Statute of Limitations on CMS Lien Recovery Action Under Secondary Payer Act

    In January 2013, the SMART Act went into effect and introduced new procedures for CMS to use when seeking reimbursement under the Secondary Payer Act [SPA].  Buried in the new regulations is 42 U.S.C. 1395y(b)(2)(B)(iii), which includes a three year limitation period on actions by the “United States” which must be filed “no later than 3 years after the date of the receipt of notice of a settlement, judgment, award…”.

CMS recently expressed an unexpected, and perhaps foreboding, view on the applicability of the three-year limitation period.  During a CMS Town Hall meeting on January 14, 2020, CMS stated that the three-year limitation applies only to legal actions brought by the United States or CMS, while it does not apply to the CMS contractors charged with collection efforts under the SPA. The slides from the Town Hall meeting can be found here.

CMS did not provide any further clarity about the limitation period. Thus, a major question remains: what is the practical impact of applying the limitation period only to the United States?  CMS may be signaling a position that the three-year limitation period should not apply to Medicare Advantage Organizations, private Medicare supplemental insurance, and other non-government entities who may attempt to seek reimbursement for medical expenses.  Importantly, this supports the position that putting CMS on notice of a recovery will not be construed as notice to other actors, such as private insurance companies running plans associated with Medicare.

Like clockwork, the 11th Cir. issued it’s opinion in MSPA Claims v. Kingsway Amigo, 2020 US. App. Lexis 4554 on Feb. 13, 2020, holding a MAO’s private right of action is governed by §1395y(b)(2)(b)(iii), which states that an action can't be brought by the United States, "unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment . . . relating to such payment owed."

The applicable limitation period will become more important as private entities increasingly utilize the so-called “private right of action” in the Secondary Payer Act to support claims for reimbursement and double damages.  

Plan of Action:

1. Make sure settlements and other recoveries are reported to all CMS related entities. That means CMS and all MAOs, CMS Supplemental Plans, and Medicare “Part D” Plans.

2. Make sure the SMART Act report of settlement from the liability carrier to CMS is timely and accurate - reporting only ICD-10 codes for the injuries which are reflected in the settlement. The best way to do this is to specify the claimed injuries and related ICD-10 codes in the settlement documents.