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The Medicare Secondary Payer (MSP) program authorizes the Centers for Medicare & Medicaid Services (CMS) to recover compensation payments from beneficiaries who have private insurance that should be primarily responsible for their medical expenses.[1]

In a class action lawsuit brought by Medicare beneficiaries and their attorney to challenge certain harsh MSP collection practices, a federal district court in Tucson, Arizona, recently held that these collection practices exceed the agency's statutory authority.[2]  Although CMS filed a notice of appeal on June 30, 2011, it has also revised two of its MSP collection letters to comply with the district court's orders.[3]

In the first part of its decision, the court held that CMS cannot insist that it be paid within 60 days of demand if the beneficiary has exercised his or her right to either appeal the amount claimed as reimbursement by Medicare, or to request a waiver of recovery.  In the second part of its decision, the court focused on the demands made on the beneficiary's attorney, holding that CMS cannot hold the attorney financially responsible if the attorney does not withhold funds from his or her client until the MSP claim has been paid.

The "Rights & Recovery" Letter

When the MSP recovery contractor first learns that an insurance liability claim is being made by a beneficiary, it sends the beneficiary and/or the beneficiary's attorney a "rights and responsibilities" letter.  The newly revised form for this letter can be found on the contractor's website,  The revised letter omits the statement made in earlier letters that Medicare should be repaid before funds are disbursed for other purposes.  It adds a statement that Medicare will not take any collection action if an appeal or waiver request is pending.  This change is significant because the demand for immediate repayment has had a chilling effect on beneficiaries' right to contest the MSP claim.

The Payment "Demand" Letter

A second letter is sent by the MSP contractor to the beneficiary and/or the beneficiary's attorney after the insurance claim has been resolved by settlement or judgment.  The revised form for this "demand" letter states that repayment of the MSP claim within 60 days is "requested,"  replacing language from the earlier MSPRC letters that stated "you must repay Medicare within 60 days."   It also clarifies that Medicare will not initiate any recovery action while an appeal or waiver request is pending.  Although it states that collection of unpaid Medicare debts may include Treasury offsets against monies payable by federal agencies, it no longer mentions termination of Social Security, Railroad Retirement, or future Medicare payments, and states that notice of any intended collection action will be provided. 

The MSP Manual

In addition to the revisions of the MSP form letters, CMS has also undertaken a review of Chapter 7 of the Medicare Secondary Payer Manual since the Haro decision.  See CMS Pub 100-05, at .   It is likely that CMS revisions to this chapter of the manual, which specified contractor recovery procedures for liability insurance, will reflect changes in MSP collection practices ordered by the court.


[1] Additional information about the Medicare Secondary Payer program can be found in earlier Alerts at
[2] Haro, et al. v. Sebelius, 2011 WL 2040219 (D.Ariz. May 9, 2011).
[3] CMS had already revised these notices once, after the Haro lawsuit was filed, but the district court held that those initial changes were not adequate to cure the deficiencies identified by the plaintiffs.

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