SPARC Act/Part D Prescription Drug Reform Reintroduced. What Does It Mean for MSP Recovery?

CMS, Medicare Set-Aside Blog, Medicare Set-Asides, MSP News on February 24, 2017 | Posted by Jean S. Goldstein, JD

In September 2016, House Representative Bill 6120 known as the Secondary Payer Advancement, Reconciliation, and Clarification (SPARC) Act was first introduced to Congress.  The bill did not pass at that time, but was just recently reintroduced into the House of Representatives as HR 1122.  Text of the recent bill is not yet available.

The bill was first initiated to clarify the ambiguity in the Medicare Secondary Payer (MSP) statute and how the MSP statute applies to the Medicare Prescription Drug (Part D) program.  Specifically, the stated purpose of the Bill was to “amend title XVIII of the Social Security Act to provide for clarification and rationalization of Medicare prescription drug plan recovery rules for certain claims.” H.R. 6120 — 114th Congress: SPARC Act.  More simply put, the initial legislation was brought forward to clarify when Medicare Part D plans can recover in the MSP context.

When Can a Medicare Part D Plan Recover?

If an injured Medicare beneficiary’s medical expenses should be covered by a Non-Group Health Plan (NGHP) or liability insurance (including no-fault, self-insurance, or workers’ compensation insurance) Medicare is not considered the primary payer.  Medicare’s responsibility in these cases has long been recognized as secondary.  In further understanding the purpose of the SPARC Act, it is important to understand that Medicare Part D Plans (PDP) are not paid for by the Center for Medicare & Medicaid Services (CMS) or Medicare, rather the plans are paid for by private health care insurance companies who receive subsidies from CMS to keep prescription drug costs low for Medicare beneficiaries.  One of the challenges with Medicare Part D and the current system, occurs when payments have made for prescription medications, which should have been paid by the responsible NGHP.  In 2003, with the Part D MSP statute implementation also came the “pay and chase” method.  With this method in place, PDPs pay for prescription medication costs, and then attempt recovery from the appropriate payer.  PDPs are then faced with seeking reimbursement from the appropriate NGHP, but are entitled to recovery.

Key Elements of the 2016 SPARC Act

Legislative proponents of the SPARC Act indicate the Act “…replaces ambiguous and uncertain Part D MSP requirements with a simplified, commonsense approach that provides beneficiaries with improved access to the care.”  Here are the key elements of the proposed legislation:

  • NGHPs would be responsible for prescription costs, and be billed as primary payer until the claim is settled.  PDPs would be the primary payer once the case has settled;
  • Would allow for subrogation for conditional payments that should be covered by a later settlement;
  • Would provide a statute of limitations for recovery of conditional payments of 3 years;
  • Would allow a PDP to wave the secondary payer provisions if the waiver is in the best interests, particularly allowing a PDP to only purse claims where the recovery will exceed the cost of collection;
  • Would require CMS to provide notice of a settlement, judgment or award to a PDP, within 15 days of receiving notice of the settlement;
  • Would require CMS to share information received under the mandatory insurer reporting requirements with PDPs;
  • Would require a PDP to advise a pharmacy or other entity providing prescription medications to bill the entity who has ongoing responsibility for medical benefits (thus ending “pay and chase”).

 Conclusion

The ultimate goal of the SPARC Act has certainly been articulated:  to ensure that Medicare beneficiaries’ prescription needs are met, while simultaneously ensuring that both PDPs and CMS’ interests are protected.  However, the previously proposed legislation, did not address how NGHPs should address the shift to PDPs post settlement.  Previously, the bill seemed to indicate that an NGHP would only be responsible for prescription medication costs until settlement of a claim, and then the cost burden would shift to a PDP.  Within the Medicare Set-Aside (MSA) community this begs the question of whether an MSA should then include a full prescription medication allocation over a Claimant’s entire life expectancy, if a PDP plan becomes the primary payer after settlement.  In essence, the provisions of the SPARC Act may limit the responsibilities of an NGHP, but it remains to be seen how that limitation will be perceived in each state, and whether the limitations will benefit NGHPs.

The recently reintroduced legislation was referred to the House Ways and Means Committee.  We will be sure to update you on the bill’s progress.