Medicare Program; Medicare Secondary Payer for Individuals Entitled to Medicare and Also Covered Under Group Health Plans
Federal RegisterAug 31, 1995
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 400 and 411
[BPD-482-FC]
RIN 0938-AD73
Medicare Program; Medicare Secondary Payer for Individuals
Entitled to Medicare and Also Covered Under Group Health Plans
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment period.
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SUMMARY: These regulations establish limits on Medicare payment for
services furnished to individuals who are entitled to Medicare on the
basis of disability and who are covered under large group health plans
(LGHPs) by virtue of their own or a family member's current employment
status with an employer; and prohibit LGHPs from taking into account
that those individuals are entitled to Medicare on the basis of
disability.
They also implement certain other provisions of section 1862(b) of
the Social Security Act, as amended by the Omnibus Budget
Reconciliation Acts of 1986, 1989, 1990, and 1993 and the Social
Security Act Amendments of 1994. Those amendments affect the Medicare
secondary payer rules for individuals who are entitled to Medicare on
the basis of age or who are eligible or entitled on the basis of end
stage renal disease and who are also covered under group health plans
(GHPs). The provisions that apply to all three groups include--
The rules under which HCFA determines that a GHP or LGHP
is not in conformance with the requirements and prohibitions of the
statute;
The appeals procedures respecting GHPs and LGHPs that HCFA
finds to be nonconforming.
The referral of nonconforming plans to the Internal
Revenue Service; and
The rules for recovery of conditional or mistaken Medicare
payments made by HCFA.
The intent of the MSP provisions is to ensure that Medicare does
not pay primary benefits for services for which a GHP or LGHP is the
proper primary payer and that beneficiaries covered under these plans
are not disadvantaged vis-a-vis other individuals who are covered under
the plan but are not entitled to Medicare.
DATES: Effective Dates: These regulations are effective on October 2,
1995.
Comment Date: We will consider comments that we receive no later
than 5 p.m. on October 30, 1995.
ADDRESSES: Mail an original and 3 copies of written comments to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: BPD-482-FC, P.O. Box 26676, Baltimore, MD 21207.
If you prefer, you may deliver original and 3 copies of your
written comments to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code BPD-482-FC. Comments received timely will be available for
public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
For comments that relate to information collection requirements,
mail a copy of comments to:
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Bldg., Washington, D.C. 30503,
Attention: Allison Herron Eydt, Desk Officer for HCFA
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
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libraries throughout the country that receive the Federal Register.
FOR FURTHER INFORMATION CONTACT: Herbert Pollock, (410) 786-4474.
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SUPPLEMENTARY INFORMATION:
I. Background
During the first 15 years of the Medicare program, Medicare was the
primary payer for all Medicare-covered services with the sole exception
of services covered under workers' compensation as provided in section
1862 of the Act. Beginning in 1980, the Congress passed a series of
amendments to section 1862 of the Act to make Medicare the secondary
payer for services covered by other types of insurance. In general,
Medicare is now secondary to all of the following:
1. All forms of liability insurance.
2. Automobile and non-automobile no-fault insurance.
3. Group health plans (GHPs) that cover end-stage renal disease
(ESRD) patients (during the first 18 months of Medicare eligibility or
entitlement).
4. GHPs that cover aged individuals who have current employment
status with an employer and aged spouses of individuals of any age who
have current employment status with an employer.
5. Large group health plans (LGHPs) that cover disabled individuals
if the individual or a member of the individual's family has current
employment status with an employer.
(Current employment status is sometimes referred to as ``current
employment.'')
II. Statutory Amendments
A. Overview
1. Section 9319 of the OBRA '86 (Pub. L. 99-509) added a new
section 1862(b)(4), which made Medicare secondary to benefits payable
by ``large group health plans'' for services furnished to ``active
individuals,'' who are entitled to Medicare based on disability.
2. Section 6202(b) of OBRA '89 (Pub. L. 101-239) reorganized and
clarified the Medicare secondary payer (MSP) provisions and transferred
the provisions applicable to the disabled to section 1862(b)(1)(B) of
the Act.
3. Section 4204(g) of OBRA '90 (Pub. L. 101-508) added a new
section 1862(b)(3)(C), which prohibits employers and other entities
from offering Medicare beneficiaries incentives not to enroll or to
terminate enrollment in a GHP that would otherwise be primary to
Medicare. Section 1862(b)(3)(C) of the Act provides for a civil money
penalty of up to $5,000 for each violation.
Section 4203(c)(1) of OBRA '90 redefined the 12-month ESRD MSP
coordination period, during which GHPs are required to pay primary to
Medicare, and extended that redefined period from 12 to 18 months. A
final rule with comment period addressing the section 4203(c)(1)
changes was published in the Federal Register on August 12, 1992 (57 FR
36006-36016).
4. Section 13561(e) of OBRA '93 (Pub. L. 103-66), effective August
10, 1993, changed the MSP provisions for the disabled to make Medicare
the secondary payer for individuals who have LGHP coverage by virtue of
the individual's own or a family member's ``current employment status
with an employer''. An individual has current employment status with an
employer if the individual is an employee, is the employer (including a
self-employed person), or is associated with the employer in a business
relationship. In general, this means that the individual is on the
employment rolls of the employer. Before this change in the law,
Medicare was also secondary payer for certain nonworking disabled
individuals who were considered to have employee status based on their
relationship with the employer, even though they may not have been on
the employment rolls.
5. Sections 151(c) and 157(b) of the Social Security Act Amendments
of 1994 (SSAA '94) (Pub. L. 103-432) made miscellaneous and technical
corrections to OBRA '89, OBRA '90, and OBRA '93. Section 151(b)(3)
added express authority to assess interest if a conditional Medicare
payment is not refunded within 60 days.
B. OBRA '86 Amendments--Active Individuals Entitled to Medicare on the
Basis of Disability
These amendments--
1. Defined the term ``active individual'' as ``an employee (as may
be defined in regulations), the employer, an individual associated with
the employer in a business relationship, or a member of the family of
any of such persons.''
2. Defined ``large group health plan'' by reference to section
5000(b) of the Internal Revenue Code (IRC) of 1986, which defined the
term as ``a plan of, or contributed to by, an employer or employee
organization (including a self-insured plan), to provide health care
(directly or otherwise) to the employees, former employees, the
employer, others associated or formerly associated with the employer in
a business relationship, or their families, that covers employees of at
least one employer that normally employed at least 100 employees on a
typical business day during the previous calendar year.'' (We have
interpreted the phrase ``normally employed at least 100 employees on a
typical business day'' to mean that the employer employed at least 100
full-time or part-time employees during 50 percent or more of the
employer's business days during the previous calendar year.)
3. Provided that Medicare may not pay for services furnished to an
active individual on or after January 1, 1987, and before January 1,
1992, to the extent that payment has been made or can reasonably be
expected to be made by an LGHP. (Section 4203(b) of OBRA '90 changed
the sunset provision from January 1, 1992, to October 1, 1995, and
section 13561(b) of OBRA '93 changed that date to October 1, 1998.)
4. Expanded HCFA's recovery rights under previous amendments to the
Medicare statute by providing that HCFA may bring an action against any
entity that fails to pay primary benefits for services furnished to
active individuals entitled on the basis of disability, as required
under section 1862(b) of the Act, and may collect double damages.
5. Created a private cause of action under which any claimant may
seek double damages from any entity responsible for payment that fails
to pay primary benefits as required by the statute.
6. Provided that an LGHP ``may not take into account that an active
individual is eligible for or receives'' Medicare benefits on the basis
of disability. The effect of this prohibition was to--
Make Medicare secondary payer for active individuals who
were entitled to Medicare on the basis of disability and whose LGHP
coverage was linked to their status as active individuals; for example,
individuals who had LGHP coverage because they were employees or
spouses of employees; and
Require the LGHP to treat such active individuals the same
way it treated similarly situated individuals.
C. OBRA '89 Amendments
The OBRA '89 amendments--
1. Revised the definition of ``active individual'' to include the
phrase ``self-employed individual (such as the employer)'';
2. Extended to individuals with ESRD and to the aged the
prohibition against taking into account Medicare entitlement.
3. Required that GHPs--
Furnish to aged employees and spouses the same benefits,
under the same conditions, that they furnish to employees and spouses
under 65; and
Not differentiate in the benefits they provide between
individuals with ESRD and other plan enrollees, on the basis of
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the existence of ESRD, the need for dialysis, or in any other manner.
4. Extended to the MSP provisions for the aged and for those with
ESRD, the Federal Government's right to recover double damages; and
5. Exempted from the MSP provisions services performed for a
religious order by members of the order who take a vow of poverty; and
6. Provided a single formula for determining Medicare secondary
payment amounts under all MSP provisions.
D. OBRA '90 Amendments
These amendments made the following changes:
1. Added a new section 1862(b)(3)(C) to the Act, which prohibited
employers or other entities from offering to an individual entitled to
Medicare any financial or other incentive not to enroll, or to
terminate enrollment, in a GHP that would be primary to Medicare,
unless the incentive was also offered to all individuals who are
eligible for coverage under the plan. That section also provided for a
penalty of up to $5,000 for each violation, which was to be applied in
accordance with provisions of section 1128A of the Act.
2. Redefined and extended the ESRD MSP coordination period. The 12-
month ESRD coordination period was redefined to begin with the first
month of ESRD-based eligibility or entitlement, and that redefined
period was extended to 18 months. (Previously, the ESRD coordination
period was a 12-month period that began with the first month of
dialysis rather than with the first month of ESRD-based eligibility or
entitlement, which generally occurs as of the fourth month of
dialysis.) On August 12, 1992, we published a final rule with comment
period (57 FR 36006-36016) that incorporated this change. We received
one comment on this particular aspect, but made no change in the
confirming final rule published on November 2, 1993 (58 FR 58502-
58504).
E. OBRA '93--Amendments Treatment of Individuals Entitled to Medicare
on the Basis of Disability Who Have LGHP Coverage by Virtue of Their
Own or a Family Member's Current Employment Status
The OBRA '93 amendments made the following changes, effective
August 10, 1993:
1. Eliminated the concept ``active individual'' and provided
instead that the MSP disability provision applies only if the
individual, or a family member, is covered under an LGHP ``by virtue of
the individual's current employment status with an employer''.
2. Provided that an individual has ``current employment status'' if
the individual is an employee, the employer (including a self-employed
person), or is associated with the employer in a business relationship.
3. Required use of the IRS aggregation rules for determining
employer size under the working aged and disability provisions.
4. Modified the MSP provisions for individuals who are eligible for
or entitled to Medicare on the basis of ESRD and also entitled on the
basis of age or disability.
5. Clarified that GHPs and LGHPs of governmental entities are
subject to the MSP provisions (although governmental entities are
exempt from the excise tax applicable to employers that participate in
nonconforming plans.)
F. The Social Security Act Amendments of 1994 (SSAA '94)
The SSAA '94 made the following miscellaneous and technical
corrections:
1. Effective as if included in the enactment of OBRA '93--
A. Clarified that plans must offer the same benefits under the same
conditions to the age 65 or older spouse of any employee; that is,
without regard to the employee's age. (With regard to spouses, the
wording of OBRA '93 could have been misconstrued as applying the
working aged provision only to age 65 or older spouses of employees age
65 or older.) (Section 151(c)(1).)
B. Clarified that GHPs and LGHPs of governmental entities have
always been subject to the MSP provisions. (OBRA '93 could have been
misconstrued as providing that plans of governmental entities are
subject to the MSP provisions only as of August 10, 1993, the date of
enactment of OBRA '93, whereas governmental entities have always been
subject to the MSP provisions, with the exception of the excise tax
applicable to employers that participate in the nonconforming plans.)
(Sections 151(c) (9) and (10).)
2. Effective as if included in the enactment of OBRA '90--
A. Clarified that employers and other entities are prohibited from
offering to an individual entitled to Medicare any financial or other
incentive not to enroll in, or to terminate enrollment in, a GHP that
would be primary to Medicare, irrespective of whether the incentive is
also offered to all other individuals who are eligible for coverage
under the plan. (Section 157(b)(7). Refer to section VIII-K of this
preamble.)
B. Clarified the extent to which section 1128A of the Act applies
to the civil money penalty of section 1862(b)(3)(C) of the Act.
(Section 157(b)(7). Refer to section VIII-K of this preamble.)
3. Effective as if included in the enactment of OBRA '89--Clarified
that under section 1862(b)(1)(C) plans may pay benefits secondary to
Medicare after the 18-month period during which the plan is prohibited
from taking into account ESRD-based eligibility or entitlement but may
not otherwise differentiate in benefits provided vis-a-vis other plan
enrollees. The OBRA '89 language could have been misconstrued as
permitting plans to discriminate against enrollees who had ESRD after
the 18-month coordination period. That is, OBRA '89 broadly stated that
plans were not prohibited from ``taking into account'' ESRD-based
eligibility or entitlement after the 18-month coordination period; the
SSAA '94 corrected that language to narrowly state that plans are not
prohibited from paying benefits secondary to Medicare after the 18-
month coordination period. (Section 151(c)(5). Refer to section VIII-D
of this preamble.)
The SSAA '94 also added express authority to assess interest if a
conditional Medicare primary payment is not refunded within 60 days. As
authorized under common law, and in accordance with HHS regulations,
consistent with the Federal Claims Collection Act (31 U.S.C. 3711),
HCFA may charge interest on amounts that any responsible party does not
refund timely. Section 151(b)(3) amended section 1862(b)(2)(B)(i) of
the Act to make explicit that the Secretary may charge interest when
timely reimbursement is not made. This self-implementing statutory
clarification is effective for items and services furnished on or after
the date of enactment, October 31, 1994. The rate of interest provided
in section 1862(b)(2)(B)(i) of the Act is the same as in sections
1815(d) and 1833(j), which is reflected in regulations at 42 CFR
405.376(d). We will include detailed policies regarding the statutory
provision in a future regulation. (Refer to section VIII-L of this
preamble.)
III. Study by the Comptroller General
OBRA '86 required the Comptroller General to conduct a study to
determine the impact of the MSP provisions for the disabled on the
access that disabled individuals and members of their families have to
employment and health insurance. In the April 10, 1991, report entitled
Medicare: Millions in Disabled Beneficiary Expenditures Shifted to
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Employers, the Comptroller General concluded that ``The OBRA '86
secondary payer provision has met its objective of shifting
considerable Medicare expenditures to LGHPs apparently without
significant adverse effect'' on the access of disabled beneficiaries
and their families to employment and health services. The report
further stated: ``In addition to suffering little adverse effect from
the provision, the disabled are safeguarded by regulations proposed by
HCFA. These rules discourage employers from taking many of the actions
they were considering that would discriminate against disabled
beneficiaries and their families in regard to health insurance.'' The
report also recommended that HCFA change its policy to remove the
``indicators'' that, prior to the changes made by OBRA '93, were used
to determine whether an individual who is not actively working for an
employer is considered an employee. That recommendation echoes those
made by many of the commenters in their responses to the proposed rules
published on March 8, 1990 at 55 FR 8491.
IV. Related Statutes
A. Internal Revenue Code (IRC)
1. OBRA '86 also amended the IRC to--
Define ``nonconforming group health plan'' as a large
group health plan that at any time during a calendar year takes into
account that an active individual is eligible for or is receiving
Medicare benefits based on entitlement to Social Security disability
benefits; and
Impose, on any employer or employee organization (other
than a governmental entity) that contributes to a nonconforming LGHP, a
tax equal to 25 percent of the expenses the employer or employee
organization incurred during the calendar year for each LGHP to which
the employer or employee organization contributes.
2. OBRA '89 further amended the IRC to--
Substitute the following definition of ``nonconforming
group health plan'' to replace the OBRA '86 definition.
``For purposes of this section, the term nonconforming group
health plan means a group health plan or large group health plan
that at any time during a calendar year does not comply with the
requirements of subparagraphs (A) and (C) or subparagraph (B),
respectively, of section 1862(b)(1) of the Social Security Act.''
Provide that the tax imposed by OBRA '86 on employers and
employee organizations that contribute to or sponsor LGHPs that do not
comply with the MSP provisions for the disabled also applies with
respect to such sponsors or contributors that do not comply with the
MSP provisions for the working aged or the MSP provisions for ESRD
beneficiaries.
OBRA '93 expanded the definition of ``nonconforming group
health plan'' to include a group health plan or LGHP that fails to
refund to HCFA conditional primary Medicare payments.
Under these IRC amendments, HCFA reports to the IRS GHPs and LGHPs
that do not comply with any of the following:
The prohibition against taking into account Medicare
entitlement when Medicare is the secondary payer for aged, ESRD, or
disabled beneficiaries.
The requirement that employees and spouses age 65 or older
be given equal benefits under the same conditions as those under 65.
The prohibition against differentiating, in the services
covered and payments made, between persons having ESRD and other
individuals covered by the plan.
The requirement that GHPs and LGHPs refund conditional
primary Medicare payments.
B. Americans With Disabilities Act
The Americans with Disabilities Act of 1990, Pub. L. 101-336 (42
U.S.C. 12101 et seq.) is related to the aims of this rule with respect
to the MSP provision for the disabled. Section 102 of that statute
prohibits discrimination against the physically or mentally disabled in
private places of employment. This Act is administered by the Equal
Employment Opportunity Commission.
C. COBRA Continuation Coverage Amendments
Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985 (Pub. L. 99-272, commonly referred to as COBRA) amended the
following statutes:
Section 4980B of the IRC (26 U.S.C. 4980B).
Part 6 of title I, subtitle B of the Employee Retirement
Income Security Act (ERISA) (29 U.S.C. 1161-1168).
Title XXII of the Public Health Service Act (42 U.S.C.
300bb-1 et seq.)
Under the COBRA amendments, certain GHPs must offer employees (and
their dependents), who would otherwise lose coverage under the plan as
a result of any of five specified ``qualifying events'', an opportunity
to elect continuation of the coverage they had immediately before the
qualifying event. ``Qualifying events'' include termination of
employment (other than for gross misconduct) and reduction in hours of
work. Continuation coverage must extend at least from the date of the
qualifying event to the earliest of a list of terminating events.
Terminating events include entitlement to Medicare and expiration of
the maximum period of continued coverage specified for a particular
qualifying event. For termination of employment or reduction of hours
of work, the maximum coverage period is 18 months. This is extended to
29 months in the case of a qualified beneficiary who is determined to
have been disabled at the time of the qualifying event. For other
qualifying events the maximum is generally 36 months.
GHP COBRA continuation coverage is generally exempt from the
Medicare secondary payer provisions. Part VII-E of this preamble
contains a detailed discussion of the MSP provisions vis-a-vis the
COBRA provisions.
V. Provisions of the Proposed Rule
The March 8, 1990, notice of proposed rulemaking proposed to add a
new subpart G to part 411--Exclusions from Medicare and Limitations on
Medicare Payment.
At that time, subpart B of part 411 set forth general rules and
definitions applicable to all of the Medicare secondary payer
provisions. Included were rules on recovery and waiver of recovery,
Medicare secondary payments, and the effect of third-party payments on
benefit utilization and deductibles. Accordingly, proposed subpart G
included only those rules that apply exclusively to LGHPs or that
differed to some extent from similar rules applicable to other third
party payers.
A. In Section 411.82, Definitions, we proposed to--
1. Interpret ``typical business day'' as 50 percent or more of the
employer's regular business days during the previous calendar year; and
2. Define ``employee'' as an individual who is actively working or
whose relationship to an employer shows that he or she has employee
status within the ordinary understanding of the term ``employee.'' In
Sec. 411.83, Determination of Employee Status, we proposed that
employee status be established if the individual met any of the
following conditions:
Received from an employer payments that are subject to
taxes under the Federal Insurance Contributions Act (FICA) or would be
subject to such taxes except for the fact that the payment is exempt
from those taxes under the IRC.
[[Page 45348]]
Was termed an employee under a Federal or State law or in
accordance with a court decision.
Was designated as an employee in the employer's records;
that is, had not had his or her employee status terminated. We proposed
that termination from payroll, in and of itself, not be considered
termination from employee status.
We also gave examples of other commonly accepted indicators of
employment status, examples that we developed in consultation with
other government agencies, including the Department of Labor and the
IRS.
We considered adding the following indicators to the list that
appeared in proposed Sec. 411.83(b):
Accrues years of service credits for pension purposes
(that is, the individual's age-based pension rights continue to
increase); and
May become vested under the employer's retirement plan,
even though he or she was not vested at the time the disability was
established.
We specifically requested comments on whether to include these two
indicators in the final rule.
B. In Section 411.88, Basis for Medicare primary payments, we
proposed that failure to furnish information necessary for HCFA to
determine whether an LGHP was primary to Medicare could lead to denial
of payment of Medicare primary benefits.
The proposed rule also--
1. Defined three key terms as follows:
``Disabled active individual'', as an active individual
who has been determined to be ``under a disability'' under section 223
of the Act, as evidenced by issuance of an SSA notification to that
effect, and who is not, and could not upon filing an application
become, entitled to Medicare on the basis of ESRD.
``Nonconforming LGHP'', as an LGHP that, at any time
during a calendar year, discriminates against a disabled active
individual who is eligible for, or receives, Medicare benefits on the
basis of disability.
``Family member'', as any person whose relationship to the
active individual is the basis for coverage under an LGHP; for example,
the relationship of a divorced or common law spouse or that of an
adopted, foster, natural or step-child, parent, or sibling.
2. Specified that a disabled active individual could accept or
reject the LGHP coverage offered by the employer, and that, if the
individual refuses the LGHP, the employer may not offer a plan that
pays benefits secondary to Medicare.
3. Provided examples of LGHP actions that would be considered
discriminatory.
4. Indicated the kinds of information that HCFA might require to
document an LGHP's compliance with the nondiscrimination rule.
5. Specified that HCFA would refer to the IRS any LGHP that it
finds to be a nonconforming LGHP.
6. Specified that the IRS imposes, on employers or employee
organizations that contribute to a nonconforming LGHP, the tax provided
for under section 5000 of the IRC of 1986.
VI. Reorganization of the Rules and Conforming Changes
Because of the statutory changes discussed above, we needed a new
subpart for the provisions that now apply generally to all GHP MSP
situations. We also needed to make room for incorporating in logical
order any additional regulations that may be required by future
amendments to the Act. Accordingly, this final rule--
Redesignates subparts E and F as F and G, respectively;
Establishes a new subpart E for the general provisions,
including appeals provisions that were not in the NPRM; and
Designates the special provisions for the disabled under a
new subpart H.
New subpart E includes--
Most of the definitions that were previously scattered
among several subparts (Sec. 411.101).
A statement of the basic prohibitions under the ESRD,
working aged, and disability MSP provisions (Sec. 411.102).
A statement of the prohibition against employers offering
incentives to encourage Medicare beneficiaries not to enroll in or to
terminate enrollment in a GHP that would be primary to Medicare
(Sec. 411.103).
An explanation of the terms ``current employment status''
and ``coverage by virtue of current employment status'' (Sec. 411.104).
The method for determining employer size (Sec. 411.106).
Examples of actions that constitute ``taking into
account'' Medicare entitlement and of permissible actions
(Sec. 411.108).
Basis for determination of nonconformance (Sec. 411.110).
Documentation of conformance (Sec. 411.112).
Determination of nonconformance and notice of that
determination (Secs. 411.114 and 411.115).
Appeals procedures (Secs. 411.120 through 411.126).
Referral to IRS (Sec. 411.130).
The following table shows how the section numbers in the final rule
differ from the numbers in the NPRM. The revised designations reflect
the reorganization of the text required by the addition of rules that
now apply to all three groups of beneficiaries (aged, disabled, and
ESRD) and the new rules on appeals procedures.
----------------------------------------------------------------------------------------------------------------
Proposed rule designation Final rule designation
Heading as shown in final rule section section
----------------------------------------------------------------------------------------------------------------
Basis and scope........................................ 411.80........................ 411.100
Definitions............................................ 411.82........................ 411.101; 411.201
Current employment status.............................. 411.83........................ 411.104
Medicare benefits secondary to LGHP benefits........... 411.85........................ 411.204
Basis for Medicare primary payments and limits on 411.88........................ 411.206
secondary payments.
Recovery of conditional Medicare payments.............. 411.92........................ 411.24
Basic prohibitions and requirements.................... 411.94(b)..................... 411.102
Taking into account entitlement to Medicare............ 411.94(d)..................... 411.108
Basis for determination of nonconformance.............. 411.94(c)..................... 411.110
Documentation of conformance........................... 411.94(e)&(f)................. 411.112
Determination of nonconformance........................ 411.94(d)..................... 411.114
Referral to the Internal Revenue Service (IRS)......... 411.94(g)..................... 411.130
----------------------------------------------------------------------------------------------------------------
Note: The headings are those used in the final rule. In
referring to the proposed rule in the preamble discussion, we use
the column 1 designations. In referring to the final rule, we use
the column 2 designations.
[[Page 45349]]
The statutory changes, the reorganization of the regulations text,
and other changes that have occurred since these rules were published
required the following conforming changes in subpart B:
1. Revise Sec. 411.20 (Basis and scope) to--
Transfer to the new subpart E the statutory basis for the
rules that apply to GHP coverage.
Reflect this change in the ``Scope'' paragraph of the
section.
Expand references (in this section and in Sec. 411.21) to
include the new subpart H.
2. Revise Sec. 411.24 (Amount of recovery) as follows:
a. In paragraph (c), to--
Reflect the fact that OBRA '89 extended to all MSP
situations the right (previously limited to MSP for the disabled) to
recover double the amount of damages if it is necessary for HCFA to
take legal action in order to recover;
Remove the parenthetical reference to the double damages
provision and expressly state the circumstances under which HCFA can
recover double damages; and
Specify that responsible parties include both third party
payers and individuals or entities that have received third party
payments that must be refunded.
b. In paragraph (e), to make clear that third parties against which
HCFA may take action are those that are ``required to make'', as well
as those who are ``responsible for making'', primary payments. This
change is necessary to conform to a language change made by OBRA '89.
c. To add a new paragraph (m) (Interest charges) to specify the
explicit authority provided by the Social Security Act Amendments of
1994, which is in addition to the long-standing authority provided by
common law and by HHS regulations (45 CFR 30.13) that are consistent
with the Federal Claims Collection Act (31 U.S.C. 3711), for HCFA to
charge interest on amounts that any responsible party does not refund
timely.
3. Amend Sec. 411.33 (Amount of Medicare secondary payment) to make
clear that Medicare payment may now be based on fee schedules (as well
as reasonable charge) and to remove paragraphs (c) and (d), which set
forth a special formula for computing Medicare secondary payments under
the MSP provisions for ESRD. (OBRA '89 provided a single formula for
all MSP situations.)
VII. Comments on the NPRM of March 8, 1990 and Responses to Those
Comments
We received 36 timely letters of comment from employers, insurance
companies, law firms, actuarial firms, individuals, associations (two
business and one medical), and beneficiary rights organizations.
Following is a discussion of those comments and our responses to them.
Thirty-three of the comments dealt with the term ``active
individual,'' including the statutory definition of that term. Since
the term ``active individual'' was deleted from the law by OBRA '93,
effective August 10, 1993, we are not responding to those comments,
except for the comment in A. below.
A. Definitions--(Section 411.82)
The law prior to OBRA '93 defined the term ``active individual'' as
``an employee (as may be defined in regulations), the employer, self-
employed individual (such as the employer), an individual associated
with the employer in a business relationship, or a member of the family
of any of such persons.'' We received a comment about one of the
categories under this definition; that is, ``individual associated with
the employer in a business relationship.''
Comment: The commenter suggested that the rules define the term
``individual associated with the employer in a business relationship.''
The commenter went on to propose that individuals who are receiving
health care coverage through an employer are associated with the
employer in a business relationship regardless of whether they are
employees. The commenter suggested that such a definition would be
appropriate because employers provide such benefits as part of a quid
pro quo for services.
Response: We do not agree that a definition of the term
``individual associated with the employer in a business relationship''
is necessary in the regulations. Any individual who qualifies for LGHP
coverage because of a business relationship with the employer (for
example, suppliers and contractors who do business with the employer)
is included within the term. We also do not agree with the commenter's
proposed definition of the term. Defining the term in the manner
proposed would bring many former employees, including retirees, who
receive benefits from an employer within the scope of the MSP provision
for the disabled. The Congress clearly did not intend the MSP provision
for the disabled to extend to retirees and other former employees,
since the term ``former employee under age 65'' was specifically
deleted from an early draft of legislation on MSP for the disabled
legislation (Senate Report 99-348 July 31, 1986).
Comment: One commenter objected to the inclusion of ``divorced
spouse'' in the definition of ``family member''. The commenter
contended that the inclusion of that term exceeded HCFA's authority,
since a ``former family member'' is not a ``family member''.
Response: We disagree. As used in new subpart H, ``family member''
means anyone who has LGHP coverage on the basis of another person's
enrollment. Spouses, children, parents, and siblings are merely
examples. Any individual to whom a LGHP grants coverage because of such
an enrollment is a family member for purposes of subpart H.
Comment: One commenter asked why the term ``spouse who was married
to an active individual'' was not included in the definition of
``family member.'' The commenter also requested clarification of the
status of an ex-spouse who is eligible to receive or is receiving
health care benefits under the continuation of coverage provisions of
COBRA and what is the LGHP's obligation to such an individual.
Response: We have revised the definition of ``family member'' to
include the term ``spouse''. The matter of an ex-spouse is discussed in
response to the previous comment. The rules that apply to disabled
individuals who have LGHP benefits as a result of the COBRA
continuation provisions are discussed under Part VII-E of this
preamble.
Comment: One commenter objected to inclusion of an ``employee-pay-
all'' plan in the definition of LGHP in the proposed rule
(Sec. 411.82(4)(ii)) on the basis that these plans are generally
``franchise arrangements'' in which the contracts are individually
underwritten and the employer merely performs the ministerial role of
collecting the premiums but not enrolling the participants.
Response: We have considered the status of ``employee-pay-all
plans'' in the past and addressed the issue in the preamble to the
Medicare regulations published on October 11, 1985 (50 FR 41503), and
in Sec. 411.70(d) of the Medicare regulations published on October 11,
1989 (54 FR 41745). Those regulations apply to the working aged and
make clear that ``employee-pay-all'' plans may satisfy the statutory
definition of GHP. We apply the same principles in the MSP rules for
the disabled. (See 52 FR 35966, September 24, 1987.)
[[Page 45350]]
Medicare is secondary to ``employee-pay-all'' plans if they meet
the statutory definition of LGHP; that is, plans that are under the
auspices of, or contributed to, by an employer or employee organization
and that cover at least one employer of 100 or more employees.
Comment: One commenter requested that the term ``Medicare payment''
in Sec. 411.92, Recovery, should be defined to eliminate confusion with
another term, ``gross amount payable'', used in Medicare contractor
manuals.
Response: The term, ``gross amount payable'', is defined at 42 CFR
411.33(e)(1) as ``* * * the amount payable without considering the
effect of the Medicare deductible and coinsurance or the payment by the
third party payer * * *.''
We have revised proposed Sec. 411.92 (now Sec. 411.24) to specify
that HCFA recovers the Medicare primary payment amount.
Comment: A commenter objected to the definition of LGHP, because it
casts too broad a net and captures many employers who have fewer than
100 employees, but who are required to provide primary coverage to
disabled active individuals because these ``small employers''
participate in a plan that has at least one employer of 100 or more
employees.
Response: The term ``large group health plan'' is defined in the
IRC of 1986 as ``a plan of, or contributed to by, an employer or
employee organization (including a self-insured plan) to provide health
care (directly or otherwise) to the employees, former employees, the
employer, others associated or formerly associated with the employer in
a business relationship, or their families, that covers employees of at
least one employer that normally employed at least 100 employees on a
typical business day during the previous calendar year.'' HCFA has no
discretion to exempt from the Medicare secondary payer provision for
the disabled employees of employers of fewer than 100 employees if they
belong to a multi-employer plan that meets the above definition. In the
MSP statute, as revised by OBRA '89, the Congress could have provided
an exception for small employers that participate in multi-employer or
multiple employer plans, similar to the exception that is specifically
provided in the statute with respect to the working aged. Since the
Congress chose to provide the exception only under the working aged
provision, we conclude that it was not the Congress' intent to allow a
similar exception under the MSP provision for the disabled.
B. Indicators of Employee Status
We received 30 comments on Sec. 411.83, which proposed to
incorporate into the regulations the policy that some disabled
individuals who are not working are considered to be employees for MSP
purposes if certain indicators of ``employee status'' are present. Only
one commenter supported the policy without reservation. The other
commenters expressed either opposition to the policy as a whole or to
one or more of the indicators used to establish whether a non-working
disabled person has employee status. We are not addressing these
comments because we have deleted the policy on indicators of employee
status, to reflect changes made by OBRA '93, effective August 10, 1993.
In the legislative history that preceded enactment of OBRA '93
(Conference Report of the House Committee on the Budget to accompany
H.R. 2264, H.R. Rep. No. 213, 103rd Cong. 1st Sess. (1993)), the
Congress provided explicit direction on how it expected us to construe
the new law. It made clear on page 805 that the term ``current
employment status with an employer'' should be implemented ``consistent
with the provision that applies to aged beneficiaries (working aged)''
and, on page 806, that ``the definition of active employee for disabled
beneficiaries (should) conform with the definition for working aged
beneficiaries.''
C. Prohibition of Discrimination
Several commenters addressed the provisions of proposed
Sec. 411.94, which dealt with the prohibition of discrimination by
LGHPs against disabled active individuals on the basis of Medicare
entitlement.
Comment: One commenter requested that HCFA discard all of the rules
on nondiscrimination on the grounds that ``they represent an
unjustified and unsupported foray into the role of the Congress.'' In
the event that HCFA decides to promulgate the proposed
nondiscrimination rules, the commenter requested that HCFA conduct
public hearings to gauge the effect of the rules.
Response: Under the law in effect before August 10, 1993, section
1862(b)(1)(B)(i) of the Act prohibited LGHPs from ``taking into
account'' that an active individual is entitled to Medicare on the
basis of disability. As amended by OBRA '93, the law prohibits LGHPs
from taking into account the entitlement to Medicare on the basis of
disability of an individual who has LGHP coverage by virtue of the
individual's own or a family member's current employment status. This
provision simultaneously makes Medicare benefits secondary to LGHP
coverage for these individuals and prohibits LGHPs from taking into
account that these individuals are entitled to Medicare on the basis of
disability. For example, without this prohibition LGHPs could deny,
reduce, or restrict coverage or access to coverage for these
individuals and thereby shift to the Medicare program the primary
responsibility for payment of their medical expenses. This would defeat
the purpose of the MSP provision for the disabled.
The public has had ample opportunity to comment on the proposed
nondiscrimination rules during the public comment period that followed
the publication of the notice of proposed rulemaking. We received a
number of substantive comments regarding the proposed nondiscrimination
rules, and we discuss these comments below. We therefore do not believe
that there is need for public hearings on the final rules.
Comment: Several commenters objected that the criteria for
prohibited discrimination in proposed Sec. 411.94(d) exceed the
statutory requirement. These commenters contended that while the
statute prohibits LGHPs only from denying coverage to disabled active
individuals on account of their Medicare entitlement, the criteria in
proposed Sec. 411.94(d) appear to prohibit LGHPs from terminating
disabled individuals on grounds other than Medicare entitlement. One
commenter expressed concern that an employer would be unable to
terminate a disabled active individual's coverage for any reason after
the individual becomes entitled to Medicare. Another commenter
recommended that the final rule specify that prohibited discrimination
occurs only when a plan treats disabled active individuals differently
from ``similarly situated'' individuals not entitled to Medicare.
Response: The statute, as amended by OBRA '86, prohibited an LGHP
from taking into account that an active individual is entitled to
Medicare on the basis of disability. As amended by OBRA '93, the
statute prohibits LGHPs from taking into account entitlement to
Medicare on the basis of disability of an individual who has LGHP
coverage by virtue of the individual's own or a family member's current
employment status. The basic rule is that, with regard to individuals
entitled to Medicare on the basis of disability who (1) have current
employment status or (2) are family members of individuals with current
employment status, LGHPs must offer the same enrollment opportunities
[[Page 45351]]
and the same coverage under the same conditions as they offer to
similarly situated individuals. In the case of employees, all other
employees enrolled or seeking to enroll in the plan are considered to
be similarly situated. In the case of each of the other categories of
individuals who have current employment status (such as business
associates or family members), all other persons in those categories
are considered to be similarly situated.
An LGHP may refuse to provide coverage, terminate enrollment, or
limit coverage (for individuals who are entitled to Medicare on the
basis of disability) only on grounds that apply to all similarly
situated individuals enrolled, or seeking to enroll, in the plan,
including individuals not entitled to Medicare. Plan provisions that
have the effect of denying, restricting, or terminating benefits for
disabled beneficiaries who have LGHP coverage by virtue of current
employment status, but not for similarly situated individuals, are
prohibited. An LGHP may make benefit distinctions among various
categories of similarly situated individuals, distinctions based, for
example, on length of time employed, employment status, or marital
status but not on disability. If the LGHP makes such distinctions, it
may also make them among disabled beneficiaries who have LGHP coverage
by virtue of current employment status.
Comment: Several commenters objected that proposed Sec. 411.94(d)
appeared to force employers to decide, before an employee who has
become disabled is determined to be ``under a disability'' within the
meaning of section 223 of the Social Security Act, whether to cease
covering the individual under the LGHP or to continue providing
benefits for as long as benefits are provided to active employees. One
commenter contended that the Congress clearly did not intend to impose
such a choice upon employers. Another commenter noted that the proposed
policy would only encourage employers to cut off health benefits to
injured workers before the individual receives a determination of
disability from the Social Security Administration.
Response: In the NPRM, we proposed to compare what an LGHP offers
or provides at or after the point of disability determination with what
it offered or provided at or after the point of Medicare entitlement.
The idea was to prevent employers from avoiding the obligation of
providing primary benefits by terminating coverage during the 29 month
waiting period between the onset of disability and Medicare
entitlement.
We agree that the proposed policy could be interpreted as
encouraging employers to terminate coverage of injured or sick workers
prior to the determination of disability. In addition, the proposed
policy could lead to an anomalous situation in which an LGHP's changing
or termination of a disabled individual's coverage would be permissible
or impermissible, depending on the variable timing of disability
determinations.
We are, therefore, not including the proposed policy in the final
regulation. The prohibition against taking Medicare entitlement into
account does not compel LGHPs to make an irrevocable choice, before the
determination of disability, between discontinuing coverage of disabled
individuals and providing coverage indefinitely. Rather, as discussed
earlier in this preamble, LGHPs are prohibited from treating
individuals entitled to Medicare on the basis of disability and covered
by virtue of their own or a family member's current employment status
differently from similarly situated individuals (that is, individuals
of the same category such as spouse, child, or employee) who are
enrolled or seeking to enroll in the plan. No change, restriction, or
termination of coverage may be imposed because individuals are entitled
to Medicare on the basis of disability. Also prohibited are changes,
restrictions, or terminations of coverage that have the effect of
treating those individuals differently from similarly situated
individuals.
Comment: Several commenters raised questions about the application
of the nondiscrimination rules to various employer health plan
provisions.
Proposed Sec. 411.94(d) appears to prohibit employers from
terminating or amending their health benefits plans, if doing so would
have the effect of reducing or terminating benefits provided under an
LGHP to a disabled active individual.
Proposed Sec. 411.94(d)(6) (denial or termination of
coverage of a disabled active individual on the basis of disability)
would prevent employers from offering employees who become disabled,
coverage under an LGHP for a limited period of time and then
terminating the coverage once the designated period has expired. This
could be interpreted to prohibit employers who voluntarily provide
extended coverage to disabled individuals from terminating the extended
coverage once the individual becomes entitled to Medicare benefits.
The rules prohibiting discrimination should not prevent an
employer from changing the status of a disabled individual in a way
that disqualifies the individual for coverage under the employer's
LGHP. For example, an employer should not be considered to be
discriminating if he removes a disabled individual from the roster of
employees, thus disqualifying the individual from coverage under the
employer's plan.
Proposed Sec. 411.94(d)(3) appears to provide that an LGHP
is discriminatory if it has a policy of offering ``disabling condition-
only'' coverage to employees who become disabled, since such coverage
is less comprehensive than coverage provided to other individuals under
the plan.
Response: An employer is not prohibited from adopting any of the
provisions described above, provided that those provisions (1) apply to
all enrollees and potential enrollees, without regard to whether they
are entitled to Medicare on the basis of disability; and (2) do not
have the effect of treating disabled Medicare beneficiaries who have
LGHP coverage by virtue of current employment status differently from
similarly situated individuals.
Thus, a ``disabling condition-only'' provision is prohibited if it
has the effect of restricting coverage for individuals entitled to
Medicare on the basis of disability but not for similarly situated
individuals who are not so entitled. The regulation does not allow an
employer to terminate the LGHP coverage of those disabled individuals
unless the employer also terminates coverage for similarly situated
individuals not entitled to Medicare on the basis of disability.
If an employer voluntarily provides LGHP coverage to an individual
who is entitled to Medicare on the basis of disability and who has LGHP
coverage by virtue of current employment status, that coverage is
primary to Medicare.
We do not believe that the statute prohibits employers from
terminating a benefit that they voluntarily provide to those disabled
individuals above the coverage given to similarly situated individuals
who are not entitled to Medicare on the basis of disability (see item
b. of comment).
Section 411.108 of this final rule makes clear that an LGHP may
not, for example, deny or terminate coverage, offer less comprehensive
coverage, or charge increased premiums for individuals entitled to
Medicare on the basis of disability and covered by virtue of current
employment status unless it takes the same actions for similarly
situated individuals who are not so entitled. However, as stated above,
employers are not required to continue indefinitely LGHP coverage that
they
[[Page 45352]]
have voluntarily provided to those disabled individuals.
Comment: One commenter objected that the nondiscrimination criteria
of proposed Sec. 411.94(d) failed to prohibit cost avoidance techniques
used by LGHPs and employers to reduce their exposure. One such tactic
is to ``churn'' insurance contracts in order to reimpose waiting
periods and pre-existing condition exclusions on ``high-exposure''
employees and their dependents. Another tactic is to pay ``high
exposure'' individuals an amount equivalent to the per capita premium
of the plan so that they can purchase health insurance on an individual
basis. The commenter recommended that the criteria in proposed
Sec. 411.94(d) specifically prohibit ``the payment of wages which are
to be dedicated toward the purchase of an individual contract for the
disabled active individual.''
Response: The Medicare law does not prohibit LGHPs from engaging in
cost-avoidance practices and from imposing cost-avoidance provisions
such as waiting periods and pre-existing condition exclusions, provided
that such practices and provisions apply equally to all enrollees and
potential enrollees and do not have the effect of treating individuals
entitled to Medicare on the basis of disability who have LGHP coverage
by virtue of current employment status differently from similarly
situated individuals. (However, other State or Federal laws should be
consulted for any effect they may have on this situation.)
Comment: One commenter asked for guidance about what constitutes
adequate notification to active individuals of the consequences of
rejecting LGHP coverage, as required under proposed Sec. 411.94(d)(8).
The commenter specifically suggested that the rules include a provision
that a statement in a Summary Plan Description satisfies this
requirement.
Response: Beneficiaries need to understand the consequences of
rejecting LGHP coverage; that is, that Medicare will be the primary
payer and the employer will not be permitted to pay secondary benefits
for Medicare-covered services. In recognition of this, we have
provided, in Sec. 411.108, that a plan would be taking into account
Medicare entitlement if it gave individuals information on their right
to accept or reject the employer plan but failed to inform them of the
consequences of rejection.
Comment: One commenter recommended that proposed Sec. 411.94
provide examples of ``taking into account.'' The commenter offered
several examples of ``taking into account'' for inclusion in the final
regulation.
Response: The criteria of proposed Sec. 411.94(d), clarified and
expanded on the basis of the commenter's suggestions, appear in the
final rule as examples of ``taking into account'' (Sec. 411.108).
Comment: One commenter recommended that the Sec. 411.94 criteria
for determining that an LGHP is discriminating explicitly apply to
employees' spouses and dependents, if the LGHP covers them. The
commenter also recommended that an LGHP be considered nonconforming if
it requires that an active individual receive health care benefits from
a prescribed provider, while other covered individuals are not mandated
to receive services from that provider.
Response: The criteria in proposed Sec. 411.94 and the final rules'
examples of ``taking into account'' clearly apply to employees' spouses
and dependents covered by an LGHP, since those persons are included
within the meaning of the term ``family member.'' Therefore, it is not
necessary to state explicitly in Sec. 411.110 that the criteria that
define a nonconforming GHP apply to LGHP coverage of employees' spouses
and dependents. An LGHP that required disabled beneficiaries covered by
virtue of current employment status, but not similarly situated
individuals, to receive services from a preferred provider would
clearly be considered nonconforming under the criteria in Sec. 411.110
of the final rule.
D. Referral to the Internal Revenue Service (Section 411.94(g))
Comment: One commenter expressed concern that proposed
Sec. 411.94(g), dealing with the reporting of nonconforming LGHPs to
the IRS, would not achieve the goal of ensuring nondiscriminatory
treatment of active individuals by LGHPs. The commenter recommended
that sanctions be incorporated into the rules to provide incentives for
LGHPs to meet the nondiscrimination requirements.
Response: HCFA reports nonconforming GHPs and LGHPs to the IRS
because the IRS administers section 5000 of the IRC, which imposes a
tax on employers and employee organizations that contribute to a
nonconforming GHP. This provision indicates the Congress' intent that
employers and employee organizations be ultimately held responsible for
the actions of their health plans. We believe that this tax provides an
incentive for employers and employee organizations to ensure that the
plans they create, participate in, or contribute to, comply with the
prohibition against taking into account Medicare entitlement. We expect
that employers and employee organizations will pursue available
remedies under contract or insurance law, if necessary, to assure that
their plans comply with the requirements of the statute and thus avoid
imposition of the tax. The tax and the requirement to report
nonconforming LGHPs were imposed for the disabled by OBRA '86 and
extended to all GHP situations by OBRA '89.
Comment: One commenter recommended that insurers of LGHPs be
reported to the IRS to provide an incentive for them to conform to the
requirements of a nondiscriminatory LGHP.
Response: See our response to the previous comment. Under section
5000 of the IRC, the tax is imposed only on employers and employee
organizations that contribute to nonconforming GHPs. This should
discourage employers and employee organizations from doing business
with an underwriting insurer that does not conform to the prohibition
against taking into account the Medicare entitlement of individuals who
are entitled on the basis of age, ESRD, or disability. It should
encourage employers and employee organizations to enforce their
insurance contracts to ensure that both the promise and the performance
under the contract conform to the MSP requirements. Insurers thus
should have an incentive to conform with MSP requirements.
Additional incentives for compliance are provided by the following
statutory provisions:
The law provides for a private right of legal action to
collect double damages from any entity (including insurers, and
employers) that fails to provide primary coverage when required by law.
The Federal Government has the right to take legal action
to collect double damages from those entities if they fail to provide
primary benefits.
E. Relation to COBRA Continuation Coverage Provisions
Under the COBRA continuation coverage provisions, an individual (or
the individual's dependents) who would otherwise lose coverage under an
employer's GHP because of specified circumstances that include
termination and reduction in hours of employment must be offered
continued coverage at his or her own expense for a designated period of
time. Under a 1989 amendment to the COBRA continuation of coverage
provisions, the period of continued coverage is up to 29 months for
individuals who were disabled (as determined under the Social Security
[[Page 45353]]
Act) at the time of their termination of employment or reduction of
hours of work. The COBRA provisions permit termination of continuation
coverage at the point of Medicare entitlement, which, for a disabled
person, begins 29 months after the onset of disability if the
individual has been entitled to monthly social security disability
benefits for 24 months. Several commenters raised the following issues:
The effect of the proposed regulations on coverage
provided to active individuals under the COBRA continuation coverage
provisions was not clear.
Section 411.94(d)(6) of the proposed regulations--
+ Appears to have the effect of extending COBRA's limited period of
continuation coverage to an unlimited period while an active individual
receives Social Security benefits. (That result would be directly
contrary to the intent of the Congress).
+ Appears to prohibit LGHPs from terminating continuation coverage
of active individuals who become entitled to Medicare benefits, even
though COBRA specifically permits this.
+ Could be interpreted to forbid employers who voluntarily provide
extended coverage beyond the maximum period mandated by COBRA from
terminating that coverage once the individual becomes entitled to
Medicare.
HCFA should include in the final regulation a specific
rule to the effect that the operation of an LGHP in any manner
permitted under the COBRA continuation coverage provision will not be
considered discriminatory.
The proposed regulations create a ``very basic conflict''
with COBRA. COBRA mandates coverage for individuals who were disabled
at the time of a COBRA ``qualifying event'' for 29 months (which is
generally the length of the waiting period for Medicare entitlement
based on receipt of Social Security disability benefits) but permits a
plan to terminate coverage at the end of the 29 months, or at the point
of Medicare entitlement. The proposed regulations, however, do not
require coverage during the Medicare waiting period but appear to
mandate coverage thereafter.
Proposed Sec. 411.94(d)(7) appears to prohibit charging
active individuals who are also COBRA beneficiaries the higher premiums
(up to 150 percent of the applicable premium) permitted under COBRA.
Response: When the proposed regulation was published, it was HCFA's
position that there was no real conflict between the MSP for the
disabled provision and the COBRA continuation of coverage provision,
since COBRA permits but does not mandate termination of coverage at the
time of Medicare entitlement. The statutes amended by COBRA state that
continuation coverage may be terminated upon entitlement to Medicare.
The Medicare statute stated that the LGHP may not take into account
entitlement to Medicare based on disability. It was HCFA's policy that
the MSP for the disabled provision prohibited termination of COBRA
continuation coverage of an active individual entitled to Medicare on
the basis of disability if the termination was based on that
entitlement. Since some people who have COBRA continuation coverage
because they have stopped working would be considered to be employees
under the indicators of employee status, the result would be that the
proposed regulation would have prohibited what the COBRA law permitted.
Blue Cross and Blue Shield of Texas filed a lawsuit challenging
HCFA's same policy with respect to COBRA continuation coverage in ESRD
MSP cases (Blue Cross and Blue Shield of Texas v. Sullivan, case No. 3-
91 2760-H (N.D. Tex.)). On April 7, 1992, the District Court for the
Northern District of Texas ruled against the government. The government
appealed that ruling to the Fifth Circuit Court of Appeals. On July 13,
1993, the appeals court held that the MSP statute ``does not require
health plans to provide continuation coverage to individuals who become
entitled to Medicare benefits because they have ESRD.'' Blue Cross and
Blue Shield of Texas v. Shalala, 995 F.2d 70, 74 (5th Cir. 1993). The
court held that the ESRD MSP provision did not modify, nor did it
preclude, acts specifically authorized under COBRA.
The issue raised in the Texas case with respect to ESRD was never
raised with respect to the MSP provisions for the aged and the
disabled. Under previous law the issue might have been raised with
respect to the disabled because the MSP provision for them did not
require (as it did for the aged) that GHP coverage be based on
``current employment''.
Under the OBRA '93 amendments, which were effective one month after
the appeals court decision, there is no issue for either group
because--
The MSP provisions for both the aged and the disabled
apply only when GHP coverage is ``by virtue of current employment
status''; and
COBRA continuation coverage is based on termination of
employment or on reduction of work hours to the point where the
individual no longer qualifies for coverage based on employment.
This final rule provides (in Sec. 411.161(a)(3)) that a GHP may
terminate COBRA continuation coverage if the individual becomes
entitled to Medicare on the basis of ESRD, notwithstanding the general
prohibition against taking into account eligibility for, or entitlement
to, Medicare benefits. Section 411.162(a)(3) makes clear that Medicare
is secondary when the plan is required by COBRA to keep the
continuation coverage in effect after Medicare entitlement or does so
voluntarily. (Changes to the regulation are discussed under part VIII-I
of this preamble.)
F. Miscellaneous Comments
Comment: One commenter asked that the final rules address the
situation in which the LGHP paid primary benefits for services provided
to an active individual and later learned that the LGHP was not primary
payer for the individual because, for example, the individual entitled
to Medicare on the basis of disability also has end-stage-renal
disease. In that case, the law provides that Medicare is primary payer.
The commenter believed that the final rule should provide for HCFA to
reimburse the LGHP directly in the same manner that an LGHP must pay
HCFA when it failed to make correct primary payments.
Response: Under current law, HCFA has an explicit right to recover
conditional primary payments from an LGHP. There is no equivalent
statutory provision for an LGHP seeking to recover its mistaken
payments. HCFA and its intermediaries and carriers do not have
authority to pay insurers and other third party payers. Sections
1815(c) and 1842(b)(6) of the Act, respectively, generally preclude
payment for provider services to anyone but the provider and preclude
payment for services of physicians and other suppliers to anyone other
than the supplier or the beneficiary. The limited exceptions allowed do
not include payment to LGHPs. Section 3491.15 of the Medicare
Intermediary Manual and section 3336.16 of the Medicare Carrier Manual
contain instructions for dealing with situations in which third party
payers have made mistaken primary payments. The person or entity that
receives HCFA's primary Medicare payment would make the refund to the
LGHP. If no Medicare claim was originally filed, the provider, supplier
or beneficiary may file one, within the time limits specified in
Secs. 424.44 and 424.45 of the regulations. We note that the situation
cited by the commenter
[[Page 45354]]
(Medicare is primary payer because the individual is entitled on the
basis of disability and also has ESRD) has a different outcome under
OBRA '93. For such a dually entitled beneficiary, Medicare is now
ordinarily secondary for the first 18 months of ESRD-based eligibility
or entitlement.
Comment: Two commenters expressed concern that the proposed rules
give HCFA the right to recover twice the amount payable by the LGHP as
primary payer if HCFA has made conditional primary payments and the
LGHP is later determined to have been the primary payer. One of the
commenters stated that the proposed rule did not take into account the
possibility that the disabled employee may have never filed a claim
with the LGHP and only with Medicare. The commenter suggested that
LGHP's be exempt from the double damages provision, since the LGHP
would be unaware of the existence of a claim for primary benefits.
Medicare should instruct beneficiaries to file claims first with the
LGHP.
Response: The MSP statute provides no authority for us to exempt
LGHPs from the double damages provision. However, we have the right to
recover double damages only if the LGHP refuses to make appropriate
reimbursement. Before instituting legal action to recover our
conditional payments, we make every attempt to inform the LGHP of its
obligations under the law and of the consequences of failure to comply.
We also provide ample time for the LGHP to reimburse the Medicare
payments.
We routinely remind beneficiaries and providers and suppliers to
file claims first with other insurance and then with Medicare. Medicare
intermediaries and carriers deny payment on claims when they have
reason to believe that there is another payer responsible for primary
payment and instruct the claimant to seek payment from that other
source before filing claims under Medicare. Since claims are often
filed by the provider or physician or other supplier, we also remind
them of their responsibility to determine whether their claims should
be filed with entities other than HCFA. In addition, we encourage GHPs
and other insurers who are obligated to pay primary to Medicare to
inform their Medicare-eligible participants that claims should first be
submitted to the responsible primary plan.
Comment: One commenter suggested that the employer or other entity
not be subject to double damages or to referral to the IRS as a
nonconforming GHP if--
The facts and circumstances show that any noncompliance
with the law or regulations was unintentional; or
The employer relied in good faith on third party
administrators, insurers, or other entities to administer or provide
health benefits.
Another commenter recommended that, until the final regulations
become effective, an employer or plan administrator be protected if he
or she acted on the basis of a reasonable good faith interpretation of
the statute.
Response: There is no provision in the law to extend protection to
employers or plan administrators, who act on the basis of a reasonable
good faith (albeit erroneous) interpretation of the law, if the GHP or
LGHP is found to be a nonconforming GHP. The individuals involved could
have sought advice directly from the Medicare contractors or from HCFA.
We have in place a comprehensive program to inform the public of its
obligations under the MSP provisions. Since the passage of the MSP
statute, we have made available to interested parties a variety of
informational materials to assist them in complying with this
provision. The Medicare intermediaries and carriers and the HCFA
regional offices are available to answer questions about the
responsibility of employers, insurers, and other entities subject to
the MSP provisions.
Comment: One commenter noted that Medicare currently makes
conditional payments when parties fail to respond to information
requests on disabled beneficiaries. The commenter supports continuation
of this policy.
Response: The basic rule, as set forth in Secs. 411.165, 411.175,
and 411.206, is that if a provider, supplier, beneficiary, or other
party fails to provide information necessary to process a claim, HCFA
may deny the claim. However, in order not to disadvantage a beneficiary
who may not be responsible for providing the needed information, HCFA
considers the specific circumstances of each failure to provide
information. Depending on those circumstances, HCFA has in the past
made, and may continue to make, conditional payments in some cases for
which information is not submitted in response to HCFA's request.
Comment: One commenter recommended that provision for an expedited
compliance procedure be added to proposed Secs. 411.92(a) and 411.94(g)
in order to reduce the administrative burden and expense of
enforcement. The commenter specifically mentioned the expedited
compliance procedure established in HCFA Program Memorandum AB-88-9
(August 1988). That procedure was designed for LGHPs that wish to
expedite payments to reimburse HCFA for Medicare conditional primary
payments.
Response: The expedited compliance procedure established by Program
Memorandum AB-88-9 was based specifically on the concept of ``active
individual''. Since OBRA '93 abolished this concept, the procedure is
obsolete. LGHPs that identify mistaken Medicare primary payments should
send their repayments to the Medicare contractor that made the mistaken
payment.
Comment: One commenter expressed concern that if an active
individual is covered as a dependent by his spouse's LGHP, and his
employer is not large enough for the employer's GHP to be considered an
LGHP and the employer does not participate in a multi-employer LGHP,
then the order of payment based on the MSP regulations would be the
spouse's LGHP as primary payer, Medicare second, and the health plan of
the disabled person's employer last. The commenter pointed out that the
proposed rule is not in accordance with the normal ``coordination of
benefits'' rules. Under those rules, if the disabled person is still
actively employed, his own health plan would be primary and the
spouse's health plan would be secondary. The commenter recommended that
the MSP rules determine only whether Medicare, or the plan covering the
disabled person as an employee, should be primary. In any event, the
plan covering the individual as a dependent should be secondary to
Medicare. Employers should not be penalized for extending health
coverage to dependents.
Response: Section 1862(b) of the Act, and the regulations, alter
State and private coordination of benefit rules so that GHPs and LGHPs
are made primary to Medicare under certain circumstances, regardless of
whether the individual is employed or is a dependent. When the health
plan of a family member is primary payer under the MSP law, that payer
must pay before Medicare even if the coordination of benefits rules
established under State law or private contract call for a different
order of payment. The Group Coordination of Benefits Model Regulation
adopted by the National Association of Insurance Commissioners (NAIC)
specifically recognizes that the usual order of payment for dependent
and nondependent coverage is reversed under the circumstances described
by the commenter. This means that, in the situation described above,
the spouse's LGHP pays first if the spouse has coverage by virtue of
current
[[Page 45355]]
employment status, Medicare second, and the disabled person's employer
plan last. However, when the disabled person's health plan coordinates
payment with the spouse's LGHP in the way described in the comment,
that is, where the disabled person's plan pays primary to the spouse's
LGHP, the combined payments of both plans constitute the primary
payment to which Medicare payment is secondary. (Further information
regarding the model regulation may be obtained by writing to the NAIC,
120 W. 12th St., Kansas City, MO 64105; phone (816) 842-3600.)
Comment: One commenter suggested that HCFA should apply the
nondiscrimination rules on a prospective basis after the date they are
adopted in final form and that HCFA should refrain from initiating any
nondiscrimination provision compliance requests until after adoption of
the final rules. Another commenter recommended that the final
regulations be made effective with plan years that begin at least six
months after the date of publication.
Response: HCFA does not have the authority to delay enforcement of
the nondiscrimination provisions. Section 9319 of OBRA '86, which
included the nondiscrimination provision, was effective for items and
services furnished on or after January 1, 1987. As indicated in the
general notice we published on September 24, 1987 (52 FR 35966), this
provision was self-implementing. It did not provide any waiver under
which we could delay the effective date.
We will enforce these provisions in accordance with our statutory
responsibility. If it is alleged that an LGHP took into account
Medicare entitlement on the basis of disability before the effective
date of this final rule, we will base our decision on the statute. This
final rule will be effective 30 days after publication in accordance
with the usual rulemaking procedures.
Comment: One commenter suggested that provisions be added to the
final regulation to ensure a formal review and appeals procedure before
HCFA takes any action adverse to an employer.
Response: Sections 411.120 through 411.126 of the new subpart E set
forth appeals procedures with respect to any GHP that HCFA has
determined to be nonconforming. These sections specify the parties and
explain the various steps in the appeals process and the rights of the
plans and of the employers and employee organizations that contribute
to the plans, including the following:
How to request a hearing (Sec. 411.120).
Provision for on-the-record review or oral hearing (at the
request of a party or on the hearing officer's own motion) and the
procedures that the hearing officer follows at an oral hearing with
respect to notice, prehearing discovery, evidence, subpoenas, etc., and
record of the hearing (Sec. 411.121).
Timing, content, distribution, and effect of the hearing
officer's decision (Sec. 411.122).
Administrator's review of the hearing decision, including
basis for decision to review, basis for remand, and finality of the
review or remand decision (Sec. 411.124).
Reopening of determinations or decisions (Sec. 411.126).
These procedures are very similar to those in effect for other
determinations that adversely affect providers or suppliers of Medicare
services. We believe that, by making them available before referral to
the IRS, we ensure due process.
Comment: One commenter encouraged HCFA to adopt a policy of
applying ``Alternative Dispute Resolution (ADR)'' techniques in MSP
cases before proceeding with litigation or referrals to the IRS. The
commenter contended that such techniques could lead to fairer and more
effective implementation of the MSP law than protracted and expensive
litigation.
Response: The commenter did not identify specifically the
techniques of dispute resolution to which he was referring. As
indicated above, this final rule provides appeal rights if HCFA
determines that a GHP is a nonconforming GHP.
VIII. Final Rule Provisions that Implement or Reflect Statutory
Amendments
A. Medicare Secondary to GHPs
Redesignated Secs. 411.162 and 411.172 and new Sec. 411.204 specify
that Medicare benefits are secondary to GHP benefits under specific
circumstances that vary depending on the basis for Medicare eligibility
or entitlement.
1. Under Sec. 411.172, aged individuals and spouses (entitled on
the basis of age), the MSP provision applies--
For plans of employers of at least 20 employees; and
For individuals covered ``by virtue of current employment
status''.
2. Under Sec. 411.204, individuals entitled on the basis of
disability, the MSP provision applies--
For plans of employers of at least 100 employees; and
For individuals covered ``by virtue of current employment
status''.
3. Under Sec. 411.162, individuals eligible or entitled on the
basis of ESRD, the MSP provision applies to employer plans, including
retirement plans, regardless of employer size and the individual's
employment status.
We note that OBRA '93 changed the coordination of benefits rules
for ESRD beneficiaries who are also entitled to Medicare on the basis
of age or disability. This change is discussed under section VIII-G of
this preamble.
B. Current Employment Status
New Sec. 411.104 explains the term and sets forth general and
special rules.
Under the general rule, an individual is considered to have current
employment status if he or she (1) is actively working or (2) is not
actively working but meets all of the following conditions:
Retains employment rights in the industry;
Has not had his or her employment terminated by the
employer, if the employer provides the coverage, or has not had his or
her membership in the employee organization terminated, if the employee
organization provides the coverage.
Is not receiving disability payments from an employer for
more than 6 months;
Is not receiving social security disability benefits; and
Has employment-based GHP coverage that is not COBRA
continuation coverage.
Examples of individuals who fall in the second group are teachers,
employees who are on furlough or sick leave, and active union members
between jobs. Also, self-employed persons are considered to have
current employment status only if their annual earnings related to the
employer that offers the GHP coverage equal at least the specified
statutory amount in section 211(b)(2) of the Act (currently that amount
is $400).
Members of a religious order who have taken a vow of poverty are
not considered to have current employment status if the services they
perform as members of the order are considered employment solely
because the order has elected (under section 3121(r) of the IRC) to
have those services considered as employment for social security
purposes.1
\1\ This exemption, enacted by OBRA '89 and effective October
1, 1989, was extended by OBRA '93 to cover services furnished before
October 1, 1989. Section 3121(r) of the IRC limits election to
orders that require their members to take a vow of poverty.
---------------------------------------------------------------------------
Members of religious orders who have not taken a vow of poverty are
considered to have current employment status with the religious order
if (1) the
[[Page 45356]]
religious order pays FICA taxes on behalf of that member, or (2) the
individual is receiving from the religious order cash remuneration for
services rendered.
Members of the clergy are considered to have current employment
status with a church or other religious organization if the individual
is receiving from the church or other religious organization cash
remuneration for services rendered.
Receipt of delayed compensation for work performed in
previous time periods does not confer ``current employment status'' on
an individual who is not working.
The new Sec. 411.104 is consistent with Congressional direction
regarding the manner in which coverage ``by virtue of current
employment status'' is to be construed.
The first time Congress used the term ``current employment'' with
respect to working aged individuals was in section 2338 of the Deficit
Reduction Act of 1984 (DEFRA), Pub. L. 98-369. DEFRA established in the
Act a new section 1837(i), which provided for a special Part B
enrollment period for individuals ``enrolled in a group health plan * *
* by reason of the individual's (or the individual's spouse's) current
employment * * * *'' Section 1837(i) expressly referred to individuals
who meet ``the conditions described in clauses (i) and (iii) of section
1862(b)(3)(A);'' that is, working aged individuals and their spouses.
In the legislative report that accompanied the DEFRA, the Congress
explained what it meant by the term ``by reason of current employment:
The use of the phrase ``by reason of current employment'' was
meant to distinguish those persons who are receiving health benefits
based on employment and are actually employed from those persons who
are receiving benefits based on employment, but who are now retired.
(Supplemental Report of the Committee on Ways and Means, U.S. House
of Representatives on H.R. 4170, Rept. 98-432 Part 2, March 5, 1984,
1662, emphasis added.)
This explanation encompassed individuals for whom Medicare was
secondary payer at that time under section 1862(b)(3)(A); that is,
individuals who were ``employed at the time (the) item or service is
furnished.''
By distinguishing in the DEFRA legislative report between ``persons
who are receiving health benefits based on employment'' and individuals
who are ``retired,'' the Congress demonstrated that it is not concerned
about fine distinctions regarding ``when'' employment-based coverage
was earned; that is, whether, for instance, present coverage of an
employed individual is based on a certain number of hours worked, or a
certain level of commissions earned, during the preceding months,
quarters, or years of employment. Rather, the Congress is only
interested in the broad distinction between plan coverage of
individuals who have coverage based on ``current employment'' and plan
coverage of those who are retired.
In OBRA '89, the Congress conformed the language of the secondary
payer provision to that of the special Part B enrollment provision for
working aged individuals. The phrase ``by reason of the current
employment of the individual (or the individual's spouse)'' replaced
the phrase ``employed at the time (the) item or service is furnished.''
By eliminating the provision that the individual actually be working
when the services were furnished, the Congress made clear its intent
that Medicare be secondary payer to employment based coverage in all
circumstances except retirement.
The OBRA '93 amendments that substituted ``by virtue of current
employment status'' for ``by reason of current employment,'' and
defined the term ``current employment status,'' reinforced
Congressional intent in this regard. OBRA '93 (section 13561(e)(1)(H))
added a new section 1862(b)(1)(E)(ii) to the Medicare law, which
expressly defines the term ``current employment status'':
(ii) CURRENT EMPLOYMENT STATUS DEFINED.--An individual has
``current employment status'' with an employer if the individual is an
employee, is the employer, or is associated with the employer in a
business relationship.
The inclusion of individuals ``associated with the employer in a
business relationship'' (that is, individuals whose relationship to the
employer is based on business rather than on work) demonstrates that
the Congress intended that the term ``current employment status'' be
given the broadest possible application. It encompasses not only
individuals who are actively working but also individuals under
contract with the employer whether or not they actually perform
services for the employer, such as attorneys on retainer, tradesmen and
insurance agents. Also, an independent insurance agent who is licensed
to sell insurance for a particular insurance company has ``current
employment status'' with that company by virtue of his ``business
relationship.'' If an agent age 65 or older has plan coverage through
that company based on this ``current employment status'', the coverage
is primary to Medicare (unless specific statutory exceptions apply,
such as the 20 employee rule) without regard to the extent to which the
agent is presently selling policies on behalf of the company. Only when
the agent retires (that is, no longer is authorized to sell policies on
behalf of the company) would the ``business relationship'' with the
employer be severed. However, Medicare would be the primary payer, if
the company imposes earnings thresholds or other requirements for
qualifying for health benefits that the agent does not meet based on
this ``current employment status''.
(As provided by OBRA '93, the ``current employment status''
criterion also applies to the disability MSP provision.)
C. Prohibition against Taking into Account Medicare Entitlement
This prohibition was imposed by OBRA '86 for the disabled, and
extended to ESRD and the aged by OBRA '89. On January 11, 1991, we
published a Federal Register notice explaining the import of these
self-executing provisions.
1. New Sec. 411.102 and redesignated Sec. 411.161 specify that a
GHP may not take into account an individual's ESRD-based Medicare
eligibility or entitlement during the 18-month coordination of benefits
period, which coincides with the first 18 months of eligibility or
entitlement.
2. New Sec. 411.102 and redesignated Sec. 411.170 specify that a
GHP of an employer of 20 or more employees may not take into account
age-based Medicare entitlement of an individual or spouse age 65 or
older who is covered (or seeks to be covered) under the plan by virtue
of the individual's current employment status with an employer.
3. New Secs. 411.102 and 411.200 specify that an LGHP (a plan that
includes at least one employer of 100 or more employees) may not take
into account the disability-based Medicare entitlement of an individual
who is covered (or seeks to be covered) under the plan by virtue of the
individual's or a family member's current employment status with an
employer.
D. Nondifferentiation in Providing Benefits
New Sec. 411.102 and redesignated Sec. 411.161 specify that, in
providing benefits to individuals with ESRD and those who do not have
ESRD, a GHP may not differentiate on the basis of the existence of
ESRD, or the need for dialysis, or in any other manner. These sections
further provide that plans may
[[Page 45357]]
pay benefits secondary to Medicare after the 18-month coordination of
benefits period.
E. Equal Benefits
New Sec. 411.102 and redesignated Sec. 411.170 specify that,
regardless of whether they are entitled to Medicare, individuals and
spouses age 65 or older, who are covered under the plan by virtue of
current employment status, are entitled to the same plan benefits,
under the same conditions, as individuals and spouses under 65. (These
limitations, imposed by OBRA '89, were also described in the January
1991 notice referred to above. OBRA '93 imposed the added requirement
of plan coverage based on current employment status.)
F. Definitions
In Sec. 411.101--
1. The definition of ``group health plan'' is revised to reflect
that plans of governmental employers are included within the meaning of
the term. This has always been so but was clarified by OBRA '93. The
definition also expressly clarifies that union plans and employee
health and welfare fund plans are included as employee organization
plans.
2. The definition of ``employer'' now includes self-employed
persons.
3. The definition of ``employee'' eliminates the ``indicator''
concept and references the special rules for the self-employed, for
members of religious orders, and for delayed compensation, already
noted under section VIII-B.
G. Coordination of Benefits: Dual Eligibility/Entitlement
New Sec. 411.163 implements the OBRA '93 amendments (sections
13561(c)(2) and (c)(3)) that established special rules for the 18-month
coordination of benefits period. These apply to beneficiaries who are
eligible for, or entitled to Medicare on the basis of ESRD, and are
also entitled on the basis of age or disability.
We consider the OBRA '93 changes to be self-implementing and
therefore effective August 10, 1993, the date of enactment. However, a
lawsuit was filed in United States District Court for the District of
Columbia on May 5, 1995 (National Medical Care, Inc. v. Shalala, Civil
Action No. 95-0860), challenging implementation of one aspect of these
provisions with respect to group health plan retirement coverage.
In what we describe below as the ``fourth rule,'' under OBRA '93,
Medicare remains the primary payer if a group health plan was already
secondary payer for an individual entitled on the basis of age or
disability when the individual becomes eligible on the basis of end-
stage renal disease. Section 411.163(b)(4) reflects this rule. At first
HCFA believed, in error, that OBRA '93 required a private plan to
become primary payer under these circumstances, but HCFA later
corrected its construction of the statute, and issued guidance on April
24, 1995, stating that Medicare remains the primary payer.
On June 6, 1995, the court issued a preliminary injunction order
precluding HCFA from implementing its corrected construction for items
and services furnished between August 10, 1993 and April 24, 1995,
pending the court's decision on the merits. HCFA will modify the rules,
if required, based on the final ruling by the court.
Before enactment of OBRA '93, the ESRD MSP provision applied only
when the individual was entitled solely on the basis of ESRD. For
example, if an individual, who retired at age 58 and was covered under
a retirement plan through the former employer, developed ESRD at age
60, the retirement plan was primary to Medicare during the first 18
months of ESRD-based eligibility or entitlement. However, if the
individual attained age 65 before the end of the 18-month period, the
ESRD MSP provision ceased to apply, and Medicare became the primary
payer because, upon attaining age 65, the individual became entitled
also on the basis of age and no longer met the ``solely'' requirement.
Similarly, the working aged and disability MSP provisions did not
apply to anyone who was eligible for or entitled to Medicare based on
ESRD. Therefore, those provisions ceased to apply, and Medicare became
the primary payer when an aged or disabled individual became eligible
for Medicare based on ESRD. The OBRA '93 amendments rectified these
situations. Section 13561(c)(2) provides that the ESRD MSP provision
applies in lieu of the working aged and disability MSP provisions when
an aged or disabled individual subject to those provisions becomes
eligible for Medicare based on ESRD. Thus, the plan must continue to
pay primary to Medicare throughout an 18-month ESRD MSP coordination
period. Section 13561(c)(3), which removed the word ``solely'' from the
ESRD MSP provision, provides that the ESRD MSP provision remains in
effect for the full 18-month period, even if an individual becomes
entitled to Medicare based on age or disability during that period. The
specific rules, which are set forth in Sec. 411.163 and referenced in
Sec. 411.172(g) (for the aged) and Sec. 411.204(b) (for the disabled),
are summarized below.
The first rule in Sec. 411.163, governed exclusively by previous
law, is that, if the 18-month period ended before August 1993, Medicare
is primary payer from the first month of dual eligibility/entitlement.
The second rule, for situations governed partly by previous law and
partly by the OBRA '93 amendment, is that if the first month of ESRD-
based eligibility or entitlement and the first month of dual
eligibility/entitlement both fall after February 1992 and before August
10, 1993, Medicare is--
Primary payer from the first month of dual eligibility/
entitlement through August 9, 1993;
Secondary payer from August 10, 1993 through the 18th
month of ESRD-based eligibility or entitlement; and
Primary payer again after the 18th month of ESRD-based
eligibility or entitlement.
The third rule, for situations governed exclusively by the OBRA '93
amendment, is that, if the first month of ESRD-based eligibility or
entitlement is after February 1992, and the first month of dual
eligibility or entitlement is after August 9, 1993, Medicare is--
Secondary during the first 18 months of ESRD-based
eligibility or entitlement; and
Primary after the 18th month of ESRD-based eligibility or
entitlement.
The fourth rule pertains to dual entitlement situations in which--
Age-based or disability-based entitlement precedes ESRD-
based eligibility; and
The GHP was not precluded from taking into account
Medicare entitlement based on age or disability (because the individual
was not covered under the plan ``by virtue of current employment
status'' or because the employer had fewer than 20 or 100 employees, in
the case of the aged and disabled, respectively) and was paying
benefits secondary to Medicare.
Medicare eligibility based on ESRD occurs automatically as of the
fourth calendar month of dialysis, and earlier under certain
circumstances, without regard to whether an individual is already
entitled to Medicare based on age or disability.
Under prior law, Medicare benefits were secondary to GHP benefits
for a period of 18 months for an individual eligible for or entitled to
Medicare based ``solely'' on ESRD. If that individual also became
entitled to Medicare based on age or disability during the 18-month
coordination period, Medicare became the primary payer because the ESRD
MSP provision did not apply; that is, plans were permitted to take into
account ESRD-based entitlement that
[[Page 45358]]
was not the sole basis of Medicare entitlement.
Also under prior law, Medicare benefits were secondary to plan
benefits for certain individuals entitled to Medicare based on age or
disability when their plan coverage was based on active employment
status, including the employment of a spouse in the case of aged
beneficiaries, or the employment of a family member in the case of
disabled beneficiaries. If the aged or disabled beneficiary
subsequently became eligible for Medicare based on ESRD, Medicare
became the primary payer because the working aged and disability MSP
provisions stipulated that they did not apply to anyone with ESRD-based
eligibility.
The OBRA '93 amendments rectify these situations. However, they do
not affect benefit coordination where Medicare is primary and a GHP
secondary for reasons wholly unrelated to ESRD. The ESRD MSP provision,
as amended by OBRA '93, expressly prohibits plans during the first 18
months of ESRD-based eligibility or entitlement from taking into
account Medicare eligibility or entitlement ``under section 226A'' of
the Social Security Act; that is, on the basis of ESRD. Thus, the plain
language of the statute permits a plan to pay secondary to Medicare for
reasons unrelated to ESRD.
In other words, if prior to the occurrence of ESRD-based
eligibility a plan was legitimately secondary to Medicare, the plan
clearly was not taking into account ESRD-based eligibility, because a
plan could not have taken into account eligibility that did not exist.
Merely continuing such authorized action, when an individual becomes
eligible based on ESRD, obviously does not take into account the later
eligibility or violate the MSP provisions. In sum, the subsequent
occurrence of ESRD-based eligibility, in and of itself, does not
establish that a GHP is taking that eligibility or entitlement into
account.
In contrast, a plan that is paying primary benefits takes into
account ESRD-based eligibility if it attempts to shift that primary
payment responsibility to Medicare when an individual becomes eligible
for Medicare based on ESRD, or when an individual is always eligible
for Medicare based on ESRD but has not completed of the 18-month
coordination period. (It goes without saying that cessation of plan
benefits for reasons that would apply to any plan enrollee, such as an
individual's failure to pay plan premiums, would not be construed as
taking into account ESRD-based eligibility.)
In arriving at this synergistic construction of the whole Medicare
statute we were mindful that nothing in the legislative history of OBRA
'93 indicates that Congress intended the dual entitlement amendments to
reverse the order of payment where plans already are permissibly paying
benefits secondary to Medicare at the time ESRD-based eligibility or
entitlement occurs. In addition, the court in Blue Cross Blue Shield of
Texas v. Shalala, 995 F.2d 70 (5th Cir. 1993), construed the ESRD MSP
provision as not modifying other provisions of law that authorize plan
actions. HCFA's construction is consistent with this court decision.
Read together, the OBRA '93 changes require GHPs that are already
paying primary to Medicare under the working aged or disability MSP
provisions to continue to pay primary to Medicare for a full 18-month
coordination period when an aged or disabled individual also becomes
eligible for or entitled to Medicare based on ESRD. Similarly, when an
individual's ESRD-based eligibility or entitlement is not preceded by
age or disability-based entitlement, the plan, including a retirement
plan, is obligated to pay primary to Medicare throughout the entire 18-
month coordination period.
With respect to retirement plans, the applicability of the ESRD MSP
provision has never been limited to plan coverage based on active
employment. The OBRA '93 amendments made no change in this regard.
Accordingly, when a retirement plan is a primary payer prior to the
occurrence of ESRD-based eligibility, the plan must pay primary to
Medicare during an 18-month coordination period, even if the individual
also becomes entitled to Medicare based on age or disability during
that period.
However, as we have stated, when a plan has already permissibly
taken into account age or disability-based Medicare entitlement, and
does nothing more, the plan is not taking into account subsequently
acquired ESRD-based eligibility. Therefore, Medicare remains primary
for an aged or disabled individual who subsequently acquired ESRD-based
eligibility when Medicare is paying primary because the individual is
not covered by virtue of current employment status, or an MSP exemption
applies, such as when an employer employs fewer than 20 or 100
employees (in the case of the aged and disabled, respectively).
Note: A suit was filed in United States District Court for the
District of Columbia on May 5, 1995 (National Medical Care, Inc. v.
Shalala, Civil Action No. 95-0860), challenging the application of
Sec. 411.63 with respect to group health plan retirement coverage.
Absent further action by Congress, the court will resolve the
matter. HCFA will publish a notice in the Federal Register regarding
the court's ruling, and will make changes to Sec. 411.63 if required
by the court.
New Sec. 411.163 replaces Sec. 411.62(e), Effect of changed basis
for Medicare entitlement, which was rendered obsolete by OBRA '93.
H. Basis for Primary Payments
New Sec. 411.206 specifies that with respect to the disabled,
Medicare is primary payer for services that are not covered under the
plan for the disabled or for similarly situated individuals or,
although covered under the plan, are not available to particular
disabled individuals because they have exhausted their benefits under
the plan. (Similar rules for ESRD and aged were already in effect.)
I. Interface With COBRA Continuation Coverage Provisions
As a result of the ``current employment status'' concept
established by OBRA '93 for the aged and the disabled and the court
rulings in the ESRD case discussed under parts VII-E and VIII-G of this
preamble--
1. New Sec. 411.161(a)(3) and redesignated Sec. 411.162(a)(3)
specify, respectively, that for ESRD beneficiaries--
A plan may terminate COBRA continuation coverage of an
enrollee who becomes entitled to Medicare if expressly permitted under
the COBRA provisions; and
Medicare benefits are secondary to COBRA continuation
benefits only when the plan--
+ Is required (under COBRA) to continue COBRA coverage after
Medicare entitlement (applicable to retirees who retired before the
employer effectively terminates regular plan coverage by filing for
bankruptcy); or
+ Continues coverage voluntarily even though not required to do so
under the COBRA provisions.
2. Redesignated Sec. 411.175 and new Sec. 411.206 specify that HCFA
makes Medicare primary payments for services furnished to aged
individuals and disabled individuals whose benefits are terminated
under the COBRA provisions that permit termination upon Medicare
entitlement and when benefits are maintained under the COBRA
provisions, notwithstanding an individual's Medicare entitlement. (An
individual who is eligible for COBRA
[[Page 45359]]
continuation coverage because his working hours have been reduced below
the minimum necessary to qualify for regular plan coverage has
``current employment status''. However, Medicare is the primary payer
because the plan coverage is not ``by virtue of'' that status.)
J. Aggregation Rules
New Sec. 411.106 sets forth the rules established by OBRA '93 for
determining the number and size of employers, as required by the ``at
least 20 employees'' provision for the aged and the ``at least 100
employees'' provision for the disabled.
These rules provide for--
Treating as a single employer all employers that are so
treated under section 53 of the IRC of 1986;
Treating as employed by a single employer all employees of
an affiliated service group, as defined in section 414(m) of the IRC;
and
Treating leased employees as employees of the person for
whom they perform services, to the extent provided in section 414(n) of
the IRC.
K. Prohibitions Against Incentives
New Sec. 411.103 reflects the provisions of OBRA' 90 (section
4203(g)) and the changes made by section 157(b)(7) (C) and (D) of the
SSAA '94 with respect to prohibition of incentives and imposition of
civil money penalties for violation. Amended section 1862(b)(3)(C)
provides that it is unlawful for an employer or other entity such as an
insurer to offer Medicare beneficiaries financial or other benefits as
incentives not to enroll in, or to terminate enrollment in, a GHP that
is, or would be, primary to Medicare, even if the payments or benefits
are offered to all other individuals who are eligible for coverage
under the plan. This prohibition precludes offering to Medicare
beneficiaries an alternative to the employer's primary plan (for
example, coverage of prescription drugs) unless the beneficiary has
primary coverage other than Medicare. An example would be primary plan
coverage through his own or a spouse's employer. An entity that
violates this prohibition is subject to a civil money penalty of up to
$5000 for each violation. Certain provisions of section 1128A of the
Act would apply to the civil money penalty.
L. Assessment of Interest
New paragraph (m) of Sec. 411.24 reflects the additional authority
to assess interest provided by SSA '94 and states the rules applicable
to interest charges. HCFA has long been authorized under common law and
Departmental regulations (45 CFR 30.13), consistent with the Federal
Claims Collection Act (31 U.S.C. 3711), to charge interest on amounts
that any responsible party does not timely refund to HCFA. The SSAA '94
(section 151(b)(3) revised the Medicare law to state specifically that
HCFA may charge interest if the responsible party does not refund HCFA
within 60 days of the date HCFA receives notice or other information
that reimbursement is owed to HCFA. Amended section 1862(b)(2)(B)(i)
provides that we may charge interest beginning with the date of that
notice or other information. The rate of interest provided in section
1862(b)(2)(B)(i) is the same as in sections 1815(d) and (1833), which
is reflected in regulations at 42 CFR 405.376(d). This is also the rate
that is charged when HCFA exercises its common law authority.
M. Plan Secondary Payments After 18-Month Coordination of Benefits
Period
Section 411.102(a)(2) reflects the change made by 151(c)(5) of the
Social Security Act Amendments of 1994 to limit what a plan may do
after the end of the coordination period.
IX. Technical Amendments
A. Nomenclature Changes
The following are in addition to those described in section VI of
this preamble:
1. To conform to the statutory language, ``employer plan'' and
``employer group health plan'' are changed to ``group health plan''.
2. To conform to the new rules that apply in dual eligibility/
entitlement situations, the word ``solely'' is removed from the phrase
``entitled solely on the basis of ESRD''.
B. Date and Duration Changes
Various dates cited in paragraphs (c) and (d) of redesignated
Sec. 411.162 have been revised to conform to the OBRA '93 amendment
that changed to October 1, 1998, the date on which the 18-month ESRD
coordination of benefits period is scheduled to revert to a 12-month
period.
X. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite prior public comment on proposed rules. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed and the terms and substance
of the proposed rule or a description of the subjects and issues
involved. This procedure can be waived, however, if an agency finds
good cause that a notice-and-public comment procedure is impractible,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
The proposed rule of March 1990 dealt only with the provisions of
OBRA '86 which pertain to the disabled and to LGHPs that cover them.
Under that rule, certain nonworking disabled persons would have been
considered employees for Medicare secondary payer purposes. Most of the
public comments we received (discussed in section VII of this preamble)
objected to that policy.
Under the OBRA '93 amendments discussed in Section IV of this
preamble, the MSP provision for the disabled applies only to persons
whose health care coverage is based on their own current employment
status or the current employment status of a family member. Since the
law and the accompanying legislative history made clear that an
individual must have ``current employment status'' for purposes of the
MSP provisions, the proposed policy is not included in the final rule.
This final rule also implements the MSP provisions of OBRA '89. The
OBRA '89 amendments (discussed under section II-C)--
Prohibited GHPs from taking into account Medicare
entitlement of aged Medicare beneficiaries and the eligibility or
entitlement of beneficiaries with ESRD. (Previously, the prohibition
against taking into account Medicare entitlement applied only to
disabled individuals.)
Required GHPs of employers of 20 or more employees to
provide to employees and spouses age 65 or over the same benefits under
the same conditions as they provide to employees and spouses under age
65;
Prohibited GHPs from differentiating, in the benefits they
provide, between individuals with ESRD and other individuals covered
under the plan;
Exempted from the MSP provisions services which members of
a religious order who have taken a vow of poverty perform as members of
the order; and
Extended to all MSP situations the Federal Government's
rights to take legal action and recover double damages from any entity
that is required or responsible to pay primary benefits.
These OBRA '89 amendments were self-implementing and as such were
reflected in a notice published on January 11, 1991 (at 56 FR 1200-
1202). The notice explained the new requirements and stated that they
could be put into effect without issuing regulations because the
statutory amendments and the Congressional
[[Page 45360]]
intent were clear. Most of the changes were applicable to services
furnished on or after December 20, 1989 and are, thus, already in
effect.
This final rule includes appeals procedures that were not in the
March 1990 proposal for appealing determinations of nonconformance.
These provisions, which have been added as a result of comments on the
proposed rule and apply to all three MSP situations, include the
following:
The rules under which HCFA determines that a plan is not
in conformance.
The appeals procedures for plans found to be
nonconforming.
Referral to the IRS.
Rules for recovery of conditional or mistaken payments.
Although notice and comment on the portions of this rule that
reflect the self-implementing statutory changes are being waived, we
will consider timely comments from anyone who believes that in issuing
these regulations we have gone beyond what the statute requires or
permits. We also welcome comments on the appeals procedures.
Since the public has already had opportunity to comment on the OBRA
'86 amendments, the OBRA '89 amendments were self-executing and went
into effect several years ago, and the OBRA '90 and the OBRA '93
amendments and the Social Security Act Amendments of 1994 addressed in
these regulations are self-implementing and clear on their face as to
Congressional intent, we find that notice and opportunity for comment
(except as provided in the preceding paragraph) are unnecessary and
that there is good cause to waive notice of proposed rulemaking.
XI. Public Comments
Although this is a final rule, we will consider comments that we
receive by the date and time specified in the DATES section of this
preamble. Because of the large number of letters of comment that we
generally receive, we cannot respond to them individually. However, if
we revise these rules as a result of comments, we will discuss all
timely comments in the preamble to the revised rules.
XII. Paperwork Reduction Act
Sections 411.112 and 411.115 of this rule contain information
collection requirements that are subject to review by the Office of
Management and Budget under the Paperwork Reduction Act of 1980. Under
Sec. 411.112, HCFA may require a GHP to demonstrate that it has
complied with the MSP provisions and to submit documentation showing
that it has not taken into account that any of its enrollees is
entitled to Medicare on the basis of age or disability or eligible or
entitled on the basis of ESRD. The estimated burden is 10 hours per
response. Under Sec. 411.115, a plan that has been determined to be
nonconforming is required to provide to HCFA the names and addresses of
all employers and employee organizations that contributed to the plan
during the year for which it was nonconforming. Since this merely
requires copies of existing data, the time required is considered
negligible.
XIII. Regulatory Impact Statement
A. Executive Order 12866
These changes are already in place, and became effective on the
statutory dates indicated in the preamble of this rule. The
discretionary portions of this regulation will not affect these changes
by more than a few million dollars at the margin. Therefore, while the
statutory changes will have economic effects in excess of $100 million,
this final rule with comment period is not an economically significant
rule under E.O. 12866. In order for the public to understand the
magnitude of the statutory changes we have prepared the following
voluntary analysis of the effects of these changes on program costs.
1. Current Employment Status
Section 13561(e) of OBRA '93 deletes the concept of ``active
individual'' and applies the MSP disability provision only to
individuals who are covered under a large group health plan by reason
of their current employment status or that of a family member.
Since disabled persons generally are not working (and therefore do
not have current employment status), fewer individuals will be subject
to the MSP provisions and Medicare will be primary payer for more
disabled beneficiaries. We estimate that the Medicare program will have
the following costs as a result of this change.
Medicare Program Costs Resulting From No Longer Treating Certain
Disabled Persons As Employees
[In million of dollars]
Fiscal year:
1995.............................................................. 3
1996.............................................................. 3
1997.............................................................. 2
1998.............................................................. 1
1999.............................................................. 0
2. Dual Eligibility/Entitlement
Before enactment of OBRA '93, if an individual was eligible for or
entitled to Medicare on the basis of ESRD and was also entitled on the
basis of age or disability, Medicare was the primary payer. This is
because the ESRD MSP provision only applied with respect to individuals
who were eligible for or entitled to Medicare solely on the basis of
ESRD. However, section 13561(c) (2) and (3) of OBRA '93 provides that
there will be an 18-month coordination period during which employer
sponsored insurance plans must pay primary benefits even if an
individual who is eligible for or entitled to Medicare based on ESRD is
also entitled to Medicare on another basis.
We estimate that the following savings will accrue to the Medicare
program as a result of this change.
Medicare Program Savings Resulting From ESRD Dual Eligibility Provisions
[In millions of dollars]
Fiscal year:
1995......................................................... 71
1996......................................................... 83
1997......................................................... 97
1998......................................................... 114
1999......................................................... 98
3. IRS Aggregation Rules
The MSP provisions for the working aged apply to employers with 20
or more employees. The MSP provisions for the disabled apply to GHPs
contributed to by at least one employer with 100 or more employees.
Large employers have been able to avoid having the MSP rules apply to
them by simply organizing themselves into small firms. Section 13561(d)
of OBRA '93 requires the use of IRS aggregation rules to determine
employer size for MSP purposes. Employers treated as single employers
under section 52 (a) or (b) of the IRC of 1986 are treated as single
employers for purposes of MSP. All employees of the members of an
affiliated service group are treated as employed by a single employer.
Leased employees (as defined in section 414(m) of the IRC) are treated
as employees of the person for whom they perform services to the same
extent as they are treated under section 414(n) of the IRC.
We estimate that the following savings will accrue to the Medicare
program as a result of this change.
[[Page 45361]]
Medicare Program Savings Resulting From Use Of IRS Aggregation Rules To
Determine Firm Size
[in million of dollars]
Fiscal year:
1995......................................................... 80
1996......................................................... 100
1997......................................................... 115
1998......................................................... 125
1999......................................................... 80
In accordance with the provisions of Executive Order 12866, this
final rule with comment period was not reviewed by the Office of
Management and Budget.
B. Regulatory Flexibility Analysis
Consistent with the Regulatory Flexibility Act (RFA) and section
1102(b) of the Social Security Act, we prepare a regulatory flexibility
analysis for each rule, unless the Secretary certifies that the
particular rule will not have a significant economic impact on a
substantial number of small entities or a significant impact on the
operation of a substantial number of small rural hospitals.
The RFA defines ``small entity'' as a small business, a nonprofit
enterprise, or a governmental jurisdiction (such as a county, city, or
township) with a population of less than 50,000. We also consider all
providers and suppliers of services to be small entities. For purposes
of section 102(b) of the Act, we define small rural hospital as a
hospital that has fewer than 50 beds and is located anywhere but in a
metropolitan statistical area.
As noted earlier, this rule incorporates changes enacted by various
statutes that already are effective. Discretionary portions of the rule
are minimal and, of themselves, have no more than an incidental effect.
Therefore, we have not prepared a regulatory flexibility analysis
because we have determined, and we certify, that these rules will not
have a significant economic impact on a substantial number of small
entities or a significant impact on the operation of a substantial
number of small rural hospitals.
List of Subjects
42 CFR Part 400
Grant programs--health, Health facilities, Health maintenance
organizations (HMO), Medicaid, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 411
Exclusions from Medicare, Limitations on Medicare payments,
Medicare, Recovery against third parties. Reporting and recordkeeping
requirements.
42 CFR Chapter IV is amended as set forth below.
PART 400--INTRODUCTION; DEFINITIONS
A. The authority citation for part 400 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh) and 44 U.S.C. Chapter 35.
Sec. 400.310 [Amended]
B. In Sec. 400.310, in the table, ``411.65'' is revised to read
``411.165''.
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
A. The authority citation for part 411 is revised to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
B. Subpart A is amended as set forth below.
Subpart A--General Exclusions and Exclusion of Particular Services
1. Section 411.1 is amended by adding the following sentence at the
end of paragraph (a):
Sec. 411.1 Basis and scope.
(a) Statutory basis. * * * Sections 1842(l) and 1879 of the Act
provide for refund to, or indemnification of, a beneficiary who has
paid a provider or supplier for certain services that the provider or
supplier knew were excluded from Medicare coverage.
* * * * *
C. Subpart B is amended as follows:
Subpart B--Insurance Coverage That Limits Medicare Payment: General
Provisions
1. Section 411.20 is revised to read as follows:
Sec. 411.20 Basis and scope.
(a) Statutory basis--(1) Section 1862(b)(2)(A)(i) of the Act
precludes Medicare payment for services to the extent that payment has
been made or can reasonably be expected to be made under a group health
plan with respect to--
(i) A beneficiary entitled to Medicare on the basis of ESRD during
the first 18 months of that entitlement;
(ii) A beneficiary who is age 65 or over, entitled to Medicare on
the basis of age, and covered under the plan by virtue of his or her
current employment status or the current employment status of a spouse
of any age; or
(iii) A beneficiary who is under age 65, entitled to Medicare on
the basis of disability, and covered under the plan by virtue of his or
her current employment status or the current employment status of a
family member.
(2) Section 1862(b)(2)(A)(ii) of the Act precludes Medicare payment
for services to the extent that payment has been made or can reasonably
be expected to be made promptly under any of the following:
(i) Workers' compensation.
(ii) Liability insurance.
(iii) No-fault insurance.
(b) Scope. This subpart sets forth general rules that apply to the
types of insurance specified in paragraph (a) of this section. Other
general rules that apply to group health plans are set forth in subpart
E of this part.
Sec. 411.21 [Amended]
2. In Sec. 411.21, the following changes are made:
(a) The introductory text is revised and a definition of ``monthly
capitation payment'' is added, to read as set forth below.
(b) In the definition of ``conditional payment'', ``for which
another insurer is primary payer'' is revised to read ``for which
another payer is responsible'', and ``subparts C through G'' is revised
to read ``subparts C through H''.
Sec. 411.21 Definitions.
In this subpart B and in subparts C through H of this part, unless
the context indicates otherwise--
* * * * *
Monthly capitation payment means a comprehensive monthly payment
that covers all physician services associated with the continuing
medical management of a maintenance dialysis patient who dialyses at
home or as an outpatient in an approved ESRD facility.
* * * * *
3. Section 411.24 is amended to revise paragraph (c) to read as
follows:
Sec. 411.24 Recovery of conditional payments.
* * * * *
(c) Amount of recovery--(1) If it is not necessary for HCFA to take
legal action to recover, HCFA recovers the lesser of the following:
(i) The amount of the Medicare primary payment.
(ii) The full primary payment amount that the primary payer is
obligated to pay under this part without regard to any payment, other
than a full primary payment that the primary payer has paid or will
make, or, in the case of a
[[Page 45362]]
third party payment recipient, the amount of the third party payment.
(2) If it is necessary for HCFA to take legal action to recover
from the primary payer, HCFA may recover twice the amount specified in
paragraph (c)(1)(i) of this section.
* * * * *
4. Section 411.24 is amended by adding a new paragraph (m) to read
as follows:
* * * * *
(m) Interest charges.(1) With respect to recovery of payments for
items and services furnished before October 31, 1994, HCFA charges
interest, exercising common law authority in accordance with 45 CFR
30.13, consistent with the Federal Claims Collection Act (31 U.S.C.
3711).
(2) In addition to its common law authority with respect to
recovery of payments for items and services furnished on or after
October 31, 1994, HCFA charges interest in accordance with section
1862(b)(2)(B)(i) of the Act. Under that provision--
(i) HCFA may charge interest if reimbursement is not made to the
appropriate trust fund before the expiration of the 60-day period that
begins on the date on which notice or other information is received by
HCFA that payment has been or could be made under a primary plan;
(ii) Interest may accrue from the date when that notice or other
information is received by HCFA and is charged until reimbursement is
made; and
(iii) The rate of interest is that provided at 42 CFR 405.376(d).
Sec. 411.33 [Amended]
5. In Sec. 411.33, the following changes are made:
a. The heading and introductory text of paragraph (a) are revised
to read as set forth below.
b. In paragraph (a)(1), ``(or the amount the supplier is obligated
to accept as payment in full if that is less than the charges)'' is
inserted immediately after ``the supplier''.
c. In paragraph (a)(3), ``Medicare fee schedule,'' is inserted
before ``Medicare reasonable charge'' and a comma is inserted after
``reasonable charge''.
d. In paragraph (b) introductory text and paragraph (b)(3),
``reasonable charge'' is revised to read ``fee schedule''.
e. Paragraphs (c) and (d) are removed and reserved.
f. In the heading of paragraph (e), ``fee schedule,'' is inserted
before ``reasonable charge'', and a comma is inserted after
``reasonable charge''.
Sec. Sec. 411.33 Amount of Medicare secondary payment.
(a) Services for which HCFA pays on a Medicare fee schedule or
reasonable charge basis. The Medicare secondary payment is the lowest
of the following:
* * * * *
(c) [Reserved]
(d) [Reserved]
* * * * *
D. Subparts E and F are redesignated as subparts F and G,
respectively, in accordance with the redesignation tables set forth
below, and throughout part 411, internal cross references are revised
to reflect these changes.
Old section (subpart E): New section
(subpart F)
411.60................................................. 411.160
411.62................................................. 411.162
411.65................................................. 411.165
Old section (subpart F): New section
(subpart G)
411.70................................................. 411.170
411.72................................................. 411.172
411.75................................................. 411.175
E. A new subpart E is added, to read as follows:
Subpart E--Limitations on Payment for Services Covered Under Group
Health Plans: General Provisions
Sec.
411.100 Basis and scope.
411.101 Definitions.
411.102 Basic prohibitions and requirements.
411.103 Prohibition against financial and other incentives.
411.104 Current employment status.
411.106 Aggregation rules.
411.108 Taking into account entitlement to Medicare.
411.110 Basis for determination of nonconformance.
411.112 Documentation of conformance.
411.114 Determination of nonconformance.
411.115 Notice of determination of nonconformance.
411.120 Appeals.
411.121 Hearing procedures.
411.122 Hearing officer's decision.
411.124 Administrator's review of hearing decision.
411.126 Reopening of determinations and decisions.
411.130 Referral to Internal Revenue Service (IRS).
Subpart E--Limitations on Payment for Services Covered Under Group
Health Plans: General Provisions
Sec. 411.100 Basis and scope.
(a) Statutory basis.--(1) Section 1862(b) of the Act provides in
part that Medicare is secondary payer, under specified conditions, for
services covered under any of the following:
(i) Group health plans of employers that employ at least 20
employees and that cover Medicare beneficiaries age 65 or older who are
covered under the plan by virtue of the individual's current employment
status with an employer or the current employment status of a spouse of
any age. (Section 1862(b)(1)(A))
(ii) Group health plans (without regard to the number of
individuals employed and irrespective of current employment status)
that cover individuals who have ESRD. Except as provided in
Sec. 411.163, group health plans are always primary payers throughout
the first 18 months of ESRD-based Medicare eligibility or entitlement.
(Section 1862(b)(1)(C))
(iii) Large group health plans (that is, plans of employers that
employ at least 100 employees) and that cover Medicare beneficiaries
who are under age 65, entitled to Medicare on the basis of disability,
and covered under the plan by virtue of the individual's or a family
member's current employment status with an employer. (Section
1862(b)(1)(B))
(2) Sections 1862(b)(1) (A), (B), and (C) of the Act provide that
group health plans and large group health plans may not take into
account that the individuals described in paragraph (a)(1) of this
section are entitled to Medicare on the basis of age or disability, or
eligible for, or entitled to Medicare on the basis of ESRD.
(3) Section 1862(b)(1)(A)(i)(II) of the Act provides that group
health plans of employers of 20 or more employees must provide to any
employee or spouse age 65 or older the same benefits, under the same
conditions, that it provides to employees and spouses under 65. The
requirement applies regardless of whether the individual or spouse 65
or older is entitled to Medicare.
(4) Section 1862(b)(1)(C)(ii) of the Act provides that group health
plans may not differentiate in the benefits they provide between
individuals who have ESRD and other individuals covered under the plan
on the basis of the existence of ESRD, the need for renal dialysis, or
in any other manner. Actions that constitute ``differentiating'' are
listed in Sec. 411.161(b).
(b) Scope. This subpart sets forth general rules pertinent to--
(1) Medicare payment for services that are covered under a group
health plan and are furnished to certain beneficiaries who are entitled
on the basis of ESRD, age, or disability.
(2) The prohibition against taking into account Medicare
entitlement based on age or disability, or Medicare eligibility or
entitlement based on ESRD.
(3) The prohibition against differentiation in benefits between
[[Page 45363]]
individuals who have ESRD and other individuals covered under the plan.
(4) The requirement to provide to those 65 or over the same
benefits under the same conditions as are provided to those under 65.
(5) The appeals procedures for group health plans that HCFA
determines are nonconforming plans.
Sec. 411.101 Definitions.
As used in this subpart and in subparts F through H of this part--
COBRA stands for Consolidated Omnibus Budget Reconciliation Act of
1985.
Days means calendar days.
Employee (subject to the special rules in Sec. 411.104) means an
individual who--
(1) Is working for an employer; or
(2) Is not working for an employer but is receiving payments that
are subject to FICA taxes, or would be subject to FICA taxes except
that the employer is exempt from those taxes under the Internal Revenue
Code.
Employer means, in addition to individuals (including self-employed
persons) and organizations engaged in a trade or business, other
entities exempt from income tax such as religious, charitable, and
educational institutions, the governments of the United States, the
individual States, Puerto Rico, the Virgin Islands, Guam, American
Samoa, the Northern Mariana Islands, and the District of Columbia, and
the agencies, instrumentalities, and political subdivisions of these
governments.
FICA stands for the Federal Insurance Contributions Act, the law
that imposes social security taxes on employers and employees under
section 21 of the Internal Revenue Code.
Group health plan (GHP) means any arrangement made by one or more
employers or employee organizations to provide health care directly or
through other methods such as insurance or reimbursement, to current or
former employees, the employer, others associated or formerly
associated with the employer in a business relationship, or their
families, that--
(1) Is of, or contributed to by, one or more employers or employee
organizations.
(2) If it involves more than one employer or employee organization,
provides for common administration.
(3) Provides substantially the same benefits or the same benefit
options to all those enrolled under the arrangement.
The term includes self-insured plans, plans of governmental
entities (Federal, State and local), and employee organization plans;
that is, union plans, employee health and welfare funds or other
employee organization plans. The term also includes employee-pay-all
plans, which are plans under the auspices of one or more employers or
employee organizations but which receive no financial contributions
from them. The term does not include a plan that is unavailable to
employees; for example, a plan only for self-employed persons.
IRC stands for Internal Revenue Code.
IRS stands for Internal Revenue Service.
Large group health plan (LGHP) means a GHP that covers employees of
either--
(1) A single employer or employee organization that employed at
least 100 full-time or part-time employees on 50 percent or more of its
regular business days during the previous calendar year; or
(2) Two or more employers, or employee organizations, at least one
of which employed at least 100 full-time or part-time employees on 50
percent or more of its regular business days during the previous
calendar year.
MSP stands for Medicare secondary payer.
Multi-employer plan means a plan that is sponsored jointly by two
or more employers (sometimes called a multiple-employer plan) or by
employers and unions (sometimes under the Taft-Hartley law).
Self-employed person encompasses consultants, owners of businesses,
and directors of corporations, and members of the clergy and religious
orders who are paid for their services by a religious body or other
entity.
Similarly situated individual means--
(1) In the case of employees, other employees enrolled or seeking
to enroll in the plan; and
(2) In the case of other categories of individuals, other persons
in any of those categories who are enrolled or seeking to enroll in the
plan.
Sec. 411.102 Basic prohibitions and requirements.
(a) ESRD--(1) A group health plan of any size--(i) May not take
into account the ESRD-based Medicare eligibility or entitlement of any
individual who is covered or seeks to be covered under the plan; and
(ii) May not differentiate in the benefits it provides between
individuals with ESRD and other individuals covered under the plan, on
the basis of the existence of ESRD, or the need for dialysis, or in any
other manner.
(2) The prohibitions of paragraph (a) of this section do not
prohibit a plan from paying benefits secondary to Medicare after the
first 18 months of ESRD-based eligibility or entitlement.
(b) Age. A GHP of an employer or employee organization of at least
20 employees--
(1) May not take into account the age-based Medicare entitlement of
an individual or spouse age 65 or older who is covered (or seeks to be
covered) under the plan by virtue of current employment status; and
(2) Must provide, to employees age 65 or older and to spouses age
65 or older of employees of any age, the same benefits under the same
conditions as it provides to employees and spouses under age 65.
(c) Disability. A GHP of an employer or employee organization of at
least 100 employees may not take into account the disability-based
Medicare entitlement of any individual who is covered (or seeks to be
covered) under the plan by virtue of current employment status.
Sec. 411.103 Prohibition against financial and other incentives.
(a) General rule. An employer or other entity (for example, an
insurer) is prohibited from offering Medicare beneficiaries financial
or other benefits as incentives not to enroll in, or to terminate
enrollment in, a GHP that is, or would be, primary to Medicare. This
prohibition precludes offering to Medicare beneficiaries an alternative
to the employer primary plan (for example, coverage of prescription
drugs) unless the beneficiary has primary coverage other than Medicare.
An example would be primary coverage through his own or a spouse's
employer.
(b) Penalty for violation.--(1) Any entity that violates the
prohibition of paragraph (a) of this section is subject to a civil
money penalty of up to $5,000 for each violation; and
(2) The provisions of section 1128A of the Act (other than
subsections (a) and (b)) apply to the civil money penalty of up to
$5,000 in the same manner as the provisions apply to a penalty or
proceeding under section 1128A(a).
Sec. 411.104 Current employment status.
(a) General rule. An individual has current employment status if--
(1) The individual is actively working as an employee, is the
employer (including a self-employed person), or is associated with the
employer in a business relationship; or
(2) The individual is not actively working and--
(i) Is receiving disability benefits from an employer for up to 6
months (the first 6 months of employer disability benefits are subject
to FICA taxes); or
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(ii) Retains employment rights in the industry and has not had his
employment terminated by the employer, if the employer provides the
coverage (or has not had his membership in the employee organization
terminated, if the employee organization provides the coverage), is not
receiving disability benefits from an employer for more than 6 months,
is not receiving disability benefits from Social Security, and has GHP
coverage that is not pursuant to COBRA continuation coverage (26 U.S.C.
4980B; 29 U.S.C. 1161-1168; 42 U.S.C. 300bb-1 et seq.). Whether or not
the individual is receiving pay during the period of nonwork is not a
factor.
(b) Persons who retain employment rights. For purposes of paragraph
(a)(2) of this section, persons who retain employment rights include
but are not limited to--
(1) Persons who are furloughed, temporarily laid off, or who are on
sick leave;
(2) Teachers and seasonal workers who normally do not work
throughout the year; and
(3) Persons who have health coverage that extends beyond or between
active employment periods; for example, based on an hours bank
arrangement. (Active union members often have hours bank coverage.)
(c) Coverage by virtue of current employment status. An individual
has coverage by virtue of current employment status with an employer
if--
(1) the individual has GHP or LGHP coverage based on employment,
including coverage based on a certain number of hours worked for that
employer or a certain level of commissions earned from work for that
employer at any time; and
(2) the individual has current employment status with that
employer, as defined in paragraph (a) of this section.
(d) Special rule: Self-employed person. A self-employed individual
is considered to have GHP or LGHP coverage by virtue of current
employment status during a particular tax year only if, during the
preceding tax year, the individual's net earnings, from work in that
year related to the employer that offers the group health coverage, are
at least equal to the amount specified in section 211(b)(2) of the Act,
which defines ``self-employment income'' for social security purposes.
(e) Special Rule: members of religious orders and members of
clergy--(1) Members of religious orders who have not taken a vow of
poverty. A member of a religious order who has not taken a vow of
poverty is considered to have current employment status with the
religious order if--
(a) The religious order pays FICA taxes on behalf of that member;
or
(b) The individual is receiving cash remuneration from the
religious order.
(2) Members of religious orders who have taken a vow of poverty. A
member of a religious order whose members are required to take a vow of
poverty is not considered to be employed by the order if the services
he or she performs as a member of the order are considered employment
only because the order elects social security coverage under section
3121(r) of the IRC. This exemption applies retroactively to services
performed as a member of the order, beginning with the effective dates
of the MSP provisions for the aged and the disabled, respectively. The
exemption does not apply to services performed for employers outside of
the order.
(3) Members of the clergy. A member of the clergy is considered to
have current employment status with a church or other religious
organization if the individual is receiving cash remuneration from the
church or other religious organization for services rendered.
(f) Special rule: Delayed compensation subject to FICA taxes. An
individual who is not working is not considered an employee solely on
the basis of receiving delayed compensation payments for previous
periods of work even if those payments are subject to FICA taxes (or
would be subject to FICA taxes if the employer were not exempt from
paying those taxes). For example, an individual who is not working in
1993 and receives payments subject to FICA taxes for work performed in
1992 is not considered to be an employee in 1993 solely on the basis of
receiving those payments.
Sec. 411.106 Aggregation rules.
The following rules apply in determining the number and size of
employers, as required by the MSP provisions for the aged and disabled:
(a) All employers that are treated as a single employer under
subsection (a) or (b) of section 52 of the Internal Revenue Code (IRC)
of 1986 (26 U.S.C. 52 (a) and (b)) are treated as a single employer.
(b) All employees of the members of an affiliated service group (as
defined in section 414(m) of the IRC (26 U.S.C. 414m)) are treated as
employed by a single employer.
(c) Leased employees (as defined in section 414(n)(2) of the IRC
(26 U.S.C. 414(n)(2)) are treated as employees of the person for whom
they perform services to the same extent as they are treated under
section 414(n) of the IRC.
(d) In applying the IRC provisions identified in this section, HCFA
relies upon regulations and decisions of the Secretary of the Treasury
respecting those provisions.
Sec. 411.108 Taking into account entitlement to Medicare.
(a) Examples of actions that constitute ``taking into account''.
Actions by GHPs or LGHPs that constitute taking into account that an
individual is entitled to Medicare on the basis of ESRD, age, or
disability (or eligible on the basis of ESRD) include, but are not
limited to, the following:
(1) Failure to pay primary benefits as required by subparts F, G,
and H of this part 411.
(2) Offering coverage that is secondary to Medicare to individuals
entitled to Medicare.
(3) Terminating coverage because the individual has become entitled
to Medicare, except as permitted under COBRA continuation coverage
provisions (26 U.S.C. 4980B(f)(2)(B)(iv); 29 U.S.C. 1162.(2)(D); and 42
U.S.C. 300bb-2.(2)(D)).
(4) In the case of a LGHP, denying or terminating coverage because
an individual is entitled to Medicare on the basis of disability
without denying or terminating coverage for similarly situated
individuals who are not entitled to Medicare on the basis of
disability.
(5) Imposing limitations on benefits for a Medicare entitled
individual that do not apply to others enrolled in the plan, such as
providing less comprehensive health care coverage, excluding benefits,
reducing benefits, charging higher deductibles or coinsurance,
providing for lower annual or lifetime benefit limits, or more
restrictive pre-existing illness limitations.
(6) Charging a Medicare entitled individual higher premiums.
(7) Requiring a Medicare entitled individual to wait longer for
coverage to begin.
(8) Paying providers and suppliers no more than the Medicare
payment rate for services furnished to a Medicare beneficiary but
making payments at a higher rate for the same services to an enrollee
who is not entitled to Medicare.
(9) Providing misleading or incomplete information that would have
the effect of inducing a Medicare entitled individual to reject the
employer plan, thereby making Medicare the primary payer. An example of
this would be informing the
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beneficiary of the right to accept or reject the employer plan but
failing to inform the individual that, if he or she rejects the plan,
the plan will not be permitted to provide or pay for secondary
benefits.
(10) Including in its health insurance cards, claims forms, or
brochures distributed to beneficiaries, providers, and suppliers,
instructions to bill Medicare first for services furnished to Medicare
beneficiaries without stipulating that such action may be taken only
when Medicare is the primary payer.
(11) Refusing to enroll an individual for whom Medicare would be
secondary payer, when enrollment is available to similarly situated
individuals for whom Medicare would not be secondary payer.
(b) Permissible actions--(1) If a GHP or LGHP makes benefit
distinctions among various categories of individuals (distinctions
unrelated to the fact that the individual is disabled, based, for
instance, on length of time employed, occupation, or marital status),
the GHP or LGHP may make the same distinctions among the same
categories of individuals entitled to Medicare whose plan coverage is
based on current employment status. For example, if a GHP or LGHP does
not offer coverage to employees who have worked less than one year and
who are not entitled to Medicare on the basis of disability or age, the
GHP or LGHP is not required to offer coverage to employees who have
worked less than one year and who are entitled to Medicare on the basis
of disability or age.
(2) A GHP or LGHP may pay benefits secondary to Medicare for an
aged or disabled beneficiary who has current employment status if the
plan coverage is COBRA continuation coverage because of reduced hours
of work. Medicare is primary payer for this beneficiary because,
although he or she has current employment status, the GHP coverage is
by virtue of the COBRA law rather than by virtue of the current
employment status.
(3) A GHP may terminate COBRA continuation coverage of an
individual who becomes entitled to Medicare on the basis of ESRD, when
permitted under the COBRA provisions.
Sec. 411.110 Basis for determination of nonconformance.
(a) A ``determination of nonconformance'' is a HCFA determination
that a GHP or LGHP is a nonconforming plan as provided in this section.
(b) HCFA makes a determination of nonconformance for a GHP or LGHP
that, at any time during a calendar year, fails to comply with any of
the following statutory provisions:
(1) The prohibition against taking into account that a beneficiary
who is covered or seeks to be covered under the plan is entitled to
Medicare on the basis of ESRD, age, or disability, or eligible on the
basis of ESRD.
(2) The nondifferentiation clause for individuals with ESRD.
(3) The equal benefits clause for the working aged.
(4) The obligation to refund conditional Medicare primary payments.
(c) HCFA may make a determination of nonconformance for a GHP or
LGHP that fails to respond to a request for information, or to provide
correct information, either voluntarily or in response to a HCFA
request, on the plan's primary payment obligation with respect to a
given beneficiary, if that failure contributes to either or both of the
following:
(1) Medicare erroneously making a primary payment.
(2) A delay or foreclosure of HCFA's ability to recover an
erroneous primary payment.
Sec. 411.112 Documentation of conformance.
(a) Acceptable documentation. HCFA may require a GHP or LGHP to
demonstrate that it has complied with the Medicare secondary payer
provisions and to submit supporting documentation by an official
authorized to act on behalf of the entity, under penalty of perjury.
The following are examples of documentation that may be acceptable:
(1) A copy of the employer's plan or policy that specifies the
services covered, conditions of coverage, benefit levels and
limitations with respect to persons entitled to Medicare on the basis
of ESRD, age, or disability as compared to the provisions applicable to
other enrollees and potential enrollees.
(2) An explanation of the plan's allegation that it does not owe
HCFA any amount HCFA claims the plan owes as repayment for conditional
or mistaken Medicare primary payments.
(b) Lack of acceptable documentation. If a GHP or LGHP fails to
provide acceptable evidence or documentation that it has complied with
the MSP prohibitions and requirements set forth in Sec. 411.110, HCFA
may make a determination of nonconformance for both the year in which
the services were furnished and the year in which the request for
information was made.
Sec. 411.114 Determination of nonconformance.
(a) Starting dates for determination of nonconformance. HCFA's
authority to determine nonconformance of GHPs begins on the following
dates:
(1) On January 1, 1987 for MSP provisions that affect the disabled.
(2) On December 20, 1989 for MSP provisions that affect ESRD
beneficiaries and the working aged.
(3) On August 10, 1993 for failure to refund mistaken Medicare
primary payments.
(b) Special rule for failure to repay. A GHP that fails to comply
with Sec. 411.110 (a)(1), (a)(2), or (a)(3) in a particular year is
nonconforming for that year. If, in a subsequent year, that plan fails
to repay the resulting mistaken primary payments (in accordance with
Sec. 411.110(a)(4)), the plan is also nonconforming for the subsequent
year. For example, if a plan paid secondary for the working aged in
1991, that plan was nonconforming for 1991. If in 1994 HCFA identifies
mistaken primary payments attributable to the 1991 violation, and the
plan refuses to repay, it is also nonconforming for 1994.
Sec. 411.115 Notice of determination of nonconformance.
(a) Notice to the GHP or LGHP--(1) If HCFA determines that a GHP or
an LGHP is nonconforming with respect to a particular calendar year,
HCFA mails to the plan written notice of the following:
(i) The determination.
(ii) The basis for the determination.
(iii) The right of the parties to request a hearing.
(iv) An explanation of the procedure for requesting a hearing.
(v) The tax that may be assessed by the IRS in accordance with
section 5000 of the IRC.
(vi) The fact that if none of the parties requests a hearing within
65 days from the date of its notice, the determination is binding on
all parties unless it is reopened in accordance with Sec. 411.126.
(2) The notice also states that the plan must, within 30 days from
the date on its notice, submit to HCFA the names and addresses of all
employers and employee organizations that contributed to the plan
during the calendar year for which HCFA has determined nonconformance.
(b) Notice to contributing employers and employee organizations.
HCFA mails written notice of the determination, including all the
information specified in paragraph (a)(1) of this section, to all
contributing employers and employee organizations already known to HCFA
or identified by
[[Page 45366]]
the plan in accordance with paragraph (a)(2) of this section. Employers
and employee organizations have 65 days from the date of their notice
to request a hearing.
Sec. 411.120 Appeals.
(a) Parties to the determination. The parties to the determination
are HCFA, the GHP or LGHP for which HCFA determined nonconformance, and
any employers or employee organizations that contributed to the plan
during the calendar year for which HCFA determined nonconformance.
(b) Request for hearing.--(1) A party's request for hearing must be
in writing (not in facsimile or other electronic medium) and in the
manner stipulated in the notice of nonconformance; it must be filed
within 65 days from the date on the notice.
(2) The request may include rationale showing why the parties
believe that HCFA's determination is incorrect and supporting
documentation.
(3) A request is considered filed on the date it is received by the
appropriate office, as shown by the receipt date stamped on the
request.
Sec. 411.121 Hearing procedures.
(a) Nature of hearing.--(1) If any of the parties requests a
hearing within 65 days from the date on the notice of the determination
of nonconformance, the HCFA Administrator appoints a hearing officer.
(2) If no party files a request within the 65-day period, the
initial determination of nonconformance is binding upon all parties
unless it is reopened in accordance with Sec. 411.126.
(3) If more than one party requests a hearing the hearing officer
conducts a single hearing in which all parties may participate.
(4) On the record review. Ordinarily, the hearing officer makes a
decision based upon review of the data and documents on which HCFA
based its determination of nonconformance and any other documentation
submitted by any of the parties within 65 days from the date on the
notice.
(5) Oral hearing. The hearing officer may provide for an oral
hearing either on his or her own motion or in response to a party's
request if the party demonstrates to the hearing officer's satisfaction
that an oral hearing is necessary. Within 30 days of receipt of the
request, the hearing officer gives all known parties written notice of
the request and whether the request for oral hearing is granted.
(b) Notice of time and place of oral hearing. If the hearing
officer provides an oral hearing, he or she gives all known parties
written notice of the time and place of the hearing at least 30 days
before the scheduled date.
(c) Prehearing discovery.--(1) The hearing officer may permit
prehearing discovery if it is requested by a party at least 10 days
before the scheduled date of the hearing.
(2) If the hearing officer approves the request, he or she--
(i) Provides a reasonable time for inspection and reproduction of
documents; and
(ii) In ruling on discovery matters, is guided by the Federal Rules
of Civil Procedure. (28 U.S.C.A. Rules 26-37)
(3) The hearing officer's orders on all discovery matters are
final.
(d) Conduct of hearing. The hearing officer determines the conduct
of the hearing, including the order in which the evidence and the
allegations are presented.
(e) Evidence at hearing.--(1) The hearing officer inquires into the
matters at issue and may receive from all parties documentary and other
evidence that is pertinent and material, including the testimony of
witnesses, and evidence that would be inadmissible in a court of law.
(2) Evidence may be received at any time before the conclusion of
the hearing.
(3) The hearing officer gives the parties opportunity for
submission and consideration of evidence and arguments and, in ruling
on the admissibility of evidence, excludes irrelevant, immaterial, or
unduly repetitious evidence.
(4) The hearing officer's ruling on admissibility of evidence is
final and not subject to further review.
(f) Subpoenas.--(1) The hearing officer may, either on his or her
own motion or upon the request of any party, issue subpoenas for either
or both of the following if they are reasonably necessary for full
presentation of the case:
(i) The attendance and testimony of witnesses.
(ii) The production of books, records, correspondence, papers, or
other documents that are relevant and material to any matter at issue.
(2) A party that wishes the issuance of a subpoena must, at least
10 days before the date fixed for the hearing, file with the hearing
officer a written request that identifies the witnesses or documents to
be produced and de
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