[Federal Register Volume 63, Number 57 (Wednesday, March 25, 1998)]
[Proposed Rules]
[Pages 14506-14526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4230]
[[Page 14505]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Parts 401, 403, et al.
Medicare Program; ``Without Fault'' and Waiver of Recovery From an
Individual as It Applies to Medicare Overpayment Liability; Proposed
Rule
Federal Register / Vol. 63, No. 57 / Wednesday, March 25, 1998 /
Proposed Rules
[[Page 14506]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 401, 403, 405, 410, 411, 413, 447, 466, 473, and 493
[HCFA-1719-P]
RIN: 0938-AD95
Medicare Program; ``Without Fault'' and Waiver of Recovery from
an Individual as it Applies to Medicare Overpayment Liability
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This rule would amend the Medicare regulations governing
liability for overpayments to eliminate application of certain
regulations of the Social Security Administration and to replace them
with HCFA regulations more specific to circumstances involving Medicare
overpayments. The following specific changes are included in this rule.
Explicit criteria and the circumstances under which a provider or
supplier can be relieved of liability for an overpayment on the basis
of being ``without fault'' with respect to the overpayment.
Specific criteria and circumstances of the conditions under which a
waiver of recovery for Medicare overpayments would apply to
individuals.
A provision to ordinarily consider it inequitable to recover an
overpayment from a without-fault individual when an overpayment is made
to a without-fault provider.
Specific provisions that enable Medicare intermediaries and
carriers to determine without fault in Medicare overpayments resulting
from Medicare secondary payer conditional payments.
Provisions that grant Peer Review Organizations the authority to
make without-fault determinations.
Provisions for an administrative appeals process for providers and
suppliers with regard to a ``not-without-fault'' determination.
We expect this rule would prevent some providers and suppliers from
claiming without-fault status. This could reduce the number of
overpayment liabilities passed on to individuals and result in a slight
increase in the amount of money recovered.
DATES: To ensure consideration, comments must be mailed or delivered to
the appropriate address, as provided below, and be received by 5 p.m.
on May 26, 1998.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1719-P, P.O. Box 26676,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses: Room 309-G, Hubert H.
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201,
or Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-1719-P. Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of this document, in Room 309-G
of the Department's offices at 200 Independence Avenue, SW.,
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to
5 p.m. (phone: (202) 690-7890).
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date
of the issue requested and enclose a check or money order payable to
the Superintendent of Documents, or enclose your Visa or Master Card
number and expiration date. Credit card orders can also be placed by
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8. As an alternative, you may view and
photocopy the Federal Register document at most libraries designated as
Federal Depository Libraries and at many other public and academic
libraries throughout the country that receive the Federal Register.
FOR FURTHER INFORMATION CONTACT: David Walczak (410) 786-4475.
SUPPLEMENTARY INFORMATION:
I. Background
In any large organization that makes payments to a substantial
number of individuals, providers, and suppliers, excesses in payment
amounts may occur. Medicare overpayments are Medicare funds an
individual, provider, or supplier has received that exceed amounts due
and payable under the Medicare statute and regulations. (The Medicare
rules at Sec. 400.202 define a ``supplier'' as ``a physician or other
practitioner, or an entity other than a provider, that furnishes health
care services under Medicare.'' Therefore, in this preamble, we have
used the term ``supplier'' to include a physician.)
Overpayments generally result when payment is made by Medicare for
noncovered items or services, when payment is made that exceeds the
amount allowed by Medicare for an item or service, or when payment is
made for items or services that should have been paid by another
insurer (Medicare secondary payer obligations). Once a determination
and any necessary adjustments in the amount of the overpayment have
been made, the remaining amount is a debt owed to the United States
Government.
Section 1870 of the Social Security Act (the Act) provides a
framework within which liability for Medicare overpayments is
determined and recoupment of overpayments is pursued. This framework
prescribes a certain flow of events (that is, a decisionmaking process)
that must be followed when pursuing the recoupment of Medicare
overpayments.
Specifically, section 1870(a) of the Act provides that a payment to
a provider or a supplier is considered to be a payment to the
individual who received the items or services. Therefore, all
overpayments (with the exception of certain aggregate overpayments
described later in this preamble) are considered to be an individual's
overpayments. However, under section 1870(b) of the Act, if payment was
made to a provider or supplier, Medicare looks first to recover any
associated overpayment from the provider or supplier unless: (1) The
provider or supplier is ``without fault'' with respect to the
overpayment, or (2) the Secretary determines that the overpayment
cannot be recouped from the provider or supplier. Section 1870(b) of
the Act also specifies that, in the absence of evidence to the
contrary, without fault is administratively presumed for a provider or
supplier when an overpayment is discovered after the third calendar
year following the year in which notice of the payment was sent to the
provider or supplier.
In accordance with section 1870(b) of the Act, if an overpaid
provider or supplier is determined to be without fault or the
overpayment cannot be recouped from the provider or supplier or the
individual was paid directly by the Medicare program, the individual is
liable for the overpayment, and Medicare seeks recovery from the
individual. In the case of an individual who is liable for an
overpayment, section 1870(b) of the Act provides for recovery by
adjusting cash benefits by
[[Page 14507]]
decreasing subsequent title II payments (social security retirement,
survivors, and disability cash benefits) or railroad retirement
benefits to which the individual (or other person if the individual
dies before the adjustment has been completed) is entitled.
Under section 1870(c) of the Act, adjustment (or any other type of
recovery of an overpayment against the individual) is waived if the
individual is without fault with respect to the overpayment and if the
adjustment or recovery would ``defeat the purposes of title II or title
XVIII'' (Medicare Part A and Part B benefits) of the Act or would be
``against equity and good conscience.'' Section 1870(c) of the Act also
specifies that adjustment or recovery is deemed to be against equity
and good conscience if the overpayment resulted from expenses incurred
for items or services for which payment may not be made under Medicare
by reason of the provisions of section 1862(a)(1) or (a)(9) of the Act
(not reasonable and necessary or custodial care), and if the
Secretary's determination that the payment was incorrect was made after
the third year following the year in which notice of that payment was
sent to the individual.
II. Current Regulations and Instructions Dealing with Overpayments
The provisions of section 1870(a) through (d) of the Act are
incorporated in our regulations in Secs. 405.350 to 405.359
(``Liability for Payments to Providers or Suppliers and Handling of
Incorrect Payments''). Specifically, Sec. 405.350 (``Individual's
liability for payments made to providers and other persons for services
furnished the individual'') provides that an individual is liable for
an overpayment if the overpayment cannot be recouped from the provider
or supplier or if the provider or supplier is without fault with
respect to the overpayment. Section 405.350(c) further specifies that,
in the absence of evidence to the contrary, a provider or supplier is
deemed to be without fault if the overpayment determination was made
after the third year following the year in which a payment notice was
sent to the provider or supplier.
In accordance with Sec. 405.350, we look first to recoup an
overpayment from the provider or supplier unless: (1) We determine that
the overpayment cannot be recouped from the provider or supplier, or
(2) the provider or supplier is without fault with respect to the
overpayment. Currently, there are no criteria in our regulations
pertaining to when a provider or supplier is without fault, nor do our
regulations make reference to Social Security Administration (SSA)
regulations with respect to provider or supplier fault. However,
criteria are listed in section 3708 of the Medicare Intermediary Manual
and in section 7103 of the Medicare Carrier Manual that incorporate the
principles employed in the SSA regulations.
Under these manual instructions, a provider or supplier is without
fault if it exercised reasonable care in billing for and accepting
payment. Exercising reasonable care means that the provider or supplier
disclosed all material facts and, based on available information,
including but not limited to, the Medicare regulations and
instructions, had a reasonable basis for assuming that the payment was
correct. However, if the provider or supplier had reason to question
the payment, it must have promptly brought the question to the
attention of the appropriate Medicare contractor (intermediary or
carrier).
If the intermediary or carrier, acting on behalf of HCFA,
determines that the provider or supplier is liable for the overpayment
according to Sec. 405.350 and the applicable manual instructions, we
recoup the overpayment from the provider or supplier. If the
intermediary or carrier, acting on behalf of HCFA, determines that the
provider or supplier is not liable for the overpayment, liability rests
with the individual, regardless of whether the individual was without
fault. Whether an individual was without fault is not relevant to his
or her liability for the overpayment, but is considered in deciding
whether to waive adjustment or recovery of the overpayment.
Under Sec. 405.355 (``Waiver of adjustment or recovery''),
adjustment or recovery against the individual is waived if the
individual is without fault with respect to the overpayment and if
recovery would cause substantial financial hardship so that the
purposes of title II or title XVIII of the Act would be defeated or if
recovery would be against equity and good conscience. Section 405.356
(``Principles applied in waiver of adjustment or recovery'') specifies
that the principles applied in determining waiver of adjustment or
recovery are the applicable principles found in SSA regulations at 20
CFR 404.506 through 404.509, 20 CFR 404.510(a), and 20 CFR 404.512.
These regulations, in part, define ``fault'' (as used in without fault)
and explain the conditions for waiver of the adjustment or recovery if
an incorrect payment has been made under title II or title XVIII of the
Act. (Before we were established as a separate agency, SSA was
responsible for both the social security cash benefit program and the
Medicare program. Consequently, the two programs have many identical
regulations that embody SSA's understanding of the terms used in the
overpayment recoupment process.)
Under Sec. 405.356 of our regulations, intermediaries and carriers,
acting on behalf of HCFA, currently determine if an individual is
without fault, based on SSA regulations at 20 CFR 404.507 (``Fault'').
Under 20 CFR 404.507, the following three elements are considered in
determining fault:
Whether the overpayment resulted from an incorrect
statement made by the individual that he or she knew or should have
known to be incorrect.
Whether the overpayment resulted from the individual's
failure to furnish information that he or she knew or should have known
to be material.
Whether the overpayment resulted from acceptance of a
payment that he or she either knew or could have been expected to know
was incorrect. These criteria provide the foundation for making
individual waiver of adjustment or recovery decisions.
Under Sec. 405.355, we may waive all or part of a recovery against
an individual who is found to be without fault if recovery would defeat
the purposes of title II or title XVIII of the Act or would be against
equity and good conscience. We currently use as a basis for making
these determinations the definitions for these terms found in SSA
regulations at 20 CFR 404.508 (``Defeat the purpose of title II'') and
20 CFR 404.509 (``Against equity and good conscience; defined'').
Under 20 CFR 404.508, ``defeat the purpose of title II'' means to
deprive a person of income required for ordinary and necessary living
expenses. Ordinary and necessary expenses, as specified in 20 CFR
404.508, include the following:
Living expenses, such as food and clothing, rent, mortgage
payments, utilities, maintenance, insurance (for example, life,
accident, and health insurance including premiums for supplementary
medical insurance benefits under title XVIII), taxes, and installment
payments.
Medical, hospitalization, and other similar expenses.
Expenses for the support of others for whom the individual
is legally responsible.
Other miscellaneous expenses that may reasonably be
considered as part of the individual's standard of living.
Using these criteria, 20 CFR 404.508(b) specifies that adjustment
or recovery will defeat the purpose of title II, for example, if the
person from whom recovery is sought needs substantially all of his or
her current income
[[Page 14508]]
(including social security monthly benefits) to meet current ordinary
and necessary living expenses.
Under 20 CFR 404.509, recovery of an overpayment is against equity
and good conscience in the following circumstances:
Because the individual relied on a notice that payment
would be made, or actually received the erroneous payment, the
individual--
* Changed his or her position for the worse; or
* Relinquished a valuable right.
The individual was living in a separate household from the
overpaid person at the time of the overpayment and did not receive the
overpayment. That section further specifies that the individual's
financial circumstances are not material to a finding of against equity
and good conscience.
HCFA, through its intermediaries and carriers, currently makes
determinations of without fault with regard to providers and suppliers.
Intermediaries and carriers also coordinate the waiver process if the
individual is liable for the overpayment. When an overpayment consists
of both Medicare Part A and Part B claims, the lead intermediary or
carrier, that is, the one that has paid the most in benefits, is
responsible for coordinating the without-fault determinations and the
waiver request process. The lead intermediary or carrier coordinates
Medicare's activities with all parties, including the intermediary or
carrier, the individual or his or her representative(s), the liability
insurer or tort-feasor (in Medicare secondary payer cases), and the
HCFA regional office, to ensure that the overpayment situation is
resolved in accordance with our guidelines.
III. Problem Areas Within the Framework of the Current Regulations
and Our Proposed Revisions to the Regulations
A. Without Fault
1. Differences Between the Social Security and Medicare Programs
The proposed regulations regarding without fault will clarify
circumstances unique to the Medicare context because the social
security regulations do not consider the different roles played by the
individual within the social security and Medicare programs. These
roles that an individual plays in obtaining benefits from each of the
programs are significantly diverse. As a social security claimant, the
individual (or his or her representative) receives a cash benefit
directly from SSA, generally with no third party involved. As a result,
the individual has a very proactive role in providing accurate
information to obtain this benefit and has a direct degree of
responsibility in accepting the SSA payment each month.
The individual entitled to Medicare, on the other hand, generally
receives items or services from a provider or supplier that, in turn,
directly bills and accepts payment from the Medicare contractor on
behalf of the individual. (There are exceptions to this arrangement, as
described later in this preamble.) The information furnished by the
individual with respect to the Medicare claim is minimal; most claim-
related information is furnished by the provider or supplier.
Therefore, the individual entitled to Medicare, in obtaining and
accepting Medicare benefits, does not have the same role as a social
security claimant.
Because of these role distinctions, the SSA regulations are not
always clearly transferable to Medicare overpayment situations. For
example, the term ``fault,'' as described in the SSA regulations,
focuses on the individual's disclosure of accurate information. This
element is emphasized because a social security claimant is in control
of all of his or her financial information (for example, receipt of
benefit checks and employment information) that often determines the
outcome of the claim. SSA relies primarily on the claimant's own self-
reporting and disclosure. A social security claimant receives a benefit
payment directly and is in a position to know if he or she received
more than the correct payment due under title II of the Act.
In contrast, Medicare relies largely on information received from
providers and suppliers to determine payment amounts. The individual
entitled to Medicare does not have the same control that a social
security claimant has in the outcome of a claim. Under most
circumstances (with the exception of cases involving unassigned Part B
claims and certain Medicare secondary payer situations), the individual
entitled to Medicare receives no actual payment and does not know if
the payment made under Medicare is correct. Generally, the information
generated by a provider or supplier, not information provided by the
individual, causes the overpayment to be made. The SSA regulations do
not take into account the significant difference between the role an
individual plays in receiving social security cash benefits and in
receiving Medicare benefits and, therefore, the social security
regulations are not always transferable to Medicare overpayment
situations.
2. Differences Resulting From Provider and Supplier Involvement
In addition, the SSA regulations do not take into consideration the
role that a provider or supplier plays in administering Medicare
benefits. While 20 CFR 404.507 describes what constitutes fault (as it
relates to without fault) on the part of an overpaid individual, it
makes no specific reference to without fault as it pertains to a
provider or supplier and does not adequately provide for situations
when a determination regarding without fault must be made for providers
or suppliers.
While the criteria in 20 CFR 404.507 can generally be applied to
all recipients of payments, they do not specifically consider
substantive differences between an individual and a provider or
supplier billing for and accepting Medicare payment. (Generally, the
recipient of a Medicare payment is a provider or supplier. However, in
the case of unassigned claims, the recipient is the individual.)
Because of Medicare provisions that require all providers and suppliers
to submit claims on behalf of individuals, the individual entitled to
Medicare does not participate in the actual claim filing process in a
significant way. Also, in most instances, it is the provider or
supplier, not the individual, that actually receives the Medicare
payment. This is because most providers and suppliers agree to bill
Medicare directly and to accept the payment amount as determined under
the applicable payment system (prospective payment, reasonable cost
method, fee schedule, or reasonable charge method) as total payment for
covered services. For providers, this is accomplished by entering into
a Medicare provider agreement. Suppliers accomplish this either by
agreeing to accept assignment on an individual claims basis or by
entering into a Medicare participation agreement. Under these
circumstances, the individual is responsible for providing the entity
with the correct insurance information and authorizing the claim by
signing the claim form; however, he or she plays no direct role in the
claim filing process and receives no direct payment.
In the case of a supplier that does not accept Medicare assignment,
the individual pays the supplier directly. The claim is submitted to
the Medicare contractor by the supplier, and the Medicare contractor
pays the individual directly. Although in these situations the
individual receives payment directly, he or she normally has no way of
knowing if the Medicare payment
[[Page 14509]]
amount for the item or service he or she received is correct.
These differences raise questions as to whether the same criteria
should be applied both to the individual and to the provider or
supplier when determining without fault with regard to an overpayment.
In particular, determining if the recipient of the payment knew, or
could reasonably be expected to know, that the payment amount was
incorrect depends on determining the level of information available to
the recipient.
The information available to a provider or supplier is more
extensive than that available to an individual. We furnish instruction
manuals to providers, and intermediaries and carriers send detailed
instructions, such as newsletters, to suppliers. This direct access to
Medicare payment information should impart a degree of knowledge and
responsibility to both providers and suppliers that does not apply to
individuals.
For example, a provider or supplier that receives an unusual
payment amount for a routinely billed service should be in a better
position than the individual to question and determine whether the
payment amount is correct. This is because of the information available
to a provider or a supplier (for example, a physician should know the
Medicare physician fee schedule payment amount for a particular
service). Although the individual may directly receive a Medicare
payment, an Explanation of Medicare Benefits or a Notice of Utilization
showing that Medicare payment has been made, the individual normally
has no way of knowing if the Medicare payment amount for a particular
covered service or item is correct.
Thus, we propose revisions to the regulations that consider the
substantive differences between an individual accepting a Medicare
payment and a provider or supplier billing for and accepting a Medicare
payment.
3. Revisions Proposed to Reflect Circumstances Unique to Medicare
a. Without Fault as it Applies to Individuals Entitled to Medicare.
In this rule, we propose to add regulations that are specifically
applicable to individuals entitled to Medicare for determining without
fault in Medicare overpayment situations. We propose that an individual
be considered to be without fault with respect to a Medicare
overpayment if he or she exercises reasonable care in requesting
Medicare payment and in accepting Medicare payment.
Under these proposed regulations, an individual exercised
reasonable care if he or she accepted a payment that he or she did not
know, or could not reasonably have been expected to know, was
incorrect; accepted a payment that, on the basis of information
available, he or she could reasonably assume was correct; or accepted
payment because of reliance on erroneous written information on the
interpretation of a pertinent provision of the Act or implementing
regulations from an official source within HCFA, SSA, or a Medicare
contractor.
Conversely, we propose that an individual is not without fault when
the individual: (1) Receives prior written notice that a particular
item or service was not covered by Medicare; (2) makes an incorrect
statement or withheld information to obtain benefits that were not due
him or her; (3) accepts a payment that he or she knew or should have
known was not due; or (4) receives a prior determination of liability
under the limitation on liability provisions in section 1879 of the Act
for the specific items or services for which a without-fault
determination is being made.
Criteria to be considered in deciding whether an individual was
without fault would include the cause of the overpayment, the
individual's ability to realize that the payment was incorrect (based
on his or her age, education, and physical or mental state), and
whether the individual could reasonably be expected to have taken
action to prevent the overpayment from occurring.
b. Without Fault as it Applies to Providers and Suppliers. We
propose to incorporate in regulations criteria that currently exist in
the Medicare Intermediary Manual, the Medicare Carrier Manual, and 20
CFR 404.506.
Under these proposed regulations, providers or suppliers are ``not
without fault'' unless they exercise reasonable care in billing for and
accepting Medicare payments and either: (1) Did not know, and could not
reasonably have been expected to know, that Medicare payment exceeded
amounts payable under the Medicare statute and regulations and,
therefore, accepted payment based on a reasonable assumption that the
payment was correct; or (2) did know, or could reasonably have been
expected to know, that Medicare payment exceeded amounts payable under
the Medicare statute and regulations but questioned the appropriate
intermediary or carrier in writing, within 60 days of receipt of the
excess payment. If, after questioning the appropriate intermediary or
carrier, the provider or supplier relied on a written response from the
intermediary or carrier that stated that the Medicare payment was
correct, or failed to receive a response from the intermediary or
carrier within 120 days of the intermediary's or carrier's receipt of
the written inquiry, the provider or supplier is without fault.
We propose that the exercise of reasonable care in billing includes
making full disclosure of all material facts and complying with each
applicable provision specified in subpart C (``Claims for Payment'') of
part 424, including the supplying of all the necessary information on
the billing form, to ensure correct payment by the intermediary or
carrier. We further propose criteria for determining that a provider or
supplier knew, or could reasonably have been expected to know, that
Medicare payment exceeded amounts payable under the Medicare statute
and regulations. Under these proposed criteria, a provider or supplier
is considered to have known that Medicare payment exceeded amounts
payable under the Medicare statute and regulations if any one of the
following conditions is met:
It had knowledge that payment exceeded amounts payable
under the statute and regulations based on experience, actual notice,
or constructive notice, including (except in very limited circumstances
described later in this preamble) final publication of payment amounts
in official source documents; receipt of HCFA notices including manual
issuances, bulletins, or other written guides or directives from
intermediaries, carriers, or Peer Review Organizations; or experience
with Medicare payment amounts for similar or reasonably comparable
items or services. Under this criterion, final publication of payment
amounts in official source documents includes correction notices that
are published after the initial publication.
It received prior notice from the peer review
organization, intermediary, or carrier of the correct Medicare payment
for the items or services furnished or for similar or reasonably
comparable items or services.
It gave the individual prior notice of the correct
Medicare payment for the items or services furnished or for similar or
reasonably comparable items or services.
These proposed criteria are similar to those contained in
Sec. 411.406 (``Criteria for determining that a provider, practitioner,
or supplier knew that services were excluded from coverage as custodial
care or as not reasonable and necessary''). Those criteria are used to
determine if a provider or supplier is liable for payment of an item or
service
[[Page 14510]]
under the limitation on liability provisions in section 1879 of the Act
because of knowledge that Medicare payment for the item or service
would be denied.
Because the criteria we propose in the without fault regulations is
based, in part, on the limitation on liability provisions, we propose
that a provider or supplier that has already been determined liable
under the limitation on liability provisions in section 1879 of the Act
for a specific item or service cannot be found without fault with
regard to the overpayment for that specific item or service.
c. Without Fault as it Applies to Peer Review Organization
Responsibilities. Because this proposed rule would furnish providers
and suppliers with appeal rights for determinations that the provider
or supplier must repay an overpayment because the provider or supplier
is not-without-fault (discussed later), we are considering expanding
the responsibility for making without-fault determinations to peer
review organizations. Although our final decision may be that
intermediaries and carriers make the without-fault determinations for
overpayments resulting from peer review organization determinations, we
want to provide as much flexibility as possible in exploring this
issue. Therefore, we propose revising our regulations to provide peer
review organizations with the authority to make without-fault
determinations. However, it should be noted that intermediaries,
carriers, and peer review organizations that make determinations are
acting on behalf of HCFA.
d. Without Fault as it Applies to the Prospective Payment System.
Under section 1886(d) of the Act, effective with hospital cost
reporting periods beginning on or after October 1, 1983, we established
a system of payment for acute inpatient hospital stays under Medicare
Part A (Hospital Insurance), based on prospectively-set rates. Under
this prospectively-set rate system (the prospective payment system),
Medicare payment is made at a predetermined, specific rate for each
hospital discharge. All discharges are classified according to a list
of diagnosis-related groups. The regulations governing the inpatient
hospital prospective payment system are located at 42 CFR part 412.
Regarding payments under the prospective payment system, we are
required, under section 1886(e)(5)(B) of the Act, to publish by
September 1 of each year a list of diagnosis-related group categories
and provide instructions on calculating proper Medicare payment
amounts. Thus, hospitals paid under the prospective payment system
generally have a way to determine whether a payment is correct or
incorrect. Accordingly, these hospitals are generally liable for
refunding Medicare overpayments they receive under the prospective
payment system because, under most circumstances, they cannot be found
to be without fault since they have an independent means of
conclusively determining whether the prospective payment system payment
they accept is correct.
However, under our proposed rule, a provider may be found to be
without fault for payments under the prospective payment system in the
event of an error in our prospective payment system publication in the
Federal Register, relating to the diagnosis-related group for which the
hospital was overpaid. In these circumstances, a hospital that can
show, based on criteria specified in these proposed regulations, that
it did not know and could not reasonably have been expected to know
that a Medicare payment based on an erroneous published schedule of
payment amounts exceeded amounts payable under the Medicare statute and
regulations is considered to be without fault for the overpayment that
resulted from the erroneous published schedule of payment amounts. We
note, however, that this rule would not apply if a correction notice
containing the correct schedule of payment amounts has been published
in the Federal Register after the initial publication of the erroneous
schedule of payment amounts. In this instance, the correction notice
imputes the same responsibility for knowledge of the overpayment as a
correct published schedule of payment amounts.
If the hospital is without fault, liability shifts to the
individual under section 1870(b) of the Act. However, under these
circumstances, an individual will also be without fault because there
is nothing to indicate that the overpayment resulted from the
individual not exercising reasonable care in requesting and accepting
Medicare payment, as specified in our regulations. In addition,
recovery from the individual may be waived on the basis of ``equity and
good conscience'' with respect to Medicare overpayments of this type.
The same rules would also apply for Medicare payment for inpatient
hospital capital-related costs. In a final rule published on August 30,
1991 (56 FR 43358), a new subpart M was added to 42 CFR part 412 to
provide for a prospective payment system for hospital inpatient
capital-related costs. Previously, hospital inpatient operating costs
were the only costs covered under the prospective payment system.
However, section 1886(g)(1) of the Act now requires that capital-
related costs be paid under the prospective payment system effective
with cost reporting periods beginning after September 30, 1991, for
hospitals paid under the prospective payment system. Implementing
regulations are found at Sec. 412.300.
e. Without Fault and Aggregate Overpayment Issues. Under section
1870 of the Act, if a provider is found to be without fault for an
overpayment, the individual who received the service for which payment
was made is liable for the overpayment. Therefore, application of the
without fault provision in section 1870 of the Act is limited to
overpayments for individual claims for which lability can ultimately be
shifted to a specific individual.
Consequently, the without fault provisions under section 1870 of
the Act do not extend to aggregate overpayment issues, such as Medicare
cost report errors, because liability for an individual claim cannot be
shifted to a specific individual. For certain providers, aggregate
overpayments result from payments under a reasonable cost payment
methodology in which payment is made on an interim basis throughout the
year, with appropriate adjustments made upon settlement of annual cost
reports. Because Medicare cost report errors are not directly
associated with specific services, liability cannot be shifted from a
specific provider to a specific individual.
Thus, the without fault provisions of this proposed rule would not
apply to overpayments resulting from aggregate payment issues, such as
cost report errors. These overpayments are addressed in section 1878 of
the Act, which contains provisions relating to the Provider
Reimbursement Review Board and the circumstances under which a provider
may obtain a hearing with the Board.
f. Without Fault as it Applies to Payment Under the Medicare
Physician Fee Schedule. A major change in Medicare physician payment
rules was enacted as part of the Omnibus Budget Reconciliation Act of
1989, (OBRA 1989), Public Law 101-239. Section 6102 of OBRA 1989 added
to the Act a new section 1848, ``Payment for Physicians' Services.''
The new section contains three major elements: (1) A new fee schedule
for physicians' services based on a Resource-Based Relative Value Scale
to replace the reasonable charge payment mechanism; (2) a Medicare
volume performance
[[Page 14511]]
standard for the rates of increase in Medicare expenditures for
physicians' services; and (3) limits on the amounts that
nonparticipating physicians submitting unassigned claims can charge
individuals for covered services.
We issued a final rule on November 25, 1991, (56 FR 59502) to
implement section 1848 of the Act. (The physician fee schedule
regulations are set forth at 42 CFR part 414, subpart A.) Section 1848
requires that the fee schedule include national uniform relative values
for all physicians' services. The fee schedule is being phased in over
4 years, beginning in 1992, with the new rules fully effective in 1996.
During 1992 through 1995, transition provisions generally blend the old
payment amount with the fee schedule amount.
At the end of each calendar year, we send each physician and other
supplier a schedule of the next year's physician fee schedule amounts.
In addition, the fee schedule is published in the Federal Register each
year. Therefore, all physicians and other suppliers paid under the
physician fee schedule are generally in a position to determine whether
a payment is correct. Accordingly, physicians and other suppliers are
generally liable for refunding Medicare overpayments they receive under
this payment system because, under most circumstances, they cannot be
found to be without fault since they have an independent way of
conclusively determining whether the payment they accept is correct.
However, under our proposed rule, a physician or other supplier may
be found to be without fault if an error in the annual fee schedule for
the services for which the physician or supplier was overpaid is
published in the Federal Register. In these circumstances, a physician
or other supplier is considered to be without fault for an overpayment
resulting from the erroneous schedule if the physician or supplier can
show, based on criteria specified in these proposed regulations, that
he or she did not know and could not reasonably have been expected to
know that a Medicare payment based on an erroneous schedule of payment
amounts exceeded amounts payable under the Medicare statute and
regulations. We note, however, that this would not be the case if a
notice correcting the erroneous schedule has been published.
If the physician or other supplier is found to be without fault,
liability shifts to the individual under section 1870(b) of the Act.
However, under these circumstances, the individual will also be without
fault under our proposed regulations because there is nothing to
indicate that the overpayment resulted from the individual not
exercising reasonable care in requesting and accepting Medicare
payment. In addition, recovery from the individual may be waived on the
basis of equity and good conscience with respect to Medicare
overpayments of this type.
g. Without Fault As It Applies to Medicare Secondary Payer
Obligations. A large proportion of Medicare overpayments results from
Medicare secondary payer situations. Because the nature of Medicare
secondary payer obligations is somewhat different from other types of
Medicare overpayments, in that Medicare secondary payer situations
involve a conditional payment and a third party payer, the current
regulations addressing without fault pose particular problems for the
recovery of Medicare secondary payer obligations.
For example, if a conditional Medicare payment becomes a de facto
overpayment (that is, a primary payer pays after Medicare payment) as a
result of an individual's action that is unrelated to the filing of a
Medicare claim, direct application of the SSA regulations can be
difficult. The SSA regulations predate the Medicare secondary payer
provisions and, therefore, do not provide for them. Under the current
regulations, when an Medicare secondary payer obligation results from a
conditional Medicare payment for an individual who is injured in an
automobile or other accident, and who subsequently receives a
settlement or damage award, the individual is generally considered to
be without fault. This is because, within the framework of the SSA
regulations, the obligation does not result from failure to supply
information because even if the individual informs us of a pending suit
we frequently make a conditional payment for the claim.
Thus, when applying the SSA regulations, few circumstances will
ever arise when the individual could be found to be at fault in causing
an overpayment of this type. This de facto without-fault finding, when
coupled with financial or equity considerations, could result in
waiving recovery from the individual in the majority of cases, even
though the individual may have been instrumental in causing the
overpayment.
We do not believe this to be an appropriate outcome in Medicare
secondary payer contexts because, under our current operating
procedures, all individuals entitled to Medicare receive a Notice of
Utilization or an Explanation of Medicare Benefits showing that
Medicare has paid for services. Therefore, individuals are informed
that Medicare has made a conditional payment. We believe that, because
this information is available, a degree of responsibility should be
imputed to the individual or the individual's representative. We
believe that the individual who elects to pursue subsequent settlement
or damage awards for injuries from liability or no-fault insurers or,
in some cases, tort-feasors, should be responsible for notifying us of
this intent and protecting the proceeds until the Medicare claim is
satisfied. If the individual does not take this responsibility, he or
she should be found not without fault once a liability insurance
payment is made and we seek to recover our conditional payment.
All too often, we are not aware of an individual's liability suit
until a liability insurance payment is about to be made, or thereafter.
At that point, it is more difficult to assert Medicare's interest,
despite the fact that under the Medicare secondary payer statute,
Medicare has a priority right of recovery. The Congress intended that
Medicare payment would be available to individuals to pay for their
covered medical expenses to avoid their having to pay for their medical
expenses out-of-pocket. Since Medicare conditionally paid for these
medical expenses, Medicare is entitled, under the statute, to
reimbursement, as opposed to the individual collecting twice for the
same loss--first in the form of a benefit payment and then in the form
of a cash settlement.
We propose adding regulations that are specifically applicable to
determining without fault for Medicare overpayments resulting from
Medicare secondary payer conditional payments. We propose that a
provider or supplier will generally be not-without-fault with respect
to a Medicare payment in a Medicare secondary payer situation unless
the provider or supplier complied with all of the claims filing
requirements specified in 42 CFR part 411 and, in the case of
providers, the provider agreement provisions in 42 CFR part 489. In
addition, we are specifying in these regulations that the without fault
provisions do not apply to third party payers or other non-Medicare
entities involved in a Medicare secondary payer case.
With regard to individuals in Medicare secondary payer cases, we
propose that an individual would not be considered to be without fault
if the facts show that the individual failed to notify Medicare within
30 days of the receipt of a payment from an entity that is primary to
Medicare or the overpayment resulted because the
[[Page 14512]]
individual failed to file a proper claim, as required in regulations,
with an entity that is primary to Medicare; made an incorrect statement
or withheld information to obtain benefits that were not due him or
her; or accepted a payment that he or she should have known was not
due.
In some cases we seek recovery of Medicare secondary payer
obligations from group health plans as a result of the data match in
section 1862(B)(5) of the Act and other procedures. In those
situations, it would ordinarily be considered inequitable to recover
from the individual, and we will not recover the incorrect Medicare
payment from the individual unless the Medicare payment was made to the
individual.
In the past, we have required written notification when an
individual requests a waiver of recovery of an overpayment. However, on
July 10, 1995, we published a proposed rule (60 FR 35544) offering the
option of requesting by telephone a review of Part B initial claim
determinations. Consequently, we are also proposing in this document
that an individual may request to be found without fault and may
request waiver by telephoning the contact listed in the notice from the
carrier, intermediary, or HCFA.
We also propose to require that, if the individual or the
individual's representative received an Explanation of Medicare
Benefits or a Notice of Utilization that Medicare made a payment, and
the individual subsequently elects to pursue a liability settlement or
damage award for an illness or for injuries sustained in an accident,
he or she must notify the Medicare contractor within 60 days of filing
a suit or a claim with the insurer. Otherwise, he or she cannot be
considered to be without fault. Thus, when Medicare is billed for
services furnished to an individual, and the individual (or his or her
estate) pursues a liability or damage award or payment from another
source, he or she must notify the Medicare contractor both when a suit
or claim is filed and when payment is received from any source other
than Medicare. This notice requirement does not apply in MSP group
health plan situations. Failure to furnish the Medicare contractor with
both notices will result in the individual (or his or her estate) being
``at fault'' with respect to any resulting Medicare secondary payer
obligation.
To ensure that beneficiaries realize their obligation to notify the
Medicare contractor as proposed above, we would include these
requirements in general program information furnished to Medicare
beneficiaries, as well as in material (such as, pamphlets) that are
targeted to Medicare secondary payer situations. Also, we would include
these new requirements in any notice or communication we send to
beneficiaries in connection with potential liability situations.
B. Not-Without-Fault Determinations and the Appeals Process
Under current regulations (405.704(b)(14)), determinations
concerning the waiver of adjustment or recovery of overpayments are
considered initial determinations, for purposes of the Medicare appeals
process, under Medicare Part A and Part B with respect to individuals.
These determinations are often based on not-without-fault findings.
However, we do not have regulations that address not-without-fault
determinations made for providers or suppliers. We believe that our
regulations need to be revised to afford providers and suppliers an
explicit right to appeal determinations made under section 1870(b) of
the Act that they are not without fault and, therefore, that they must
repay an overpayment.
Although the Medicare statute does not specifically provide for
appeal rights for providers and suppliers regarding a not-without-fault
determination, we believe that the administrative appeals process
should include that issue. This process will ensure that, when a not-
without-fault determination is made, the adversely-affected party has a
due process right of appeal that is expressly recognized by regulation.
Therefore, we propose to revise the Medicare appeals regulations to
state that, if a provider or supplier that is not without fault
receives an initial determination that an overpayment must be refunded,
the issue of without fault would also be appealable.
C. Defeats the Purposes of Title II or Title XVIII of the Act and
Equity and Good Conscience
If it is determined that an individual entitled to Medicare is
without fault, we may waive all or part of a recovery against that
individual according to SSA regulations at 20 CFR 404.508 (``Defeat the
purpose of title II'') or 20 CFR 404.509 (``Against equity and good
conscience; defined''). SSA's definitions of these terms and the
examples cited in which they arise reflect SSA's assessment of how this
principle applies to recovery from a social security claimant when the
claimant has received more than the correct payment due under title II
of the Act. There are no illustrations that explain how to apply this
principle to a Medicare overpayment situation. As previously noted, an
individual entitled to Medicare and a social security claimant are in
distinguishable positions with respect to overpayments. For example,
the social security claimant is actually receiving a cash benefit.
However, the individual entitled to Medicare, in most cases, receives
no direct payment. Consequently, the SSA rules are not always directly
transferable to a Medicare overpayment situation and provide no clear
guidelines for their application to Medicare situations.
In particular, in the case of a Medicare secondary payer
overpayment, transferring the SSA regulations for granting a waiver
based on financial hardship or equity and good conscience poses a
specific problem. Because the SSA regulations predate the existence of
the Medicare secondary payer provisions, they were not written with
Medicare secondary payer situations in mind and contain no specific
illustrations applying to Medicare secondary payer recoveries. In
principle, in the Medicare secondary payer context, there is no basis
for the existence of financial hardship because the individual either
knows or may reasonably be expected to know from the inception of a
claim that Medicare has a priority right of recovery (that is, that we
can recover our conditional payments directly from the primary payer or
from any entity that received payment, directly or indirectly, from the
primary payer).
The facts of a particular circumstance, however, do not always
support this position. For example, suppose an individual entitled to
Medicare has received a cash settlement as a result of a liability suit
after receiving Medicare payment. Subsequently, the individual spends
the settlement proceeds without repaying Medicare. Within the framework
of the SSA regulations, the overpayment does not result from failure to
supply information since Medicare pays even if the individual makes us
aware of a pending suit. Therefore, the individual passes the first
test of being without fault.
The final settlement payment received by the individual as a result
of this liability suit could be small enough that an individual could
contend that reimbursing Medicare would cause economic hardship or
would be inequitable. Thus, it is possible that the individual would
not be required to repay Medicare for this type of overpayment because
of the application of the SSA regulations addressing without fault
coupled with the SSA definitions of ``defeats the purposes of title II
or title XVIII'' and ``against equity
[[Page 14513]]
and good conscience.'' We believe that the current Medicare overpayment
regulations should be revised to not preclude recovery of an
overpayment in Medicare secondary payer situations, but be written in a
way that does not unfairly disadvantage the individual or the Medicare
program.
Additionally, a 1990 Court of Appeals decision indicates that SSA's
definition of against equity and good conscience may be too narrow for
SSA or Medicare issues. In the court case, a social security claimant
challenged SSA's waiver denial determination that, although he was
without fault in causing the overpayment, recovery would not defeat the
purpose of title II or be against equity and good conscience. In an
unreported decision, the District Court for the Western District of
Washington upheld the waiver denial. However, the Court of Appeals for
the Ninth Circuit reversed the decision, holding that requiring the
plaintiff to repay the overpayment would be against equity and good
conscience. (Quinlivan v. Sullivan, 916 F.2d 524 (9th Cir. 1990)).
The Court indicated that, although the Act does not define the
phrase against equity and good conscience, the Secretary has
interpreted it, in 20 CFR 404.509, to be narrowly limited to situations
when (1) the claimant changed his or her position for the worse, (2)
relinquished a valuable right, or (3) lived in a separate household
from the overpaid person at the time of the overpayment and did not
receive the overpayment.
The Court was of the opinion that the Congress intended to broaden
the availability of the waiver (id. at 526). Accordingly, the Court
concluded that ``the meaning of the phrase, `against equity and good
conscience,' cannot be limited to the three narrow definitions set
forth in the Secretary's regulations. The Congress intended a broad
concept of fairness to apply to waiver requests, one that reflects the
ordinary meaning of the statutory language and considers the facts and
circumstances of each case'' (id. at 527). The Court favored the
against equity and good conscience interpretation used by the
Department of Veterans Affairs (VA) in its regulations at 38 CFR 1.965
(July 1, 1988 edition), published on July 19, 1974 (39 FR 26400) (id.
at 526 and 527, n.2).
The cited VA regulation indicates that the application of the
standard, ``equity and good conscience,'' will be applied when the
facts and circumstances in a particular case indicate a need for
reasonableness and moderation in the exercise of the Government's
rights. Under the VA regulations, equity and good conscience means
arriving at a fair decision between the obligor and the Government that
is not unduly favorable or adverse to either side.
In making a determination of equity and good conscience, the VA
regulation specified that consideration should be given, but should not
be limited, to the following elements: (1) Fault of the debtor; (2)
balance of faults; (3) undue hardship; (4) defeats the purpose for
which benefits were intended; (5) unjust enrichment; and (6) changed
position to one's detriment. In applying this single standard for all
areas of indebtedness, the VA regulation further indicates that
consideration should be given to the elements of (1) fraud or
misrepresentation of a material fact, (2) material fault, and (3) lack
of good faith; any one of which, if found, would preclude the granting
of a waiver.
Because the Quinlivan case related to a social security claimant,
we are not bound to follow that decision. However, a 1993 District
Court decision found that we were not using broad concepts of fairness
in reviewing waivers in Medicare secondary payer liability cases, nor
had we told our decision makers to ``base the waiver determination on
the totality of the circumstances.'' We submitted substantial materials
to the court to reflect our actual policies (contrasted with the
policies reflected in the SSA regulations) with regard to waiver of
recovery in Medicare secondary payer liability cases. However, despite
those representations, the court ordered us to formalize these policies
by way of written guidelines to ensure their application, instead of
the SSA policies, when reviewing whether waiver should be granted under
equity and good conscience in Medicare secondary payer liability
situations. The court, making reference to the Quinlivan case, further
ordered that the guidelines incorporate broad concepts of fairness and
not limit waivers to the three factual situations listed in 20 CFR
404.509. (Zinman v. Shalala, Civ. No. 90-20674 (N.D. Cal. September 24,
1993 and November 29, 1993)). The September ruling is reported at 835
F. Supp. 1135 (N.D. Cal. 1993).
As a result of that court ruling, we issued guidelines to all of
our regional offices on November 17, 1994. In those guidelines, we
incorporated our longstanding interpretation of against equity and good
conscience as that principle relates to Medicare overpayments. While
the guidelines were issued to apply to Medicare secondary payer
liability overpayment situations, we advised that they could also be
used as guidance in overpayment situations other than those involving
Medicare secondary payer liability cases.
We have always taken the broader view of equity and good conscience
that the Quinlivan and Zinman Courts endorsed. Not only do we find the
Courts' reasoning in those cases to be persuasive, we also find the
language of the VA regulation to be a useful guide. Accordingly, in
formulating standards for applying equity and good conscience to
Medicare situations for the guidelines issued in November 1994, we have
not only expressed our long-held expansive view of this concept, we
have also incorporated, to the extent possible, the VA approach in
expressing that policy.
We propose to incorporate into our regulations our current policies
regarding when recovery of an overpayment may be waived based on
financial hardship. Our current policies are in accordance with SSA's
definition of defeat the purposes of title II or title XVIII. Under
this proposed regulation, recovery of an overpayment would defeat the
purposes of title II or title XVIII when the individual needs
substantially all current income and assets to meet ordinary and
necessary living expenses.
We propose to consider the individual's current assets and ordinary
and necessary living expenses when evaluating requests for waiver based
on financial hardship. Ordinary and necessary living expenses would
include the following:
Current living expenses, such as food and clothing, rent,
mortgage payments, utilities, maintenance, insurance (for example,
life, accident, and health insurance including premiums for Part B
Medicare), taxes, and installment payments.
Current medical, hospitalization, and other related
expenses not covered by Medicare or another insurer.
Expenses for the support of others for whom the individual
is legally responsible.
Other miscellaneous expenses that may reasonably be
considered necessary to maintain the individual's current standard of
living.
In addition, we propose to include in the regulations examples that
demonstrate how the principles of defeat the purposes of title II or
title XVIII would be applied in Medicare overpayment situations.
We propose to add regulations that incorporate criteria to be used
when determining whether recovery of an overpayment may be waived based
on equity and good conscience. Our proposed regulations require that
the standard of equity and good conscience would be applied to Medicare
[[Page 14514]]
overpayment recoveries using broad concepts of fairness and reviewing
the totality of the circumstances in each particular case. We have used
as the basis for our proposed regulations both language from the VA
regulation on equity and good conscience found at 38 CFR 1.965, which
the U.S. Court of Appeals for the Ninth Circuit believes reflects the
intent of the Congress, and guidelines that were issued as a result of
the Zinman court case (as discussed earlier in this preamble).
Under the proposed regulations, factors to be considered when
applying the standard of equity and good conscience include, but are
not limited to, the following:
The amount of the overpayment.
The size of a liability settlement and the amount the
individual would retain if Medicare recovered.
The degree to which recovery would cause undue hardship
for the individual.
The degree to which Medicare and/or its contractors
contributed to causing the overpayment.
The degree to which the individual contributed to causing
the overpayment (even if determined to be without fault in accordance
with Sec. 401.355).
The impact of an accident on the individual, both
physically and financially.
Whether the individual would be unjustly enriched by a
waiver of recovery.
Whether it would be equitable for us to reduce the
recovery if the individual is responsible for noncovered accident-
related out-of-pocket expenses and/or future accident-related expenses.
Whether the individual made a personal financial decision
based on his or her reliance on erroneous information supplied to the
individual by Medicare or SSA, and recovery would change the
individual's position to his or her material detriment.
Also, we would provide several Medicare overpayment examples in
which waiver of recovery is being sought based on the concepts involved
with equity and good conscience to illustrate how those concepts are to
be applied.
In some cases an overpayment is made to a without-fault provider or
supplier on behalf of a without-fault individual who did not receive
the payment. In those situations, we ordinarily would consider recovery
from the individual to be inequitable, and would, therefore, waive
recovery.
In accordance with section 1870(c) of the Act, we would specify
that recovery is deemed to be against equity and good conscience if the
overpayment resulted from expenses incurred for items or services for
which payment may not be made under Medicare by reason of the
provisions of 1862(a)(1) or (a)(9) of the Act (reasonable and necessary
or custodial care), and if the Secretary's determination that the
payment was incorrect was made after the third year following the year
in which notice of that payment was sent to the individual.
The basic concepts embodied in the principle of waiver based on
equity and good conscience assume that an individual did not
intentionally cause an overpayment. Therefore, we propose that applying
the equity and good conscience standard for waiving recovery does not
apply if we determine that the individual committed fraud,
misrepresentation, or some other action or omission that indicates the
individual's lack of good faith in causing an overpayment.
D. Waiver Policy With Regard to Liability Settlement Agreements and
Stipulations
In general, Medicare policy requires recovering payments from
liability awards or settlements, whether a settlement arises from a
personal injury action or a survivor action, without regard to how a
settlement agreement stipulates disbursement should be made. This
requirement also applies to situations in which the settlements do not
expressly address damages for medical expenses. Since liability
payments are usually based on the injured or deceased person's medical
expenses, liability payments are considered to have been made ``with
respect to'' medical services related to the injury even when the
settlement does not expressly include an amount for medical expenses.
To the extent that Medicare has paid for these services, the law
obligates us to seek recovery of Medicare payments.
The only situation in which we recognize allocations of liability
payments to nonmedical losses is when the payment is based on a court
order on the merits, that is, the court makes a substantive decision on
the amounts to be awarded. If the court specifically designates amounts
that are for the reimbursement of pain and suffering or other amounts
not related to medical services, we will accept the court's designation
and not seek recovery from portions of court awards that are designated
as payment for losses other than medical services.
Conversely, we do not generally grant waivers if an individual
obtains a settlement that is expressly awarded for medical expenses.
However, we believe there are circumstances in which waiver could be
justified. For example, a situation could arise in which an
individual's injury was great but the award of damages was small, or in
which the individual incurred bona fide medical expenses (other than
deductibles, premiums, and coinsurance) that were not reimbursed by
Medicare; that is, out-of-pocket medical expenses. We believe the
criteria we propose for equity and good conscience are broad enough
that these situations will be taken into consideration when determining
whether waiver of recovery should be granted.
E. Waiver Policy With Regard to Estates
Under current law, a deceased individual's estate may request a
waiver of adjustment or recovery of an overpayment when the estate (or
the now-deceased individual) has effected a liability recovery.
Although in these situations an estate (or the now-deceased individual)
may be found to have been without fault with respect to notifying us of
the third party recovery, it is generally difficult to satisfy the
second test for waiver--that recovery from the estate would defeat the
purposes of title II or title XVIII or be against equity and good
conscience. Because the individual is deceased, he or she does not need
the monies to meet ordinary and necessary living expenses or medical
expenses. In addition, it is unlikely that the estate would warrant the
money based on an argument of detrimental reliance. Therefore, waiver
is generally not applied in these situations.
However, when a title II dependent survives a deceased individual
(who is without fault), and Medicare's recovery or adjustment of an
overpayment from the estate would be made by decreasing payments to the
title II dependent, situations could arise in which waiver of
adjustment or recovery of the overpayment would be appropriate.
Therefore, we propose adding a provision to the regulations that would
permit a waiver for an estate if the estate (and the individual) were
without fault and the individual had a surviving title II dependent. A
waiver would be granted in these situations if recovery from the estate
would be made by decreasing payments to the title II dependent and the
recovery would defeat the purposes of title II or title XVIII or would
be against equity and good conscience.
IV. Provisions of the Proposed Regulations
The existing regulations at Secs. 405.301 through 405.359 would be
removed.
[[Page 14515]]
With the exception of Sec. 405.356, these sections would be replaced by
proposed Secs. 401.301 through 401.370. The remaining sections of
subpart C of part 405 (Secs. 405.370 through 405.380) would be
redesignated and moved into subpart D of part 401 as Secs. 401.375
through 401.396.
These proposed regulations would supersede SSA criteria for
Medicare purposes. SSA criteria would no longer have any application to
recovering Medicare overpayments.
Generally, this proposed rule clarifies the explicit criteria and
circumstances under which a provider, supplier, or individual will be
relieved of liability for a Medicare overpayment. Thus, we are
proposing no changes to current carrier and intermediary liability in
instances when an overpayment results from a carrier or intermediary
error. We are aware, however, of the perception that carriers and
intermediaries may not be held accountable in instances when an
overpayment results from their error. Therefore, we are requesting
comments on proposed changes to our current carrier and intermediary
standards that might introduce a higher level of accountability when
overpayments are the result of carrier or intermediary errors,
regardless of whether a provider or supplier was without fault.
As part of the proposed changes to the regulations, we would
describe ``recovery'' to include ``adjustment'' as one type of
recovery, rather than listing it separately, as in section 1870 of the
Act. Under Medicare operations, adjustment is one way we can recover an
overpayment from an individual who is found liable for that
overpayment. However, we have alternative ways of recovering an
overpayment that we often use before adjusting title II or railroad
retirement benefits. Therefore, we would include adjustment as one of
several ways we may recover from an individual (or his or her estate).
In addition, we would make certain technical changes to the
regulations.
Once these proposed regulations are published as final, conforming
changes will be made to the appropriate regulations in 20 CFR part 404
to remove references to title XVIII as they relate to without fault.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
However, we believe the information collection requirements
referenced in this proposed rule, as summarized below, are exempt from
the Paperwork Reduction Act of 1995 for the following reasons:
The requirements in this proposed rule are either facts or opinions
obtained or solicited through non-standardized follow-up questions
designed to clarify responses to approved collections of information,
initiated on an individual basis, and/or are performed in the conduct
of an administrative action, investigation, or audit involving an
agency against specific individuals or organizations (see title 5
Sec. 1320.3(c), 1320.3(h)(9), and/or 1320.4(a)(2)).
Section 401.352 Waiver of Recovery of Overpayment From Individuals
Section 401.352 requires an individual desiring a waiver of
recovery of an overpayment to request the waiver within 60 days from
the date on the written notification from HCFA that he or she is liable
for the overpayment.
Section 401.364 Without Fault and Medicare Secondary Payer (MSP)
Obligations
Section 401.364 requires an individual to give notice of receipt of
a payment from an entity that is primary to Medicare and requires an
individual desiring a waiver of recovery of an MSP obligation to
request the waiver within 60 days from receipt of written notification
from HCFA that he or she is liable for the obligation.
Section 411.23 Individual's Cooperation
When HCFA makes conditional payments, Sec. 411.23 requires an
individual to notify HCFA of the progress and final outcome of the
liability claim. The individual must notify the intermediary or carrier
within 60 days of filing a claim with an entity that is primary to
Medicare and notify HCFA within 30 days of receipt of payment from an
entity primary to Medicare.
Organizations and individuals desiring to submit comments should
send them to both the following addresses:
Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850, Attn: HCFA-1719-P.
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Allison Herron Eydt, HCFA Desk Officer.
VI. Regulatory Impact Statement
A. Introduction
This proposed rule clarifies our right and responsibility to
recover overpayments, and the conditions under which recovery of
overpayments may be waived. Under the Medicare statute, when a Medicare
overpayment occurs, and a provider or supplier is found to be without
fault, the liability is passed on to the individual. Medicare then
seeks recovery from the individual or waives the recovery.
Our present regulations do not clearly differentiate an
individual's responsibilities from provider and supplier
responsibilities with regard to overpayment liability and recovery.
This proposed rule describes the conditions for determining who is at
fault for the overpayment; specifies criteria for determining the
liability of providers, suppliers, and individuals; and describes the
circumstances under which recoveries from individuals can be waived.
In addition, this proposed rule would provide for the
administrative appeals process to include determinations when a
provider or supplier is found to be at fault in causing an overpayment.
Also, this proposed rule more specifically defines without fault with
respect to Medicare secondary payer situations as well as the
conditions for waiver of adjustment or recovery of Medicare
overpayments in Medicare secondary payer situations.
We expect the main effect of this proposal would be to prevent some
providers and suppliers from claiming without-fault status. This could
reduce the number of overpayment liabilities passed on to individuals
and result in a slight increase in the amount of money recovered. We
estimate that this proposed rule would result in
[[Page 14516]]
additional overpayment recoveries for 5 fiscal years as follows:
Estimated Additional Recoveries From the Medicare Program Parts A and B
[In Millions]
------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------------------------------------------------------------------
$7........... $13 $15 $16 $18
------------------------------------------------------------------------
B. Regulatory Flexibility Act
Consistent with the Regulatory Flexibility Act (5 U.S.C. 601
through 612) we generally prepare a regulatory flexibility analysis
unless the Secretary certifies that a proposed rule would not have a
significant economic impact on a substantial number of small entities.
For purposes of the Regulatory Flexibility Act, all providers and
suppliers are considered to be small entities. Individuals and Medicare
contractors are not included in the definition of a small entity.
In addition, section 1102(b) of the Act requires the Secretary to
prepare a regulatory impact analysis if a proposed rule may have a
significant impact on the operations of a substantial number of small
rural hospitals. This analysis must conform to the provisions of
section 603 of the Regulatory Flexibility Act. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area and has fewer
than 50 beds.
This proposed rule would add regulations that are specifically
applicable for determining without fault in general Medicare
overpayment situations, as well as for obligations resulting from
Medicare secondary payer conditional payments.
Under this proposed rule, a provider or supplier would be required
to notify the Medicare contractor in writing within 60 days if any
payment exceeds the usual compensation for an item or service under
Medicare. A Medicare contractor would be required to respond to a
provider or supplier within 120 days of receipt of a written inquiry
from the provider or supplier questioning the correctness of a Medicare
payment amount.
For Medicare secondary payer situations, an individual pursuing a
claim for a liability settlement or damage award for illness or
injuries sustained in an accident would be required to notify the
Medicare contractor within 60 days of filing a suit or a claim with an
insurer. In addition, an individual would be required to notify the
Medicare contractor within 30 days of receiving a payment from a
liability insurer or, in certain circumstances, direct payment for a
tort-feasor.
This proposed rule would not place an unreasonable burden on
individuals, providers, suppliers, or Medicare contractors. We believe
that the time required for individuals, providers, suppliers, or
Medicare contractors to comply with the provisions of this proposed
rule would be minimal. As in the past, providers and suppliers would be
required to exercise reasonable care in billing for and accepting
payment from Medicare.
For these reasons, we have determined that this proposed rule would
not result in a significant economic impact on a substantial number of
small entities and would not have a significant economic impact on the
operations of a substantial number of small rural hospitals. Therefore,
we are not preparing an analysis for either the Regulatory Flexibility
Act or section 1102(b) of the Act.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.
VI. Other Information
A. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. However, we will
consider all comments that are received by the date and time specified
in the DATES section of this preamble, and, if we proceed with a
subsequent document, we will respond to the comments in the preamble to
that document.
List of Subjects
42 CFR Part 401
Claims, Freedom of information, Health facilities, Medicare,
Privacy.
42 CFR Part 403
Health insurance, Hospitals, Intergovernmental relations, Medicare,
Reporting and recordkeeping requirements.
42 CFR Part 405
Administrative practice and procedure, Health facilities, Health
professions, Kidney diseases, Medicare, Reporting and recordkeeping
requirements, Rural areas, X-rays.
42 CFR Part 410
Health facilities, Health professions, Kidney diseases,
Laboratories, Medicare, Rural areas, X-rays.
42 CFR Part 411
Kidney diseases, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 413
Health facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs-health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
42 CFR Part 466
Grant programs-health, Health care, Health facilities, Health
professions, Peer Review Organizations (PRO), Reporting and
recordkeeping requirements.
42 CFR Part 473
Administrative practice and procedure, Health care, Health
professions, Peer Review Organizations (PRO), Reporting and
recordkeeping requirements.
42 CFR Part 493
Grant programs-health, Health facilities, Laboratories, Medicaid,
Medicare, Reporting and recordkeeping requirements.
42 CFR chapter IV would be amended, under the authority of sections
1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh),
as follows.
PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS
A. Part 401 is amended by adding a new subpart D to read as
follows:
Subpart D--Recovery of Overpayments, Suspension of Payment, and
Repayment of Scholarships and Loans
General Provisions
401.301 Basis and scope.
401.303 Definitions.
Liability for Payments to Providers and Suppliers and Handling of
Incorrect Payments
401.305 Individual's liability for incorrect payments.
Medicare Debts Arising from an Overpayment to a Provider or to a
Supplier that Received Payment on Behalf of an Individual
401.310 Overpayments.
[[Page 14517]]
401.320 Liability of a provider or a supplier.
401.323 Determining without fault for a provider or a supplier.
401.326 When a provider or a supplier is relieved of liability.
401.329 Recovery of overpayment from providers or suppliers:
General rule.
Medicare Debts Arising from an Overpayment to an Individual
401.340 Liability of an individual.
401.343 Overpayment limitation for the individual.
401.346 Recovery of overpayment from the individual.
401.349 Adjustment against an individual's title II or railroad
retirement benefits.
401.352 Waiver of recovery of overpayment from individuals.
401.355 Determining without fault for an individual.
401.358 Defeat the purposes of title II or title XVIII of the Act.
401.361 Equity and good conscience.
401.364 Without fault and Medicare Secondary Payer (MSP)
obligations.
401.367 Initial determination.
401.370 Liability of certifying or disbursing officer.
Suspension of Payment to Providers and Suppliers and Collection and
Compromise of Overpayments
401.375--401.390 [Reserved]
Interest
401.393 [Reserved]
Repayment of Scholarships and Loans
401.396 [Reserved]
Subpart D--Recovery of Overpayments, Suspension of Payment, and
Repayment of Scholarships and Loans
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
General Provisions
Sec. 401.301 Basis and scope.
(a) Statutory basis. This subpart is based on the indicated
provisions of the following sections of the Act:
1815--Payment to providers of services (Part A).
1833--Payment of benefits (Part B).
1842--Use of carriers for administration of benefits.
1848--Payment for physicians' services.
1866--Agreements with providers of services.
1870--Overpayment on behalf of individuals and settlement of claims
for benefits on behalf of deceased individuals.
1879--Limitation on liability of individual if Medicare claims are
disallowed.
1886--Payment to hospitals for inpatient hospital services.
1892--Offset of payments to individuals to collect past-due
obligations arising from breach of scholarship and loan contracts.
(b) Scope. (1) This subpart sets forth the policies and procedures
for processing incorrect payments and recovering overpayments under the
Medicare program and for offsetting payments to collect past-due
obligations arising from breach of scholarship and loan contracts.
(2) When the term ``HCFA'' is used in reference to making
determinations, it includes intermediaries, carriers, or PROs, as
appropriate.
Sec. 401.303 Definitions.
(a) Person (for purposes of this subpart) means an individual, a
trust or estate, a partnership, or a corporation.
(b) Supplier has the meaning given in Sec. 400.202 of this chapter.
Liability for Payments to Providers and Suppliers and Handling of
Incorrect Payments
Sec. 401.305 Individual's liability for incorrect payments.
(a) In accordance with section 1870(a) of the Act, any payment made
under title XVIII of the Act to any provider or supplier with respect
to any item or service furnished an individual is regarded as a payment
to the individual, and recovery is made in accordance with
Secs. 401.346 through 401.352 if any of the following conditions
exists:
(1) More than the correct amount is paid to a provider or supplier
and the intermediary, the carrier, or HCFA determines that--
(i) Within a reasonable period of time, the excess over the correct
amount cannot be recouped from the provider or supplier, or
(ii) The provider or supplier was without fault with respect to the
payment of the excess.
(2) A payment has been made to a provider for inpatient hospital
services furnished to a noneligible individual before notification of
noneligibility, in accordance with the provisions described in section
1814(e) of the Act.
(b) For purposes of paragraph (a)(1)(ii) of this section, a
provider or supplier is, in the absence of evidence to the contrary,
deemed to be without fault if the determination by HCFA, that more than
the correct amount was paid, was made after the third year following
the year in which notice was sent to the individual that the amount had
been paid.
Medicare Debts Arising From an Overpayment to a Provider or to a
Supplier That Received Payment on Behalf of an Individual
Sec. 401.310 Overpayments.
(a) Definition. An overpayment consists of Medicare funds a
provider, a supplier, or an individual has received in excess of
amounts payable under the Medicare statute and regulations.
(b) Types of overpayments. Overpayments are of the following types:
(1) Overpayment to a provider that received payment on behalf of an
individual (including an overpayment resulting from payment for
inpatient hospital services furnished to a noneligible individual
before notification of noneligibility in accordance with section
1814(e) of the Act and an overpayment to a provider determined from a
cost report under part 413 of this chapter or under the prospective
payment systems (PPS) included in part 412 of this chapter).
(2) Overpayment to a supplier that received payment on behalf of an
individual.
(3) Direct overpayment to an individual or to a person acting on
behalf of an individual.
(c) Examples of causes of Medicare overpayments. Examples of how
Medicare overpayments occur include, but are not limited to, the
following:
(1) Payments made by Medicare for noncovered services.
(2) Medicare payment in excess of the allowable amount for an
identified covered service.
(3) Errors and nonreimbursable expenditures in cost reports.
(4) Duplicate payments.
(5) Medicare payment when another entity had the primary
responsibility for payment.
(d) When an overpayment is considered a debt. (1) General
Overpayments. Once a determination and any adjustments in the amount of
the overpayment have been made, the remaining amount is a debt owed to
the United States Government.
(2) Medicare Secondary Payer (MSP) obligations. Potential debts
arise under the MSP provisions when an individual recovers payment from
an entity that had the primary responsibility for payment. Obligations
to refund Medicare under the MSP provisions are addressed in part 411,
subparts B through F of this chapter and Sec. 401.364.
Sec. 401.320 Liability of a provider or a supplier.
(a) In accordance with section 1870(b), unless found to be without
[[Page 14518]]
fault, as described in this subpart, a provider or a supplier that
receives Medicare payment with respect to items or services furnished
to an individual is liable for any overpayment resulting from that
payment.
(b) HCFA makes determinations whether providers or suppliers are
without fault with respect to overpayments.
Sec. 401.323 Determining without fault for a provider or a supplier.
(a) General rule. In accordance with section 1870(b) of the Act, a
provider or a supplier is without fault if--
(1) Based on the criteria specified in paragraph (b) of this
section, the facts show that the provider or the supplier exercised
reasonable care in billing for and accepting Medicare payment; and
(2) Based on the criteria specified in paragraph (c) of this
section, the facts show that the provider or the supplier either--
(i) Did not know, and could not reasonably have been expected to
know, that Medicare payment was in excess of amounts payable under the
Medicare statute and regulations and, therefore, accepted payment based
on a reasonable assumption that the payment was correct; or
(ii) Did know, or could reasonably have been expected to know, that
Medicare payment was in excess of amounts payable under the Medicare
statute and regulations but questioned the appropriate intermediary or
carrier in writing, at the correct address, within 60 days of receipt
of the excess payment, and--
(A) Relied on a written response from the intermediary or carrier
that stated that the Medicare payment was correct; or
(B) Failed to receive a response from the intermediary or carrier
within 120 days of the intermediary's or carrier's receipt of the
inquiry.
(b) Exercising reasonable care in billing. Exercising reasonable
care in billing includes--
(1) Making full disclosure of all material facts; and
(2) Complying with each applicable provision specified in subpart C
of part 424 of this chapter, including supplying all necessary
information on the billing form (or through electronic media), to
ensure correct payment by the intermediary or carrier.
(c) Criteria for determining that a provider or a supplier knew
that the payment was an excess payment. A provider or a supplier is
considered to have known that the Medicare payment was in excess of
amounts payable under the Medicare statute and regulations if any one
of the conditions specified in paragraphs (c)(1) through (c)(3) of this
section is met.
(1) Knowledge based on experience, actual notice, or constructive
notice. It is clear that the provider or the supplier knew, or could
have been expected to know, that Medicare payment was in excess of
amounts payable under the Medicare statute and regulations on the basis
of--
(i) Final publication (including any published correction notice)
of payment amounts in official source documents, for example, the
Federal Register (except in very limited circumstances, as provided for
in paragraph (h)(1) of this section);
(ii) Receipt of HCFA notices, either written or electronic,
including manual issuances, bulletins or other written guides, or
directives from intermediaries, carriers, or PROs; or
(iii) Experience with Medicare payment amounts for similar or
reasonably comparable items or services.
(2) Notice from the PRO, intermediary, or carrier. Before the items
or services were furnished, the PRO, intermediary, or carrier had
informed the provider or supplier of the correct Medicare payment for
the items or services furnished or for similar or reasonably comparable
items or services.
(3) Notice from the provider or supplier to the individual. Before
the items or services were furnished, the provider or the supplier
informed the individual of the correct Medicare payment for the items
or services furnished, or for similar or reasonably comparable items or
services.
(d) Intermediary or carrier fault. Determination of without fault,
as specified in paragraph (a) of this section, pertains solely to the
liability of the provider or the supplier. Even when HCFA's or an
intermediary's or carrier's actions cause or contribute to the
overpayment, that fact does not relieve the provider or the supplier
from liability for repayment if the provider or the supplier is not
without fault.
(e) Intermediary and carrier action. (1) The Medicare intermediary
or carrier, as appropriate, must provide a written response within 120
days of receipt of a correctly addressed written inquiry regarding the
correctness of a Medicare payment amount. If the intermediary or
carrier informs the provider or the supplier that the payment amount is
correct, or fails to reply within 120 days, the provider or the
supplier is without fault even if the intermediary or carrier should
later discover that the questioned payment amount was an overpayment.
(2) The 120-day limitation for the response applies only to an
evaluation of the correctness of the payment amount. If the evaluation
indicates that the payment amount is incorrect, the intermediary or
carrier must send a notice to that effect to the provider or supplier
within the 120-day period. Once a timely notice has been sent, the
intermediary or carrier may determine the precise amount of the
overpayment and initiate recovery procedures without regard to the 120-
day limitation.
(f) When a provider or a supplier is considered to be not without
fault. There are some circumstances when a provider or a supplier will
never be without fault. A provider or a supplier is not without fault
if any of the following conditions exist:
(1) It did not exercise reasonable care in billing for and
accepting payment, in accordance with criteria specified in paragraph
(b) of this section.
(2) It accepted a Medicare payment that it knew, or could
reasonably have been expected to know, was in excess of amounts payable
under the Medicare statute and regulations, as determined by criteria
specified in paragraph (c) of this section.
(3) It has already been determined, in accordance with the
limitation on liability provisions of section 1879 of the Act and
Sec. 411.406 of this chapter, that the provider or the supplier knew,
or could reasonably have been expected to know, that the specific items
or services (for which a without fault determination is being made)
would not be paid for by Medicare.
(4) The overpayment resulted from a payment that did not conform to
the applicable published schedule payment amount, as explained in
paragraph (h)(2) of this section.
(5) The overpayments resulted from payment for noncovered services
that were a part of a pattern of billing for similar services that the
provider or the supplier knew or should have known were noncovered.
(6) The overpayment resulted from the failure of the provider or
the supplier, in making a claim for payment, to comply with a provision
of subpart C of part 424 of this chapter.
(7) The overpayment resulted from a payment by a workers'
compensation plan, a liability or no-fault insurer, or group health
plan for the same service paid for by Medicare.
(8) Fraud or similar fault has been determined. Similar fault
includes situations when a provider or supplier obtains a provider
number from a carrier
[[Page 14519]]
or intermediary while excluded from the Medicare program and when a
provider or supplier hires and seeks reimbursement for services
performed by excluded individuals.
(g) Overpayments that result from Medicare provider cost report
errors. The without fault provisions in this section do not apply to
overpayments that result from aggregate payment issues, such as
Medicare provider cost report errors.
(h) Special rule for physician fee schedule and prospective payment
system (PPS) diagnosis-related group (DRG) schedule and Medicare fee or
rate schedule amounts. HCFA publishes fee schedules that establish
payment amounts for physician services and rates of payment for
services furnished under the hospital PPS as indicated by a specific
DRG. Other fee schedules or rates of payment may be established from
time to time. Except as provided in paragraph (h)(1) of this section,
the final publication of these payment amounts in official source
documents is evidence that a provider or a supplier could have been
expected to know that the payment amount was in excess of amounts
payable under the Medicare statute and regulations, as specified in
paragraph (c)(1)(i) of this section.
(1) In the case of an error in a schedule of payment amounts
published in the Federal Register (for which no correction notice has
been published), a provider or a supplier that can show, based on
criteria specified in paragraphs (c)(1)(ii) or (c)(1)(iii), (c)(2), and
(c)(3) of this section, that it did not know, and could not have been
expected to know, that a Medicare payment based on the erroneous
published schedule of payment amounts was in excess of amounts payable
under the Medicare statute and regulations, is without fault with
respect to the resulting overpayment.
(2) When an overpayment occurs because a payment does not conform
to the applicable published schedule, a provider or a supplier is not
without fault.
(i) Without fault presumption: Three-year rule. In accordance with
section 1870(b) of the Act, if HCFA determines that more than the
correct amount was paid to a provider or supplier, and this
determination was made after the third calendar year following the year
in which the notice was sent to the provider or supplier that payment
had been made (or, in the case of Part A benefits, approved), the
overpaid provider or supplier is considered without fault unless one of
the following conditions exist:
(1) The overpayment resulted from a payment that did not conform to
the applicable published schedule payment amount, as explained in
paragraph (h)(2) of this section.
(2) The overpayment resulted from payment for noncovered services
that were a part of a pattern of billing for similar services that the
provider or the supplier knew, or should have known, were noncovered.
(3) The overpayment resulted from the failure of the provider or
the supplier, in making a claim for payment, to comply with a provision
of subpart C of part 424 of this chapter.
(4) The overpayment resulted from a payment by a workers'
compensation plan, a liability or no-fault insurer, or group health
plan for the same service paid for by Medicare.
(5) The overpayment resulted from fraud or similar fault. Similar
fault includes situations when a provider or supplier obtains a
provider number from a carrier or intermediary while excluded from the
Medicare program and when a provider or supplier hires and seeks
reimbursement for services performed by excluded individuals.
Sec. 401.326 When a provider or a supplier is relieved of liability.
A provider or a supplier is relieved of liability for refunding an
overpayment when it is found to be without fault under the criteria in
this subpart. When a provider or a supplier is determined to be without
fault, liability for the overpayment shifts to the individual. See
Sec. 401.340 (concerning the liability of an individual).
Sec. 401.329 Recovery of overpayment from providers or suppliers:
General rule.
When it is determined that a provider or a supplier is liable for
an overpayment, HCFA uses the following methods to recover the
overpayment:
(a) Direct collection.
(b) Recoupment or offset against any monies that HCFA owes the
provider or supplier.
(c) Offset against a Federal tax refund under authority of 31
U.S.C. 3720A.
Medicare Debts Arising From an Overpayment to an Individual
Sec. 401.340 Liability of an individual.
(a) Direct payment imputed. In accordance with section 1870(a) of
the Act, a Medicare payment made to a provider or a supplier with
respect to any item or service furnished to an individual is considered
as if it were a payment to the individual.
(b) Scope of individual's potential liability. In accordance with
section 1870(b) of the Act, subject to the provisions in Secs. 401.346
through 401.352, an individual is liable for an overpayment if any of
the following situations occur:
(1) An amount is paid to an individual that is more than the amount
payable under the Medicare statute and regulations.
(2) An amount is paid to a provider or a supplier for items or
services furnished to the individual that is more than the amount
payable under the Medicare statute and regulations, and HCFA determines
that--
(i) The overpayment cannot be recouped from the provider or the
supplier within a reasonable period of time; or
(ii) The provider or the supplier was without fault, as described
in Sec. 401.323, with respect to the overpayment.
(3) Payment was made to a provider for items and services furnished
to an individual under the provisions described in section 1814(e) of
the Act (``Payment for Inpatient Hospital Services Prior to
Notification of Noneligibility'').
Sec. 401.343 Overpayment limitation for the individual.
If an overpayment has been made to a provider or a supplier, the
individual is liable only to the extent that he or she has benefited
from that payment, for example, when the Medicare payment exceeds the
charges for which the individual was legally responsible.
Sec. 401.346 Recovery of overpayment from the individual.
If an individual is liable for an overpayment (that is, a payment
described in Sec. 401.340(b)), recovery, to the extent of the
liability, is made in one of the following ways:
(a) By direct collection against the individual (or his or her
estate if the individual has died).
(b) By adjustment of title II or railroad retirement benefits, in
accordance with section 1870(b)(3) and 1870(b)(4) of the Act, in one of
the following ways:
(1) By decreasing any payment under title II of the Act or under
the Railroad Retirement Act of 1974 (45 U.S.C. 231) to which the
individual is entitled.
(2) By decreasing, if the individual has died before recovery is
completed, any payment under title II of the Act or under the Railroad
Retirement Act of 1974 that is based on the individual's earnings
record (or compensation) and payable to the individual's estate or to
any other person.
(c) By offset against a Federal tax refund under authority of 31
U.S.C. 3720A.
(d) By applying the requirements and procedures that implement the
Federal
[[Page 14520]]
Claims Collection Act (FCCA) (31 U.S.C. 3711) with respect to Medicare
payments and the general FCCA regulations set forth at Sec. 401.387 and
subpart F of this part. If HCFA's regulations fail to address a
particular issue, refer to 45 CFR part 30.
Sec. 401.349 Adjustment against an individual's title II or railroad
retirement benefits.
(a) Certification of amount that will be adjusted. In accordance
with section 1870(b) of the Act, as soon as practicable after any
adjustment against an individual's title II or railroad retirement
benefits is determined to be necessary, HCFA certifies to SSA the
amount of the overpayment or payment with respect to which the
adjustment is to be made. If the adjustment is to be made by decreasing
subsequent payments under the railroad retirement benefits, the
certification is made to the Railroad Retirement Board.
(b) Procedures for recovery by adjustment of benefits.
(1) The procedures applied in making an adjustment to title II
benefits are the applicable procedures of 20 CFR 404.502.
(2) The procedures applied in making an adjustment to railroad
retirement benefits are the applicable procedures of 20 CFR part 367.
Sec. 401.352 Waiver of recovery of overpayment from individuals.
(a) The provisions of Sec. 401.346 are not applied and there is no
recovery of an overpayment made under Sec. 401.340(b) if--
(1) The overpayment has been made with respect to an individual who
is without fault, as specified in Sec. 401.355, or the recovery would
be made by decreasing payment to which another person who is without
fault is entitled, as provided in section 1870(c) of the Act; and (2)
The recovery would either--
(i) Defeat the purposes of title II or title XVIII of the Act, as
specified in Sec. 401.358; or
(ii) Would be against equity and good conscience, as specified in
Sec. 401.361.
(b) An individual desiring a waiver of recovery of an overpayment
must request the waiver within 60 days from the date on the written
notification from HCFA that he or she is liable for the overpayment.
(c) A waiver granted in accordance with Sec. 401.358 or
Sec. 401.361 may be granted partially or in full.
(d) HCFA determines whether waiver of recovery of an overpayment
for which an individual is liable under this subpart will be granted.
(e) A waiver of recovery of an overpayment may be granted to a
deceased individual's estate if all of the following conditions exist:
(1) The estate and the deceased individual are without fault.
(2) The deceased individual is survived by a title II dependent.
(3) Recovery of the overpayment from the estate would be made by
decreasing payments to the title II-dependent. (4) The recovery would
defeat the purposes of title II or title XVIII, as defined in
Sec. 401.358, or would be against equity and good conscience, as
defined in Sec. 401.361.
Sec. 401.355 Determining without fault for an individual.
(a) General. In accordance with section 1870(c) of the Act, a
determination of without fault pertains to the liability of the
individual. Even when HCFA's actions cause or contribute to the
overpayment, that fact does not relieve the individual from liability
for repayment if the individual is not without fault. In determining
whether a individual is without fault, HCFA considers all pertinent
circumstances, including the individual's age, intelligence, education,
and physical and mental condition. (See Sec. 401.364(d) for application
of without fault for an individual with respect to a Medicare payment
in an MSP situation.)
(b) Reasonable care standard. An individual is considered without
fault with respect to an overpayment made to him or her, or to a
provider or a supplier on his or her behalf, if the individual has
exercised reasonable care in requesting and accepting Medicare payment.
The individual, or other person acting on behalf of the individual, has
exercised reasonable care when he or she has--
(1) Accepted a payment that the individual, or other person acting
on behalf of the individual, did not know, or could not reasonably have
been expected to know, was incorrect;
(2) Accepted a payment because of reliance on erroneous written
information from an official source within HCFA, SSA, or a Medicare
intermediary or carrier with respect to the interpretation of a
pertinent provision of the Act or implementing regulations; or
(3) Made a reasonable assumption, based on available information
including, but not limited to, Medicare instructions and regulations,
that the payment was correct.
(c) When an individual is considered to be not without fault. There
are some circumstances in which an individual will never be without
fault. An individual is considered to be not without fault for an
overpayment when the individual, or other person acting on behalf of
the individual, has--
(1) Received prior written notice that a particular item or service
was not covered or paid for by Medicare;
(2) Made an incorrect statement or withheld information to obtain
benefits that were not due the individual;
(3) Accepted a payment that he or she knew or should have known was
not due; or
(4) Received a prior determination, in accordance with the
limitation on liability provisions in section 1879 of the Act and
Sec. 411.404 of this chapter, that he or she knew, or could reasonably
have been expected to know, that the specific items or services (for
which a without fault determination is being made) would not be paid
for by Medicare.
Sec. 401.358 Defeat the purposes of title II or title XVIII of the
Act.
(a) General. The standard of defeat the purposes of title II or
title XVIII, contained in section 1870(c) of the Act, means that
recovery of all or part of the overpayment frustrates the purposes of
benefits under these titles by depriving an individual (or surviving
title II dependent) of income required for ordinary and necessary
living expenses.
(b) Ordinary and necessary living expenses. For purposes of this
subpart, an individual's ordinary and necessary living expenses include
the following expenses:
(1) Current living expenses, such as food and clothing, rent,
mortgage payments, utilities, maintenance, insurance (for example,
life, accident, and health insurance, including premiums for
Supplementary Medical Insurance benefits under title XVIII and premiums
for Medigap insurance), taxes, and installment payments.
(2) Current medical, hospitalization, and other related expenses
not covered by Medicare or another insurer.
(3) Expenses for the support of others for whom the individual is
legally responsible.
(4) Other miscellaneous expenses that may reasonably be considered
necessary to maintain the individual's current standard of living.
(c) Example. An individual entitled to Medicare, who was also
receiving title II benefits, was injured in a slip and fall accident.
He pursued a liability suit and received a settlement. However, after a
pro rata share of procurement costs were deducted, he was left with an
amount that was smaller than, or close to, Medicare's claim amount. As
a result of expenses related to the accident, he has a monthly
budgetary shortfall and does not have savings. In
[[Page 14521]]
addition, the individual has out-of-pocket medical expenses. If
Medicare were to recover the overpayment by adjusting the individual's
title II benefit, he would be deprived of income necessary for ordinary
and necessary living expenses. Assuming that the individual is without
fault, his liability for the overpayment may be waived partially or in
full based on financial hardship. (The fact that the individual is left
with a settlement amount that is smaller, or close to, what Medicare
would recover does not automatically permit waiver of the recovery
under this regulation. The final determination would depend on the
total amount of the individual's settlement and his other financial
circumstances.)
Sec. 401.361 Equity and good conscience.
(a) General rule. The standard of equity and good conscience,
contained in section 1870(c) of the Act, is applied to title XVIII
overpayment recoveries using broad concepts of fairness and reviewing
the totality of an individual's circumstances in each particular case.
(b) Factors to be considered. In applying the standard of equity
and good conscience, factors to consider include, but are not limited
to, the following:
(1) The amount of the overpayment.
(2) The size of a liability settlement and the amount the
individual would retain if Medicare recovered.
(3) The degree to which recovery would cause undue hardship on the
individual.
(4) The degree to which Medicare and/or its contractors contributed
to causing the overpayment.
(5) The degree to which the individual contributed to causing the
overpayment (even if determined to be without fault in accordance with
Sec. 401.355.
(6) The impact of an accident on the individual both physically and
financially.
(7) Whether the individual would be unjustly enriched by a waiver
of recovery.
(8) If the individual is responsible for noncovered accident-
related out-of-pocket expenses and/or future accident-related expenses,
whether it would be equitable for Medicare to reduce its recovery.
(9) Whether the individual made a personal financial decision based
on his or her reliance on erroneous information supplied to the
individual by Medicare or SSA, and recovery would change the
individual's position to his or her material detriment.
(c) Examples in which waiver of recovery is being sought based on
the concepts involved with equity and good conscience. Assuming that
the individual is without fault in accordance with Sec. 401.355, the
following examples illustrate situations in which waiver of recovery is
sought based on the concepts involved with equity and good conscience
and how those concepts are to be applied. The purpose of these examples
is to illustrate both the application of the basic principles of the
equity and good conscience standard and that each individual case must
be evaluated on the basis of its particular facts and circumstances.
Example 1
Facts: As a result of an accident, an individual's leg was
amputated below the knee, and he was confined to a nursing home. He
filed suit for the injuries and damages he suffered as a result of the
accident. The settlement he received was just a few hundred dollars
more than Medicare's claim amount (after a pro rata share of
procurement costs were deducted). The individual has substantial
outstanding medical bills that will not be reimbursed by Medicare or
another insurer.
Analysis: In determining whether waiver may be granted on the basis
of equity and good conscience, HCFA may take into consideration that
the accident has had a significant impact on the individual, both
physically and financially, in that he must not only deal with the
physical trauma of the leg amputation, but also with being confined to
the nursing home with its resultant increased nursing care costs. In
addition, the individual will retain only a few hundred dollars of his
settlement if Medicare seeks full recovery, and will still have
substantial remaining medical bills he will be responsible to pay. This
situation could cause undue hardship for the individual.
Action: Given the significant impact that the accident has had on
the individual, both physically and financially, HCFA may find that it
is against equity and good conscience to recover and may grant a full
waiver.
Example 2
Facts: As a result of an accident, a 26-year-old individual is
rendered a ventilator-dependent quadriplegic. (The individual was
eligible for Medicare prior to the accident because of a disabling
condition that occurred several years ago; however, he had been able to
care for himself without outside assistance.) The individual pursued a
liability claim after the accident and received a settlement that was
twice the amount of Medicare's potential claim (after a pro rata share
of procurement costs were deducted). The individual needs all of his
income and settlement proceeds to finance 24-hour nursing care, upon
which he will be totally dependent for the remainder of his lifetime,
and to enable him to live independently (outside of an institution). In
addition, the individual will have future unavoidable accident-related
expenses that will not be reimbursed by Medicare or another insurer.
Analysis: In determining whether waiver may be granted on the basis
of equity and good conscience, several factors involved in this case
should be considered. The individual's young age should be considered
as it relates to the expense of being totally dependent on 24-hour
nursing care for the remainder of his lifetime. Moreover, he is a
ventilator-dependent quadriplegic. Additionally, although he received a
settlement that was twice the amount of Medicare's potential recovery,
he has substantial accident-related expenses and is likely to have
future out-of-pocket expenses that will not be covered by Medicare or
another insurer.
Action: HCFA may find that it is against equity and good conscience
to recover, and grant full waiver based on the various factors involved
in this case. Although the settlement received by the individual is
more than Medicare's potential recovery, consideration must be given to
the extent of his disability, his need for lifetime 24-hour nursing
care, and the future accident-related expenses he is likely to incur.
Example 3
Facts: After being notified in writing by an SSA official that she
was eligible for title II and title XVIII benefits, the individual
dropped her existing health insurance based on the prospect of
receiving health insurance coverage under Medicare. One year later, it
was discovered that, due to an error by SSA, her eligibility status was
erroneous because she did not have enough qualifying quarters of
covered employment under the Act to obtain the required insured status.
During that year, the individual was hospitalized, and a significant
amount of Medicare benefits was paid on her behalf. Because the
individual dropped her previous health insurance coverage, Medicare was
her only source of health care coverage during this time. The
individual's financial situation is such that recovery of the
overpayment would change her financial position for the worse.
Analysis: In determining whether waiver may be granted on the basis
of equity and good conscience, HCFA may consider several factors. The
fact that the individual made a personal financial
[[Page 14522]]
decision based on her reliance on erroneous information supplied by SSA
warrants significant consideration. This, in turn, raises the question
of whether recovery would change the individual's position to her
material detriment, as well as the degree to which she contributed to
the overpayment. Since she did not know that she was not entitled to
receive the Medicare services (and, in fact, was told otherwise by
SSA), it appears that she did nothing to actually contribute to the
overpayment other than avail herself of services to which she believed
she was entitled.
Action: In this situation, recovery may be waived as against equity
and good conscience because the individual, based on erroneous
information provided by SSA, relinquished her right to payment from
another source, and recovery would change her position to her material
detriment.
Example 4
Facts: An individual sustained injuries in an automobile accident
that rendered her incapable of operating a motor vehicle unless the
vehicle was modified for use by a handicapped person. Medicare made
conditional payments on the individual's behalf. The individual filed
suit for the injuries and damages she suffered as a result of the
accident and received a settlement that was about equal to the amount
of Medicare conditional payments made on her behalf. The individual
submitted documentation demonstrating that all of the money she
received in the settlement was used to purchase a modified vehicle
required as a result of the accident and requested a waiver of recovery
of the overpayment.
Analysis: If Medicare seeks full recovery, the individual will
likely have to sell her modified vehicle to repay Medicare. This
modified vehicle is necessary because of the injuries she sustained in
the accident and, like the car in which she had the accident, is her
only means of transportation. Selling the modified vehicle to repay
Medicare would cause her to be without transportation and would place
her in a worse position than before the accident. Based on this
consideration, and the significant physical impact that the accident
has had on the individual, recovery of the overpayment may be against
equity and good conscience.
Action: HCFA may grant a waiver in an amount equal to the cost of
the vehicle and, based on the various factors involved in this case,
including the fact that all of the money she received in the settlement
was used to purchase the modified vehicle, could be justified in
waiving an additional amount. If the cost of the modified vehicle were
less than the settlement amount, HCFA could grant a partial waiver up
to the cost of the vehicle.
Note: Using the settlement money to purchase a vehicle was
considered appropriate only because the individual required a
modified vehicle as a result of her accident. It would be
inappropriate to grant waiver simply because the individual chose to
purchase another car from the proceeds.
Example 5
Facts: An individual sustained multiple injuries in an automobile
accident that caused him to be away from his job (without pay) for 4
months. His monthly income just equals his monthly expenses. The
individual received a liability settlement that was about equal to
Medicare's potential claim (after a pro rata share of procurement costs
were deducted). However, he incurred significant accident-related out-
of-pocket medical expenses.
Analysis: In determining whether waiver may be granted on the basis
of equity and good conscience, HCFA may take into consideration that
the accident has caused the individual to lose 4 months of income, and,
thus, his ability to absorb the out-of-pocket medical expenses has
greatly diminished. If the individual repaid Medicare the total amount
owed, he would be left with no funds with which to pay his out-of-
pocket medical expenses. Because of this, it may be equitable for
Medicare to reduce its recovery due to the individual's responsibility
for noncovered out-of-pocket expenses. Therefore, it would be against
equity and good conscience for Medicare to recoup its entire potential
recovery amount.
Action: HCFA may grant a partial waiver up to the amount of out-of-
pocket expenses.
Example 6
Facts: An individual was injured in an accident that triggered
Medicare conditional payments. Before the accident, he was experiencing
monthly financial difficulties due to expenses that were not related to
the accident. Medicare's recovery after reduction for procurement costs
is significantly less than the total liability settlement received by
the individual. The individual has several thousand dollars worth of
injury-related out-of-pocket medical expenses.
Analysis: Although the individual has monthly financial
difficulties that appears to constitute a financial hardship, it must
be noted that this financial hardship existed before the accident. It
is important to remember that repaying Medicare must be the
circumstance that causes financial hardship. Pre-existing financial
hardship alone is not a sufficient reason to grant waiver.
Additionally, after repaying Medicare and reimbursing himself for out-
of-pocket expenses, the individual will still retain a significant
portion of the settlement proceeds. The repayment of Medicare's claim
will not cause undue hardship. All of these factors must be taken into
consideration when making a waiver decision that is not unduly
favorable or adverse to either side, but is fair to both the individual
and to HCFA.
Action: Based on the circumstances presented in this case, the
likely outcome is to deny waiver. Although the individual has
substantial out-of-pocket expenses, he would not be unduly
disadvantaged if Medicare seeks full recovery because he will still
retain a significant portion of his settlement after the recovery.
(d) Special Rule: When recovery of an overpayment from an
individual is ordinarily considered inequitable. (1) Except for MSP
obligations, recovery of an overpayment from a without-fault individual
is ordinarily considered to be inequitable if the individual did not
receive the payment.
(2) For MSP obligations, recovery from a without-fault individual
is considered to be inequitable only if the recovery involves a group
health plan and the individual did not receive the Medicare payment.
(e) Deemed to be against equity and good conscience. In accordance
with section 1870(c) of the Act, recovery of an overpayment, or of such
part of an overpayment as is determined would be inconsistent with the
purposes of title XVIII of the Act, is deemed to be against equity and
good conscience when either of the following conditions exist:
(1) The overpayment resulted from expenses incurred for items or
services for which payment may not be made under title XVIII by reason
of the provisions of section 1862 (a)(1) or (a)(9) of the Act
(reasonable and necessary, or custodial care).
(2) HCFA did not determine that the payment was incorrect until
after the third year following the year in which the notice of the
payment was sent to the individual.
(f) Equity and good conscience deemed inapplicable. In considering
whether recovery of a Medicare overpayment should be waived, the
application of the standard of equity and good conscience is deemed
inapplicable in either of the following circumstances:
[[Page 14523]]
(1) The individual committed a fraud or misrepresented a material
fact that resulted, directly or indirectly, in the overpayment.
(2) The individual's actions or omissions indicate a lack of good
faith or the absence of an honest intention to abstain from taking an
unfair advantage of Medicare.
Sec. 401.364 Without fault and Medicare Secondary Payer (MSP)
obligations.
(a) MSP debt defined. In general, an MSP debt is an amount owed to
the United States Government, once a determination and any recovery
adjustments are made to an obligation, that resulted from a payment
made by Medicare for an identified item or service and payment for the
item or service has been made, can reasonably be expected to be made,
or, in certain circumstances, can reasonably be expected to be made
promptly, by another entity that is required or responsible under
section 1862(b) of the Act to make primary payment. HCFA's rules that
govern MSP obligations are located at part 411, subparts B through F of
this chapter.
(b) Application of without-fault provisions to MSP obligations--
third-party payor or other non-Medicare entity. The without-fault and
related provisions specified in Secs. 401.323 and 401.326 (with respect
to providers and suppliers) and in Secs. 401.352, 401.355, 401.358, and
401.361 (with respect to individuals entitled to Medicare) do not apply
to MSP obligations for which a third-party payer or other non-Medicare
entity is liable. A provision in a contract to which a third-party
payer or other non-Medicare entity is a party, or a State law provision
that governs the relations between the third-party payer or other non-
Medicare entity and an individual entitled to Medicare, that gives or
purports to give any right of subrogation to the third-party payer or
other non-Medicare entity does not confer a right to without-fault
consideration for an obligation for which the third-party payer or
other non-Medicare entity is responsible.
(c) Application of without-fault provisions to MSP obligations--
providers and suppliers. In general, a provider or a supplier is not
without fault with respect to a Medicare payment in an MSP situation
unless it complied with all of the requirements specified in part 411
of this chapter and, in the case of providers, part 489 of this
chapter.
(d) Application of without-fault provisions to MSP obligations--
individuals. (1) In general, an individual is without fault with
respect to a Medicare payment in an MSP situation except when the
individual (or the individual's representative)--
(i) Fails to give notice as required by Sec. 411.23(a)(1) of this
chapter (that is, notice that a claim has been filed with an entity
that may be primary to Medicare) to the intermediary or carrier within
60 days of filing the claim;
(ii) Fails to give notice as required by Sec. 411.23(a)(2) of this
chapter (that is, notice of receipt of a payment from an entity that is
primary to Medicare) to HCFA within 30 days of receipt of a payment;
(iii) Fails to file a proper claim, as defined in Sec. 411.21 of
this chapter, with an entity that is primary to Medicare for the item
or service for which no proper claim was filed, subject to the recovery
provisions in Secs. 411.24(l) and 411.32(c) of this chapter;
(iv) Makes an incorrect statement or withholds information to
obtain benefits that are not due him or her; or
(v) Accepts a payment that he or she clearly should have known was
not due.
(2) An individual who is without fault according to paragraph
(d)(1) of this section may have recovery of an MSP obligation (either
by adjustment of his or her social security benefit or by direct
recovery) waived if the recovery would either--
(i) Defeat the purposes of title II or title XVIII of the Act, as
specified in Sec. 401.358; or
(ii) Would be against equity and good conscience, as specified in
Sec. 401.361 (a) through (c), (e), and (f).
(3) An individual desiring a waiver of recovery of an MSP
obligation must request the waiver within 60 days from receipt of
written notification from HCFA that he or she is liable for the
obligation.
(4) HCFA may waive recovery, in whole or in part, in accordance
with Sec. 401.358 or Sec. 401.361 (a) through (c), (e), and (f) of this
subpart.
Sec. 401.367 Initial determination.
Each of the following determinations is an initial determination
for purposes of Secs. 405.704(b), 405.704(c), and 405.803(b) of this
chapter, as applicable, and the entities are parties for purposes of
Secs. 405.708 and 405.805 of this chapter:
(a) A determination that a provider or supplier must repay an
overpayment because the provider or supplier is not without fault.
(b) A determination that an individual (or the estate of an
individual), does not qualify for waiver of adjustment or recovery of
overpayments because the individual is, or the estate and the
individual are, not without fault.
(c) A determination, with respect to an individual that is (or an
estate and individual that are) without fault, that the individual (or
estate) does not qualify for waiver of adjustment or recovery of
overpayments on the basis that the purposes of title II or of title
XVIII of the Act would be defeated, as described in Sec. 401.358.
(d) A determination, with respect to an individual that is (or an
estate and individual that are) without fault, that the individual (or
estate) does not qualify for waiver of adjustment or recovery of
overpayments on the basis that recovery would be against equity and
good conscience, as described in Sec. 401.361.
Sec. 401.370 Liability of certifying or disbursing officer.
No certifying or disbursing officer is liable for any amount
certified or paid by him or her to a provider or supplier in either of
the following situations:
(a) The amount is waived under the provisions of this subpart.
(b) Recovery is not completed prior to the death of all persons
against whose benefits the recovery is authorized.
Suspension of Payment to Providers and Suppliers and Collection and
Compromise of Overpayments
Secs. 401.375--401.390 [Reserved]
Interest
Sec. 401.393 [Reserved]
Repayment of Scholarships and Loans
Sec. 401.396 [Reserved]
B. Part 401, subpart F, is amended as follows:
Subpart F--Claims Collection and Compromise
1. In Sec. 401.601, paragraphs (d)(2)(ii) and (d)(2)(iii) are
revised to read as follows:
Sec. 401.601 Basis and scope.
* * * * *
(d) Related regulations. * * *
(2) HCFA regulations. * * *
(ii) Adjustments in railroad retirement or social security benefits
to recover Medicare overpayments to individuals are covered in
Secs. 401.310 through 401.340.
(iii) Claims against providers and suppliers for overpayments under
Medicare and for assessment of interest are covered in Secs. 401.387
and 401.393.
* * * * *
2. In Sec. 401.607, paragraph (d)(2) is revised to read as follows:
Sec. 401.607 Claims collection.
* * * * *
[[Page 14524]]
(d) Collection by offset. * * *
(2) Under regulations at Secs. 401.310 through 401.340, HCFA may
initiate adjustments in program payments to which an individual is
entitled under title II (Federal Old-Age, Survivors, and Disability
Insurance Benefits) of the Act or under the Railroad Retirement Act of
1974 (45 U.S.C. 231) to recover Medicare overpayments.
C. Part 405 is amended as set forth below:
PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED
1. The authority citation for subpart C continues to read as
follows:
Authority: Sections 1102, 1815, 1833, 1842, 1866, 1870, 1871,
1879, and 1892 of the Social Security Act (42 U.S.C. 1302, 1395g,
1395l, 1395u, 1395cc, 1395gg, 1395hh, 1395pp, and 1395ccc) and 31
U.S.C. 3711.
2. The following sections are redesignated as part 401, subpart D
as shown in the table below:
------------------------------------------------------------------------
Old section-- New section--
------------------------------------------------------------------------
405.370................................... 401.375
405.371................................... 401.378
405.372................................... 401.381
405.373................................... 401.384
405.374................................... 401.387
405.375................................... 401.390
405.376................................... 401.393
405.377................................... 401.394
405.378................................... 401.395
405.380................................... 401.396
------------------------------------------------------------------------
3. Subpart C, is further amended by removing the undesignated
centered headings and Secs. 405.301 through 405.359, and subpart C is
reserved.
Subpart G--Reconsiderations and Appeals Under Medicare Part A
4. Subpart G is amended as follows:
a. The authority citation for subpart G continues to read as
follows:
Authority: Secs. 1102, 1151, 1154, 1155, 1869(b), 1871, 1872,
and 1879 of the Social Security Act (42 U.S.C. 1302, 1320c, 1320c-3,
1320c-4, 1395ff(b), 1395hh, 1395ii, and 1395pp).
b. In Sec. 405.704, the section heading and the introductory text
of paragraph (c) are revised, and a new paragraph (c)(3) is added, to
read as follows:
Sec. 405.704 Actions that are initial determinations.
* * * * *
(c) Initial determination with respect to a provider. An initial
determination with respect to a provider is a determination made on the
basis of the request for payment filed by the provider under Part A of
Medicare on behalf of an individual who was furnished items or services
by the provider, but only if the determination involves the following:
* * * * *
(3) A determination by HCFA that a provider must repay an
overpayment because the provider is not without fault as that term is
described in Sec. 401.323 of this chapter.
Subpart H--Appeals Under the Medicare Part B Program
5. Subpart H is amended as follows:
a. The authority citation for subpart H is revised to read as
follows:
Authority: Secs. 1102, 1842(b)(3)(C), and 1869(b) of the Social
Security Act (42 U.S.C. 1302, 1395u(b)(3)(C), and 1395ff(b)).
b. In Sec. 405.803, paragraph (b) is revised to read as follows:
Sec. 405.803 Initial determination.
* * * * *
(b) An initial determination for purposes of this subpart includes,
among others, the following determinations:
(1) Whether the items and services furnished are covered.
(2) Whether an individual deductible has been met.
(3) Whether a receipted bill or other evidence of payment is
acceptable.
(4) Whether the charges for items or services furnished are
reasonable.
(5) For items or services furnished an individual by a supplier in
accordance with an assignment under Sec. 424.55 of this chapter, that
are not covered by reason of Sec. 411.15(g) or Sec. 411.15(k) of this
chapter, whether the individual or supplier knew, or could reasonably
have been expected to know, that the items or services were excluded
from coverage.
(6) A determination that a supplier must repay an overpayment
because the supplier is not without fault as that term is described in
Sec. 401.323 of this chapter.
(7) A determination that an individual, or the estate of the
individual, does not qualify for waiver of adjustment or recovery of
overpayments because the individual is, or the estate and the
individual are, not without fault as that term is described in
Sec. 401.355 of this chapter.
(8) A determination, with respect to an individual that is (or an
estate and individual that are) without fault, that the individual (or
estate) does not qualify for waiver of adjustment or recovery of
overpayments on the basis that recovery would defeat the purposes of
title II or of title XVIII of the Act, as described in Sec. 401.358 of
this chapter.
(9) A determination, with respect to an individual that is (or an
estate and individual that are) without fault, that the individual (or
estate) does not qualify for waiver of adjustment or recovery of
overpayments on the basis that recovery would be against equity and
good conscience, as described in Sec. 401.361 of this chapter.
* * * * *
c. Section 405.805 is revised to read as follows:
Sec. 405.805 Parties to the initial determination.
The parties to the initial determination (see Sec. 405.803) may be
any party described in Sec. 405.802(b). A party may also be any
supplier as defined at Sec. 400.202 of this chapter that has been
determined to be not without fault as that term is described in
Sec. 401.323 of this chapter, with respect to that issue only.
D. Part 411 is amended as set forth below:
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
1. The authority citation for part 411 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. Section 411.23 is revised to read as follows:
Sec. 411.23 Individual's cooperation.
If HCFA makes conditional payments, the individual must do the
following:
(a) Cooperate in notifying HCFA of the progress and final outcome
of the liability claim, including, but not limited to--
(1) Notifying the intermediary or carrier within 60 days of filing
a claim with an entity that may be primary to Medicare; and
(2) Notifying HCFA within 30 days of the receipt of a payment from
the entity that is primary to Medicare.
(b) Cooperate in the recovery action.
3. Section 411.28 is revised to read as follows:
Sec. 411.28 Waiver of recovery and compromise of claims.
(a) HCFA may waive recovery, in whole or in part, if HCFA
determines that waiver is in the best interest of the Medicare program.
(b) General rules applicable to compromise of claims are set forth
in subpart F of part 401 of this chapter.
(c) Other rules pertinent to recovery are contained in subpart D of
part 401 of this chapter.
[[Page 14525]]
E. Part 466 is amended as set forth below:
PART 466--UTILIZATION AND QUALITY CONTROL REVIEW
1. The authority citation for part 466 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. In Sec. 466.86, new paragraph (a)(5) is added to read as
follows:
Sec. 466.86 Correlation of Title XI functions with Title XVIII
functions.
(a) Payment determinations. * * *
(5) A finding by the PRO that the provider or supplier is not
without fault, as that term is described in Sec. 401.323 of this
chapter, with respect to an overpayment, is conclusive for payment
purposes.
* * * * *
3. In Sec. 466.94, paragraph (c)(6) is redesignated as paragraph
(c)(7), and a new paragraph (c)(6) is added to read as follows:
Sec. 466.94 Notice of PRO initial denial determination and changes as
a result of a DRG validation.
* * * * *
(c) Content of the notice. * * *
(6) If applicable, a statement about the without fault
determination as that term is described in Sec. 401.323 of this
chapter.
* * * * *
F. Part 473 is amended as set forth below:
PART 473--RECONSIDERATIONS AND APPEALS
1. The authority citation for part 473 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. In Sec. 473.14, paragraph (c)(2) is revised to read as follows:
Sec. 473.14 Applicability.
* * * * *
(c) Nonapplicability of rules to related determinations. * * *
(2) Without fault determinations with respect to overpayments are
made under section 1870 of the Act, and limitation on liability
determinations on excluded coverage of certain services are made under
section 1879 of the Act. Initial determinations under sections 1870 and
1879 and further appeals are governed by the reconsideration and appeal
procedures in part 405, subpart G of this chapter for determinations
under Medicare Part A, and part 405, subpart H of this chapter for
determinations under Medicare Part B. References in those subparts to
initial and reconsidered determinations made by HCFA should be read to
mean initial and reconsidered determinations made by a PRO.
G. Technical Amendments.
Sec. 401.378 [Amended]
1. Redesignated Sec. 401.378 is amended as follows:
a. In paragraph (b), the citations ``Sec. 405.372'' and
``Sec. 405.373'' are removed, and the citations ``Sec. 401.381'' and
``Sec. 401.384'', respectively, are added in their place.
b. In paragraph (c), the citations ``Sec. 405.372'' and
``Sec. 405.372(a)(2)'' are removed, and the citations ``Sec. 401.381''
and ``Sec. 401.381(a)(2)'', respectively, are added in their place.
Sec. 401.381 [Amended]
2. Redesignated Sec. 401.381 is amended as follows:
a. In paragraph (a)(1), the citation ``Sec. 405.371(a)(1)'' is
removed and the citation ``Sec. 401.378(a)(1)'' is added in its place.
b. In paragraph (a)(2), the citation ``Sec. 405.371(c)'' is removed
and the citation ``Sec. 401.378(c)'' is added in its place.
c. In paragraph (b)(1), the citations ``Sec. 405.374'' and
``Sec. 405.375'' are removed and the citations ``Sec. 401.387'' and
``Sec. 401.390'', respectively, are added in their place.
d. In paragraph (e), the citations ``Sec. 405.371(b)'' and
``Sec. 405.378'' are removed and the citations ``Sec. 401.378(b)'' and
``Sec. 401.395'', respectively, are added in their place.
3. Redesignated Sec. 401.384 is amended as follows:
a. In paragraph (a) introductory text, the citation
``Sec. 405.371(a)(2)'' is removed and the citation
``Sec. 401.378(a)(2)'' is added in its place.
b. In paragraph (a)(2), the citation ``Sec. 405.374'' is removed
and the citation ``Sec. 401.387'' is added in its place.
c. In paragraph (c), the citations ``Sec. 405.374'' and
``Sec. 405.375'' are removed and the citations ``Sec. 401.387'' and
``Sec. 401.390'', respectively, are added in their place.
Sec. 401.387 [Amended]
4. In redesignated Sec. 401.387, paragraph (a), the citations
``Sec. 405.372'' and ``Sec. 405.373'' are removed and the citations
``Sec. 401.381'' and ``Sec. 401.384'', respectively, are added in their
place.
Sec. 401.390 [Amended]
5. In redesignated Sec. 401.390, paragraph (a), the citations
``Sec. 405.374'' and ``Sec. 405.372(b)(2)'' are removed and the
citations ``Sec. 401.387'' and ``Sec. 401.381(b)(2)'', respectively,
are added in their place.
Sec. 401.394 [Amended]
6. In redesignated Sec. 401.394, paragraph (e) introductory text,
the citation ``Sec. 405.374'' is removed and the citation
``Sec. 401.387'' is added in its place.
Sec. 401.601 [Amended]
7. In Sec. 401.601, the following changes are made:
a. In paragraph (d)(2)(ii), the phrase ``Secs. 405.350-405.356 of
this chapter'' is removed, and the citation ``Sec. 401.305'' is added
in its place.
b. In paragraph (d)(2)(iii), the phrase ``Secs. 405.374 and 405.376
of this chapter'' is removed, and the phrase ``Secs. 401.387 and
401.393'' is added in its place.
Sec. 401.607 [Amended]
8. In Sec. 401.607, in paragraph (d)(2), the phrase
``Secs. 405.350-405.358 of this chapter'' is removed, and the phrase
``Secs. 401.346 and 401.349'' is added in its place.
PART 403--RECOGNITION OF STATE REIMBURSEMENT CONTROL SYSTEMS
9. The authority citation for part 403 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Sec. 403.310 [Amended]
10. In Sec. 403.310, in paragraph (a), the citation
``Sec. 405.378'' is removed, and the citation ``Sec. 401.395'' is added
in its place.
Sec. 405.705 [Amended]
11. In Sec. 405.705, in paragraph (d), the citation
``Sec. 405.376'' is removed, and the citation ``Sec. 401.393 of this
chapter'' is added in its place.
Sec. 405.1801 [Amended]
12. In Sec. 405.1801, in paragraph (a), under the definition
``Intermediary determination,'' in paragraph (4), the citation
``Sec. 405.376'' is removed, and the citation ``Sec. 401.393 of this
chapter'' is added in its place.
Sec. 405.1803 [Amended]
13. In Sec. 405.1803, in paragraph (c), the citation ``405.373'' is
removed, and the citation ``Sec. 401.384(a) of this chapter'' is added
in its place.
[[Page 14526]]
PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
14. The authority citation for part 410 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Sec. 410.1 [Amended]
15. In Sec. 410.1, in paragraph (b), the phrase ``subpart C of part
405 of this chapter'' is removed, and the phrase ``Subpart D of Part
401 of this chapter'' is added in its place.
Sec. 411.28 [Amended]
16. In Sec. 411.28, the following changes are made:
a. In paragraph (b), the citation ``405.376'' is removed, and the
citation ``401.393'' is added in its place.
b. In paragraph (c), the phrase ``in subpart C of part 405 of this
chapter'' is removed, and the phrase ``in subpart D of part 401 of this
chapter'' is added in its place.
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES
17. The authority citation for part 413 continues to read as
follows:
Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).
Sec. 413.20 [Amended]
18. In Sec. 413.20, in paragraph (e), the citation
``Sec. 405.372(a)'' is removed wherever it appears (twice), and the
citation ``Sec. 401.381'' is added in its place.
Sec. 413.153 [Amended]
19. In Sec. 413.153, the following changes are made:
a. In paragraph (a)(1)(ii), the citation ``Sec. 405.377'' is
removed, and the citation ``Sec. 401.394'' is added in its place.
b. In paragraph (a)(1)(iii), the citation ``Sec. 405.378'' is
removed, and the citation ``Sec. 401.395'' is added in its place.
PART 447--PAYMENTS FOR SERVICES
20. The authority citation for part 447 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Sec. 447.31 [Amended]
21. In Sec. 447.31, in paragraph (a), the citation ``Section
405.377'' is removed, and the citation ``Sec. 401.394'' is added in its
place.
PART 493--LABORATORY REQUIREMENTS
22. The authority citation for part 493 continues to read as
follows:
Authority: Sec. 353 of the Public Health Service Act, secs.
1102, 1861(e), the sentence following 1861(s)(11), 1861(s)(12),
1861(s)(13), 1861(s)(14), 1861(s)(15), and 1861(s)(16) of the Social
Security Act (42 U.S.C. 1302, 1395x(e), the sentence following
1395x(s)(11), 1395x(s)(12), 1395x(s)(13), 1395x(s)(14),
1395x(s)(15), and 1395x(s)(16).
Sec. 493.1834 [Amended]
23. In Sec. 493.1834, in paragraph (i)(1)(ii), the citation
``Sec. 405.378(d)'' is removed, and the citation ``Sec. 401.395(d)'' is
added in its place.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93,774, Medicare--
Supplementary Medical Insurance Program)
Dated: January 8, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Dated: January 20, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-4230 Filed 3-24-98; 8:45 am]
BILLING CODE 4120-01-U
