiary and the 
beneficiary's representative, if the beneficiary has a representative.
* * * * *

0
5. Amend Sec.  405.921 by:
0
A. In paragraph (a)(1), removing ``;'' and adding in its place ``.''
0
B. In paragraph (a)(2) introductory text, removing the phrase ``must 
contain--'' and adding in its place the phrase ``must contain all of 
the following:''
0
C. In paragraphs (a)(2)(i) and (a)(2)(ii), removing ``;'' and adding in 
its place ''.''
0
D. In paragraph (a)(2)(iii), removing ``; and'' and adding in its place 
''.''
0
E. Redesignating the second and third sentences of paragraph (b)(1) as 
paragraphs (b)(1)(i) and (ii), respectively.
0
F. In paragraph (b)(2) introductory text, removing the phrase ``must 
contain:'' and adding in its place the phrase ``must contain all of the 
following:''
0
G. In paragraphs (b)(2)(i) through (b)(2)(iv), removing ``;'' and add 
in its place ``.''
0
H. In paragraph (b)(2)(v), removing ``; and'' and add in its place 
``.''
0
I. Adding paragraph (c) to read as follows:

Sec.  405.921  Notice of initial determination.

* * * * *
    (c) Notice of initial determination sent to an applicable plan--(1) 
Content of

[[Page 10618]]

the notice. The notice of initial determination under Sec.  
405.924(b)(16) must contain all of the following:
    (i) The reasons for the determination.
    (ii) The procedures for obtaining additional information concerning 
the contractor's determination, such as a specific provision of the 
policy, manual, law or regulation used in making the determination.
    (iii) Information on the right to a redetermination if the 
liability insurance (including self-insurance), no-fault insurance, or 
workers' compensation law or plan is dissatisfied with the outcome of 
the initial determination and instructions on how to request a 
redetermination.
    (iv) Any other requirements specified by CMS.
    (2) [Reserved]

0
6. Amend Sec.  405.924 by:
0
A. In paragraph (b) introductory text, removing the phrase ``with 
respect to:'' and add in its place the phrase ``with respect to any of 
the following:''
0
B. In paragraph (b)(1) through (b)(11) removing ``;'' and adding in its 
place ``.''
0
D. In paragraph (b)(12) introductory text, removing the ``:'' and 
adding in its place ``--''.
0
C. Adding paragraph (b)(16).
    The addition reads as follows:

Sec.  405.924  Actions that are initial determinations.

* * * * *
    (b) * * *
    (16) Under the Medicare Secondary Payer provisions of section 
1862(b) of the Act that Medicare has a recovery claim if Medicare is 
pursuing recovery directly from an applicable plan. That is, there is 
an initial determination with respect to the amount and existence of 
the recovery claim.
* * * * *

0
7. Amend Sec.  405.926 by:
0
A. In the introductory text, removing the phrase ``not limited to -'' 
and adding in its place the phrase ``not limited to the following:''
0
B. In the introductory text of paragraph (a), removing the phrase ``for 
example -'' and adding in its place the phrase ``for example one of the 
following:''
0
C. In paragraphs (a)(1) and (a)(2), removing ``;'' and adding in its 
place ``.''
0
D. Adding paragraph (a)(3).
0
E. In paragraphs (b) through (j), removing ``;'' and adding in its 
place ``.''
0
F. Revising paragraph (k).
0
G. In paragraphs (l) through (q), removing ``;'' and adding in its 
place ``.''
0
H. In paragraph (r), removing ``; and'' and adding in its place ``.''
    The addition and revision read as follows:

Sec.  405.926  Actions that are not initial determinations.

* * * * *
    (a) * * *
    (3) Determination under the Medicare Secondary Payer provisions of 
section 1862(b) of the Act of the debtor for a particular recovery 
claim.
* * * * *
    (k) Except as specified in Sec.  405.924(b)(16), determinations 
under the Medicare Secondary Payer provisions of section 1862(b) of the 
Act that Medicare has a recovery against an entity that was or is 
required or responsible (directly, as an insurer or self-insurer; as a 
third party administrator; as an employer that sponsors, contributes to 
or facilitates a group health plan or a large group health plan; or 
otherwise) to make payment for services or items that were already 
reimbursed by the Medicare program.
* * * * *

0
8. Add a new Sec.  405.947 to read as follows:

Sec.  405.947  Notice to the beneficiary of applicable plan's request 
for a redetermination.

    (a) A CMS contractor must send notice of the applicable plan's 
appeal to the beneficiary.
    (b) Issuance and content of the notice must comply with CMS 
instructions.

0
9. Amend Sec.  405.980 by revising the section heading to read as 
follows:

Sec.  405.980  Reopening of initial determinations, redeterminations, 
reconsiderations, hearings, and reviews.

* * * * *

    Dated: November 20, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: January 15, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-04143 Filed 2-26-15; 8:45 am]
BILLING CODE 4120-01-P
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