Auto No-fault; Medicare reporting; cost containment

1. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
AutoMed Solutions White Paper

2. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
Page 2
Introduction
Effective July 1, 2009, auto no-fault insurers will be required to determine the
beneficiary status for all claims as part of an amendment to the Medicare Secondary
Payer statute. Auto no-fault insurers must report details of any settlement involving a
Medicare beneficiary to the Centers for Medicare and Medicaid Services (CMS) or
face fines of $1,000 per day per claim.
Since non-compliance is costly, it is critical for auto no-fault insurers to formulate a
plan now for addressing the new requirement. This position paper provides
background on the Medicare Secondary Payer statute and what it means for no-fault
insurers. It also offers insight on how pharmacy benefit managers can assist with
aspects of the law that pertain to certain medical expenses.
Overview of the Medicare, Medicaid and SCHIP Extension
Act of 2007
The Medicare, Medicaid and SCHIP Extension Act was signed into law by President
Bush in December 2007. This act amends the existing Medicare Secondary Payer
statute by establishing new reporting guidelines for all liability insurers, including
auto no-fault insurers. Essentially, the law is designed to prevent auto no-fault
insurers from shifting financial responsibility for medical expenses to the federal
government.
The term Medicare Secondary Payer means that another entity, and not Medicare,
has the primary responsibility for a claim. By law, Medicare is supplemental to no-
fault insurance when the injury date is on or after December 5, 1980. That means all
suppliers, physicians, providers and so forth must bill the no-fault insurer first and
Medicare second.1
A Medicare eligible person is one who is either 65 years old or older, younger than
65 with a disability and has received Social Security disability benefits for 24 months,
or has been diagnosed with end-stage renal disease.
According to the new provisions, no-fault insurers must report Medicare eligible
claims that occur on or after July 1, 2009, as well as those with an ongoing
responsibility for payment of medical services. CMS provides helpful example

3. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
Page 3
reporting scenarios on pages 36-39 of the MMSEA Section 111 Medicare
Secondary Payer Mandatory Reporting User Guide.2
Non-compliance is stiff and may not only result in fines, but failure to comply with the
Medicare Secondary Payer statute can also result in serious repercussions such as
litigation against the auto no-fault insurer. In addition, CMS could potentially recover
double the amount of Medicare payments and/or refuse payment for the treatment
related to the injury.
Medicare Set-Aside Arrangements Defined
A Medicare Set-Aside arrangement (MSA) is a federally-mandated account used to
pay future medical expenses for conditions related specifically to the coverage of the
policy. For example, in auto no-fault this would be medical conditions related
specifically to the automobile accident.
Auto no-fault insurers will be required to project all future medical expenses,
including prescription drug costs, when submitting information related to Medicare
Set-Asides. This will ensure that money is earmarked from a settlement to pay for
future, injury-related, Medicare-covered services.
MSA arrangements are determined using analysis of the claim and medical
information. The analysis accounts for the following information:
• Date and nature of the injury
• Type and extent of the injury or illness
• Rated age of the injured party and life expectancy
• Date and basis of Medicare entitlement
• Review of medical and pharmacy payment history
• Comprehensive review of medical records
• Physician recommendations
• Extent of disability
• Medicare coverage limitations
• Fee schedules and future medical needs for treatment of the injury through life
expectancy (life care plan or detailed cost projections)

4. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
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Steps for Complying with the New Law
Auto no-fault insurers should begin planning now and put proper processes into
place to ensure compliance by July 1, 2009. A pharmacy benefit manager provides
the expertise necessary to complete a pharmaceutical cost projection, which is often
the most costly portion of the MSA.
A pharmaceutical cost projection can provide insurers with valuable information and
potentially save settlement dollars. Pharmaceutical cost projections should be
conducted by highly credentialed pharmacists specializing in pain management with
experience in retail, home delivery, home infusion, hospital and managed care
pharmacy.
A comprehensive pharmaceutical cost projection report is completed based upon review
of prescription drug history and medical records. A clinical pharmaceutical team ensures
that only diagnosis and age appropriate treatment recommendations are included in the
review.
Pharmacy benefit managers should have evaluations performed by clinical pharmacists
to project reasonable and necessary treatment regimens for the allowed conditions. Cost
projections are based on the current treatment program and best practice guidelines
(evidence-based medicine).
Clinical pharmacists should also be available to collaborate with physicians to make
appropriate treatment changes, if applicable, which may prove to be more cost effective.
Additional Benefits of Obtaining Pharmaceutical Cost
Projections
In addition to compliance with the expanded Medicare Secondary Payer statute,
there are numerous benefits of obtaining pharmaceutical cost projections for auto
no-fault claims.
Managing medication costs has become a key business issue for auto no-fault
insurers, with approximately $3.26 billion in medication expenses associated with
auto accidents each year.3

5. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
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Challenges associated with managing medication costs include price inflation,
paying for expensive brand medications and filling non-compensable medications.
On average, inappropriate utilization of prescription medications costs auto no-
fault insurers an additional 10 to 15 percent each year due to overspending.4
Without proper management, these challenges can cause an overall rise in the
cost of pharmacy expenses and a decrease in insured satisfaction.
Auto no-fault insurers can gain more control over medication costs by putting the
proper processes into place. A solid understanding of settlement costs combined
with a strong utilization review program can provide greater insight into total
medication costs while streamlining pharmacy benefits. This can result in
significant cost savings for auto no-fault insurers and reduce overall settlement
dollars where Medicare is involved.

6. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
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About AutoMed Solutions
AutoMed Solutions, powered by Progressive Medical, is a pharmacy benefit
manager that has provided pharmacy management solutions for more than 20
years. Here are some features and benefits of AutoMed Solutions Pharmaceutical
Cost Projections:
• Conducted by highly credentialed pharmacists holding degrees from Bachelor
of Science to Doctorate of Pharmacy who are pain management specialists
with experience in retail, home delivery, home infusion, hospital and managed
care pharmacy.
• Completed based upon review of prescription drug history and medical records.
• Include diagnosis and age appropriate treatment recommendations in the
review.
• Performed by clinical pharmacists to project reasonable and necessary
treatment regimens for the allowed conditions.
• Based on current treatment programs and best practice guidelines (evidence-
based medicine).
• Include clinical pharmacists collaborating with physicians to make appropriate
treatment changes, if requested, which may prove to be more cost effective.
For more information on Pharmaceutical Cost Projections offered by AutoMed
Solutions, please call 866.271.8678 or visit www.progressive-medical.com.

7. The Impact of New Medicare Reporting Enforcement
Requirements on Auto No-Fault Insurers
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References
1
MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide
2
MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting User Guide
3
PhRMA, Prescription Medicine Spending Trends, July 26, 2006
4
Progressive Medical, Inc., Internal Audit, 2006