[Federal Register Volume 68, Number 143 (Friday, July 25, 2003)]
[Rules and Regulations]
[Pages 43940-43942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18509]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 411 and 489

[CMS-1475-FC]
RIN 0938-AM65


Medicare Program; Third Party Liability Insurance Regulations

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period removes Sec.  411.54(c)(2) 
and a portion of Sec.  489.20(g) from our regulations. These 
regulations were held by a court to be inconsistent with the Medicare 
Secondary Payer provisions that are found in section 1862(b)(2)(a) of 
the Social Security Act. Specifically, the court held that Sec.  
411.54(c)(2) and a portion of Sec.  489.20(g) are unenforceable to the 
extent that these regulations require providers and suppliers to only 
bill Medicare and prohibits them from billing a liability insurer or 
asserting or maintaining a lien against a beneficiary's liability 
insurance settlement during the ``promptly'' period.

DATES: Effective date: This final rule with comment period is effective 
on August 25, 2003.
    Comment date: We will consider comments if we receive them at the 
appropriate address, as provided in the addresses section, no later 
than 5 p.m. on September 23, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1475-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1475-FC, PO Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for us to receive mailed comments on 
time in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and two copies) to one of the following 
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-8013.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available if you wish to retain proof of filing by stamping in and 
retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Suzanne Ripley, (410) 786-0970.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: Comments 
received timely will be available for public inspection as they are 
recorded and processed, generally beginning approximately 4 weeks after 
the publication of the document, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m. To schedule an appointment to view public comments, phone (410) 
786-7197.

I. Background

    Under section 1862(b)(2)(A) of the Social Security Act (the Act), 
Medicare payments may not be made for any item or service for which 
payment has been made or can reasonably be expected to be made 
``promptly'' (as determined in accordance with our regulations) under a 
liability insurance policy. The regulations at Sec.  411.54(c)(2) and a 
portion of Sec.  489.20(g) require providers and suppliers (including 
physicians) to bill Medicare for Medicare covered services. These 
regulations also prohibit those providers and suppliers from billing a 
liability insurer or asserting or maintaining a lien against the 
beneficiary's insurance settlement, regardless of when the liability 
insurer is billed or when the lien is asserted. After the regulations 
at Sec.  411.54(c)(2) and Sec.  489.20(g) were published, but before 
the effective date, the American Hospital Association (AHA), filed a 
lawsuit on behalf of its member hospitals to prevent us from 
implementing these sections. (See American Hospital Association (AHA) 
v. Sullivan, 1990 WL 274639 (D.D.C. May 24, 1990).) During the 
litigation, the parties stipulated to allow providers to bill liability 
insurers or assert or maintain a lien against a beneficiary's insurance 
settlement.
    The court ultimately held that this statutory provision (that 
prohibits Medicare from making payment where liability insurance that 
is expected to pay promptly exists) permits a provider to seek payment 
from insurance or assert or maintain a lien against the beneficiary's 
insurance settlement during the ``promptly'' period. Therefore, we were 
unable to implement Sec.  411.54(c)(2) and the portion of Sec.  
489.20(g) that states, ``except when the primary payer is a liability 
insurer and except as provided in paragraph (j) of this section.'' The 
court took no action affecting existing special rules for Oregon. The 
court also did not address billing a liability insurer or asserting or 
maintaining a lien after the expiration of the ``promptly'' period. The 
AHA decision has not been appealed. Therefore, to the extent that Sec.  
411.54(c)(2) and a portion of Sec.  489.20(g) are inconsistent with the 
court's decision, they are unenforceable.
    In light of the AHA decision, we are continuing the policy which we 
stipulated during the AHA case with respect to all providers and 
suppliers (including physicians); that is, we are allowing them to bill 
liability insurers or assert or maintain liens on a beneficiary's 
liability insurance settlement rather than billing Medicare. The 
Commerce Clearing House, Inc. (CCH) published two policy memoranda that 
addressed the issue of billing a liability insurer or asserting or 
maintaining a lien against a beneficiary's liability insurance 
settlement, referring to the holding in the AHA case. (Medicare & 
Medicaid Guide (CCH) 45, 187 at 53, 508-53, 512 (1997). The first 
policy memorandum entitled, ``Provider and Supplier Billing When 
Medicare is Secondary Payer to Liability Insurance--Information'', is 
dated August 21, 1995. The second policy memorandum entitled `` Charges 
to Beneficiaries and Handling Improper Collections By Providers and 
Suppliers When Medicare is Secondary Payer to Liability Insurance--
Action'', is dated March 12, 1996. These memoranda can

[[Page 43941]]

be obtained by calling the contact person listed in this final rule 
with comment period or by accessing the CMS Web site: http://www.cms.hhs.gov.
    To date, we have not enforced Sec.  411.54 (c)(2) or the portion of 
Sec.  489.20(g) that is inconsistent with the court's decision. Because 
Sec.  411.54(c)(2) was written without regard to the pre- and post 
``promptly'' period, we are removing this section in its entirety, even 
though the AHA decision found it unenforceable only during the 
``promptly'' period. This final rule with comment period does not 
establish lien rights that are not available to providers and suppliers 
(including physicians) under State law. The final rule with comment 
period does not alter the prohibition against double billing; that is, 
it does not allow a provider or supplier (including a physician) to 
bill Medicare and simultaneously bill the liability insurer or assert 
or maintain a lien against the beneficiary's liability insurance 
settlement.

II. Provisions of the Final Rule

    The final rule with comment period removes Sec.  411.54(c)(2) and 
revises paragraphs (c) and (d) of our regulations. It also removes the 
words ``except when the primary payer is a liability insurer and except 
as provided in paragraph (j) of this section'' from Sec.  489.20(g).

III. 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 when a collection of information requirement is submitted to 
the OMB for review and approval. In order to fairly evaluate whether 
OMB should approve an information collection, section 3506(c)(2)(A) of 
the Paperwork Reduction Act of 1995 requires that we solicit comment on 
the following issues:
    [sbull] The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    [sbull] The accuracy of our estimate of the information collection 
burden.
    [sbull] The quality, utility, and clarity of the information to be 
collected.
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirements discussed below.

Section 411.54 Limitation on Charges When a Beneficiary Has Received a 
Liability Insurance Payment or Has a Claim Pending Against a Liability 
Insurer

    Section 411.54(c) states that a hospital must, upon request, 
furnish to the beneficiary or his or her representative an itemized 
bill of the hospital's charges.
    This requirement, which is subject to the PRA, is not being revised 
in this regulation. The burden associated with this requirement is 
currently captured under OMB control number 0938-0565, which is 
approved through November of 2005.
    We have submitted a copy of this final rule with comment period to 
OMB for its review of the information collection requirements described 
above. These requirements are not effective until they have been 
approved by OMB.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following: Centers for 
Medicare and Medicaid Services, Office of Strategic Operations and 
Regulatory Affairs, Division of Regulations Development and Issuances, 
Attn.: Dawn Willinghan (Attn: CMS-1475-F), Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    Office of Information and Regulatory Affairs, Office of Management 
and Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, CMS Desk Officer.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority, under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued. The AHA 
decision holds that the Medicare Secondary Payer provisions permit a 
provider to seek payment from that insurance or assert or maintain a 
lien against the beneficiary's insurance settlement during the 
``promptly'' period. To the extent that Sec.  411.54(c)(2) and a 
portion of Sec.  489.20(g) are inconsistent with the court's decision, 
they are unenforceable. Good cause exists to waive notice and comment 
because the agency's action to remove Sec.  411.54(c)(2) and revise 
Sec.  489.20(g) is compelled by the AHA decision.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking and to issue this final rule with comment period.

V. Regulatory Impact

    We have examined the impacts of this final rule with comment period 
as required by Executive Order 12866 (September 1993, Regulatory 
Planning and Review), the Regulatory Flexibility Act (RFA) (September 
16, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive 
Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). We have 
determined that the effect of this final rule on the economy and the 
Medicare program is negligible. Therefore, this final rule is not a 
major rule as defined in Title 5, United States Code, section 804(2) 
and is not an economically significant rule under Executive Order 
12866.
    Because these regulations have been unenforceable since the AHA 
decision, the impact of this regulation is limited to the expected 
elimination of potential lawsuits that may be brought against hospitals 
by beneficiaries seeking to require hospitals to bill Medicare for the 
cost of their treatment. Since 1990 we have been aware of only several 
cases where beneficiaries have brought litigation against hospitals 
seeking State court orders requiring the hospitals to bill Medicare. 
The beneficiaries have based their cases on the published regulations. 
While we do not believe that many such suits have or will be filed, 
individual hospitals can spend substantial monies defending these types 
of lawsuits. Beneficiaries who bring these suits, only to lose based on 
the State court's reading of CMS' policy, also may be responsible for 
some attorneys' costs and may be responsible for fees for the 
hospital's attorneys in some cases. To the extent that this regulation 
clarifies CMS policy by eliminating unenforceable regulations, we 
believe that the number of lawsuits filed may decline.

[[Page 43942]]

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
considered to be small entities. Because this regulation merely deletes 
these unenforceable provisions from our regulations, we have determined 
and we certify that this final rule will not have a significant 
economic impact on a substantial number of small entities. Therefore, 
we are not preparing an analysis for the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule or notice having the effect of a 
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 604 of the RFA. 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 
100 beds. We have determined that this final rule will not have a 
significant effect on the operations of a substantial number of small 
rural hospitals. Therefore, we are not preparing an analysis for 
section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule or notice having the effect of a rule that may result 
in expenditures in any 1 year by State, local, or tribal governments, 
in the aggregate, or by the private sector, of $110 million. This final 
rule has no consequential effect on State, local, or tribal governments 
or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule or notice having the effect 
of a rule that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This final rule will not have a substantial effect on 
State or local governments.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 411

    Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 485

    Grant programs--health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as follows:

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
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).


0
2. Section 411.54 is amended by revising paragraphs (c) and (d) to read 
as follows:


Sec.  411.54  Limitation on charges when a beneficiary has received a 
liability insurance payment or has a claim pending against a liability 
insurer.

* * * * *
    (c) Itemized bill. A hospital must, upon request, furnish to the 
beneficiary or his or her representative an itemized bill of the 
hospital's charges.
    (d) Exception--(1) Prepaid health plans. If the services were 
furnished through an organization that has a contact under section 1876 
of the Act (that is, an HMO or CMP), or through an organization that is 
paid under section 1833(a)(1)(A) of the Act (that is, through an HCPP) 
the rules of Sec.  417.528 of this chapter apply.
    (2) Special rules for Oregon. For the State of Oregon, because of a 
court decision, and in the absence of a reversal on appeal or a 
statutory clarification overturning the decision, there are the 
following special rules:
    (i) The provider or supplier may elect to bill a liability insurer 
or place a lien against the beneficiary's liability settlement for 
Medicare covered services, rather than bill only Medicare for Medicare 
covered services, if the liability insurer pays within 120 days after 
the earlier of the following dates:
    (A) The date the provider or supplier files a claim with the 
insurer or places a lien against a potential liability settlement.
    (B) The date the services were provided or, in the case of 
inpatient hospital services, the date of discharge.
    (ii) If the liability insurer does not pay within the 120-day 
period, the provider or supplier:
    (A) Must withdraw its claim with the liability insurer and/or 
withdraw its lien against a potential liability settlement.
    (B) May only bill Medicare for Medicare covered services.
    (C) May bill the beneficiary only for applicable Medicare 
deductible and co-insurance amounts plus the amount of any charges that 
may be made to a beneficiary under 413.35 of this chapter (when cost 
limits are applied to these services) or under 489.32 of this chapter 
(when services are partially covered).

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
1. The authority citation for part 489 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
2. Section 489.20 is amended by revising paragraph (g) to read as 
follows:


Sec.  489.20  Basic commitments.

* * * * *
    (g) To bill other primary payers before Medicare.
* * * * *

    Authority: Section 1862(b)(2)(A) of the Social Security Act (42 
U.S.C. 1395Y)

(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: June 6, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: June 30, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-18509 Filed 7-17-03; 10:06 am]
BILLING CODE 4120-01-P