Determining Liability and Waiver of Recovery for Overpayments

70 – Determining Liability and Waiver of Recovery for Overpayments (Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) The Medicare law contains three provisions (§1870, §1879 and §1842(l)) dealing with liability for, and recovery of, individual overpayments. These provisions do not cover cost report overpayments. These provisions are reflected below and, for a more extensive treatment, in Medicare Claims Processing Manual, Publication 100-04, Chapter 31, Financial Liability Protections. The contractor shall determine whether the provider, physician, or beneficiary is liable for the overpayment. Most contractor payments for provider services are made to providers on behalf of the beneficiaries who received the services. If payment is made directly to the beneficiary, liability always lies with the beneficiary unless recovery is waived under the limitation of liability provision. Where the provider or physician has been overpaid, it is liable for the overpayment unless the contractor determines that it was without fault with respect to the overpayment. If the contractor determines that an overpaid provider or physician was without fault and therefore not liable for the overpayment, it relieves the provider of liability for the overpayment. The beneficiary automatically becomes liable, whether or not the beneficiary was at fault. However, recovery from the beneficiary may be waived if you determine the beneficiary is without fault and recovery would defeat the purposes of Title II or Title XVIII or would be against equity and good conscience. 70.1- 1879 Determination – Limitation of Liability (Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) Section 1879 of the Social Security Act (the Act) provides financial relief to beneficiaries, providers, practitioners, and other suppliers who acted in good faith in accepting or providing services found to be not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, or to constitute custodial care. The provision applies to all Part A/Part B claims decisions where claims are denied or reduced (prepay or postpay) under §1862(a) (9) and §1879 (e) and (g) of the Act. Contractors must make an individualized determination for each claim that is denied as not reasonable and necessary. (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits, §14.1) A. Limitation on Liability – Indemnification Procedures for Claims Filed under Part B Section 1879(b) of the Act provides that, when a physician/supplier is held liable for the payment of expenses incurred by a beneficiary for items or services determined to be excluded and such physician/supplier requests and received payment from the beneficiary or any person(s) who assumed financial responsibility for payment of expenses, the Medicare program will indemnify the beneficiary or other person(s) for any payments made to the liable physician/supplier (including deductible and coinsurance payments). Further, any such indemnification payments are considered overpayments to the physician/supplier. (See PIM Exhibits, §14.1.) B. Limitation on Liability Where Physician and Beneficiary Did Not Have Prior Knowledge With Respect to Services Found To Be Not Reasonable And Necessary Services (§1879 of Act) When both the physician and the beneficiary did not have prior knowledge with respect to services found to be not reasonable and necessary, permit Medicare payment to be made under the limitation on liability provision. (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits, §14.1) An overpayment does not exist if a determination is made that the limitation of liability provision applies. The claim decision must incorporate a limitation of liability determination. 70.2 - 1842(l) Determination (Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) For denials of nonassigned claims based on §1862(a)(1) involving physician services, the contractor must make a determination under §1842(l) of the Act regarding whether the physician or supplier must refund any payment collected from the beneficiary. This should be done for initial determinations (prepay) and for postpayment denials. (See Medicare Program Integrity Manual (PIM), Publication 100- 08, Exhibits, §14.3) 70.3 - 1870 Determination – Waiver of Recovery of an Overpayment (Rev. 294, Issued: 10-06-17, Effective: 07-03-17, Implementation: 07-03-17) Once the contractor has concluded that an overpayment exists (that is, a finding that payment cannot be made under the waiver of liability provisions) it makes a §1870(b) determination regarding whether the provider/beneficiary was without fault with respect to the overpayment. Once this determination has been made, then waiver of recovery of the overpayment from the provider/beneficiary should be considered per §1870(c). The contractors make a §1870 determination for all assigned and non-assigned claims, however, §1870 (b) or (c) of the Act, does not apply to the provider on non-assigned post-payment §1862(a)(1) denied claims. However, it can apply to the beneficiary meaning that the beneficiary was not at fault in causing the overpayment. The provider may have a refund obligation to the beneficiary, but the provider did not receive an overpayment from the Medicare program. Section 1870 is not limited to claims denied under §1862(a)(1) of the Act for not being reasonable and necessary. Section 1870 is the framework for determining who is liable for the overpayment and whether the overpayment recovery can be waived. For providers taking assignment, waiving recovery of an overpayment is appropriate where the provider was without fault with respect to causing the overpayment. Where recovery from the provider is waived per 1870(c), the overpayment becomes an overpayment to the beneficiary. However, if the provider was “at fault” in causing the overpayment, recovery of the overpayment from the provider must proceed. Section 1870 waiver of recovery determinations also must be made where the provider mistakenly receives direct payment on an unassigned claim and this is the basis for the overpayment. Examples of §1870 determinations: A. Overpaid Provider or Physician Not Liable Because It Was Without Fault (§1870(b) of the Act.) If a provider was without fault with respect to an overpayment it received (or is deemed without fault, in the absence of evidence to the contrary, because the overpayment was discovered subsequent to the fifth calendar year after the year of payment) it is not liable for the overpayment; therefore, it is not responsible for refunding the amount involved. The contractor makes these determinations. B. Beneficiary Liable for Overpayments to Provider That Was Without Fault With Respect to the Overpayment (§§1870(a) and (b) of the Act) If an overpaid provider was without fault, or is deemed without fault and therefore not liable for refund, liability shifts to the beneficiary. If the overpayment involves services that are not reasonable and necessary, you should have made a §1879 determination regarding the beneficiary’s liability for the overpayment. If the overpayment does not involve medically unnecessary services, then limitation on liability does not apply. C. Contractor Waiver of Recovery from Beneficiary (§1870(c) of the Act) If a beneficiary is liable for an incorrect payment, recovery may be waived if the beneficiary was without fault with respect to the overpayment and recovery would defeat the purposes of title II or title XVIII of the Social Security Act (i.e., cause financial hardship) or would be against equity and good conscience. (Where an overpayment is discovered subsequent to the fifth calendar year after the year the payment was made, recovery is deemed against equity and good conscience if the beneficiary was without fault.) If §1879 of the Act is applicable, then §1879 determination is made first since an overpayment does not exist if payment can be made under §1879 because there was lack of knowledge by both the beneficiary and the provider.