Need to repay Medicare? Not so fast!

March 1, 2007

CMS published a proposed rule change that would let physicians repay Medicare overpayments over time, rather than demanding the money all at once.

Last November, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule change that would let physicians repay Medicare overpayments over time, rather than demanding the money all at once. The new rule includes a more flexible "hardship" provision and adopts the overall attitude, "Let's find a way to work this out ..."

The Alliance for Specialty Medicine, which represents more than 200,000 physicians in 11 medical specialty organizations, including the American Academy of Dermatology, likes the proposal and has some suggestions for improvement in the hardship area.

Why overpayment?

Let's start at the beginning. Why would Medicare providers be overpaid?

"Generally, overpayments result when payment is made by Medicare for noncovered items or services that exceed the amount allowed by Medicare for an item or service, or when payment is made for items or services that should have been paid by another insurer (Medicare secondary payer obligations)," CMS explains in its Federal Register notice.

"Once a determination and any necessary adjustments in the amount of the overpayment have been made, the remaining amount is a debt owed to the United States government," the notice states.

One might argue that Medicare should get it right to begin with, but we are talking about the federal government.

Ante up to Uncle Sam

Federal law authorizes the head of an agency to collect claims in any amount. Uncollectible claims of more than $100,000, exclusive of interest, get referred to the Department of Justice "for compromise."

Currently, CMS states in its notice, "In almost all cases, we try to work with the provider or supplier to recover the overpayment. In general, it has been our experience that it is in both CMS and the debtor's best interests to work out a reasonable repayment schedule to recoup an overpayment rather than demand immediate collection of the debt, which could place a provider or supplier into bankruptcy."

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) includes provisions requiring CMS to use certain statutory criteria to decide whether a provider or supplier should be granted a repayment schedule of at least six months and up to five years.

Repaying over time

Under that law, CMS may grant a provider or supplier, upon request, a repayment schedule of at least six months if overpayment within 30 days would constitute a "hardship"- provided certain criteria are met.

So CMS is proposing the addition of a new "hardship" test to the existing regulations to determine the appropriate extended repayment schedule (ERS). In fact, under the proposal, all ERS requests would first be evaluated under the new test, and if "hardship" is determined and no statutory exception applies, there would be a repayment period of at least six months, but not more than three years.

The Alliance, in comments submitted to CMS, points out that providers can get six months to repay "if the total amount of all outstanding overpayments equals 10 percent or greater of the total Medicare payments made for the period of the most recently submitted cost report or the previous calendar year."

The organization says that even though the 10 percent requirement for hardship is specified in the MMA, "We believe that CMS should exercise some flexibility to allow use of a sliding-scale percentage so that the qualifying amount represents a graduated burden based on the proportion of that physician's income represented by Medicare."

The Alliance also expresses concern about the threat of everything coming due if one payment is missed.