Civil Monetary Penalties relating to Medicare and Medicaid Services

October 13, 2023by Milling Law0

By Bruce Cranner

The Centers for Medicare and Medicaid Services (CMS) has finalized and published the rule specifying how and when it will calculate and impose civil monetary  penalties (CMPs) when Group Health Plan (GHP) and Non-Group Health Plan (NGHP) Responsible Reporting Entities (RREs) fail to meet their Medicare Secondary Payer (MSP) reporting obligations.  The text of the Final Rule, as published at 42 CFR 402, can be found at and is attached hereto.

The Final Rule will become effective on December 11, 2023.

Failure to report is the sole basis for imposition of CMPs. Contradictory reporting and errors in reporting were included as grounds for CMPs are not included in the Final Rule. Failure to timely report prevents CMS from promptly and accurately determining the proper primary payer and taking the appropriate actions. CMPs are designed to address this issue.

GHPs: Timeliness is defined as reporting to CMS within one year of the date GHP coverage became effective.

NGHPs: Timeliness is defined as reporting to CMS within one year of the date of a settlement, judgment, award, or other payment obligation (or the date of funding of a settlement, judgment, award, or other payment, if funding is delayed), or the date when an entity’s Ongoing Responsibility for Medicals (ORM) became effective.

CMS developed an audit process to identify noncompliance.

•    CMS will audit a randomized sample of recently added beneficiary records. CMS has determined that it will be possible to audit a total of 1,000 records per calendar year across all RRE submissions, divided equally among each calendar quarter (250 individual beneficiary records per quarter).

•    A proportionate number of GHP and NGHP records based upon the pro-rata count of recently added records will be evaluated.  For example, if over the calendar quarter being evaluated, CMS received 600,000 GHP records and 400,000 NGHP records for a total of 1,000,000 recently added beneficiary records, then 60 percent of the 250 records audited for that quarter would be GPH records and 40 percent would be NGHP records.

•    At the end of each calendar quarter, CMS will randomly select the indicated number of records and analyze each record for compliance.

The penalties for GHPs and NGHPs are calculated differently because CMS does not have statutory authority to adjust the penalty amount imposed on GHPs.

GHPs: For any selected record that is more than 1 year (365 calendar days) late, a penalty of $1,000 per day (adjusted annually for inflation) will be imposed.

NGHPs: For any selected record determined to be noncompliant, a tiered approach to penalties will be implemented.

To calculate the penalty imposed against an RRE, CMS will multiply the number of audited records found to be noncompliant by the number of days each record was late (in excess of 365 days).  The resulting product will then be multiplied by the appropriate penalty amount.

NGHP Tiered Penalty Approach: 

For any record selected via the random audit process where the NGHP RRE submitted the information more than 1 year after the date of settlement, judgment, award, or other payment obligation (including assumption of ORM for medical care), the daily penalty will be:

$250.00 for each calendar day of noncompliance where the record was reported more than 1 year but less than 2 years after the required reporting date.

$500.00 for each calendar day of noncompliance where the record was reported more than 2 years but less than 3 years after the required reporting date.

$1,000 for each calendar day of noncompliance where the record was reported 3 years or more after the required reporting date.

Penalties are adjusted annually for inflation pursuant to 45 CFR part 102.

Safe Harbors
No penalty will be imposed if any of the following apply.

NGHP Good Faith Efforts to Obtain Identifying Information

The NGHP RRE makes good faith efforts to obtain the beneficiary’s name, date of birth, gender, Medicare Beneficiary Identifier (MBI), Social Security Number (or last 5 digits) and those efforts are documented.  To satisfy the Safe Harbor, the NGHP must perform the following action:

1.    Communicate the need for the information to the beneficiary and his/her attorney or other representative, if applicable, or both.

2.    Request the information from the beneficiary and his/her attorney or other representative (if applicable) at least three times

a.    Once in writing (including electronic mail);
b.    Once more by mail; and
c.    Once more by phone or other means of contact in the absence of a response.

3.    If the RRE receives a written response from the beneficiary or their attorney or representative that clearly and unambiguously declines or refuses to provide any portion of the required information, no additional communication is required.

4.    The documented refusal must be maintained for at least 5 years.

 Technical or System Issues Outside of the RRE’s Control 

The untimely reporting is the result of a technical or system issue outside of the control of the RRE, or that is the result of an error caused by CMS or one of its contractors.

 Recent Policy or Procedural Change 

The NGHP or GHP noncompliance is due to a CMS policy or procedural change that has been effective for less than 6 months following the implementation of that policy or procedural change (or for 1 year if CMS failed to provide at least 6 months’ notice before implementing the change).

Compliance with Reporting Thresholds or Reporting Exclusions 

The NGHP or GHP entity complied with any reporting thresholds or other reporting exclusions.

Observations and Additional Information:

Statute of Limitations: CMS has 5 years from discovery of the noncompliance to enforce CMPs.

Appeals: CMS will follow the formal appeals process set forth in 42 CFR 402.19 and 42 CFR part 1005.  An informal notice (described as a written pre-notice) will precede the formal notice of the CMP.  The RRE will have 30 days to respond with mitigating factors before issuance of the formal written notice.  CMS encourages RREs to submit all mitigating factors, and there are no strict limits on acceptable documentation.

Double damages and interest for failure to reimburse Medicare: The penalties addressed in the Final Rule on CMPs pertain to Section 111 reporting only. The Medicare Secondary Payer Act (MSPA) provisions have not been revised and are not impacted by the Final Rule.  The potential for double damages and interest for failure to properly and timely reimburse Medicare remains in place.

Termination of ORM:  The Final Rule does not appear to impose penalties for failure to report termination of ORM.  Additional clarification from CMS will be obtained.

 MSP Termination Date for GHPs:  The Final Rule does not appear to impose penalties for failure to enter an MSP Termination Date. Additional clarification from CMS will be obtained.

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