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

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

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

CMS recently expressed an unexpected—and perhaps foreboding—interpretation of that limitation period. During a CMS Town Hall meeting held on January 14, 2020, CMS stated that the three-year limitation applies only to legal actions initiated by the United States or CMS itself, and not to CMS contractors tasked with collection efforts under the SPA. [The slides from that Town Hall meeting can be found here.]

CMS provided no further clarification about this distinction. That leaves a significant and pressing question: What is the practical impact of applying the limitation period only to the United States? One interpretation is that CMS may be signaling that the three-year limitation period does not apply to recovery efforts pursued by Medicare Advantage Organizations (MAOs), private Medicare supplemental insurers, or other non-governmental entities attempting to seek reimbursement for medical expenses.

Importantly, this interpretation also supports the position that providing notice to CMS does not necessarily satisfy the notice requirements for these other actors—especially private insurance companies administering plans under Medicare. In other words, a liability carrier’s SMART Act report to CMS may not shield your client from claims down the line by other Medicare-related entities.

Right on cue, the Eleventh Circuit issued its opinion in MSPA Claims v. Kingsway Amigo, 2020 U.S. App. LEXIS 4554 (Feb. 13, 2020), holding that a MAO’s private right of action is governed by § 1395y(b)(2)(B)(iii). The court confirmed that such an action may not be brought “…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.”

With more private entities relying on the Secondary Payer Act’s private right of action—often coupled with demands for double damages—understanding the applicable limitations period becomes critical.

Plan of Action:

1. Report Broadly. Ensure that all settlements and recoveries are reported to all CMS-related entities. This includes not only CMS, but also all MAOs, CMS supplemental plans, and Medicare Part D providers.
2. Ensure Accuracy. Confirm that the liability carrier’s SMART Act settlement report to CMS is both timely and accurate. That means it should include only the ICD-10 codes related to injuries that are actually being compensated in the settlement. The best way to control this is to specify the injuries and the corresponding ICD-10 codes in the settlement documentation itself.

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