Statistically, Medicare-related claims make up around 10-15% of your total claims volume at any given time.
It doesn’t seem like much when you consider it in that light, so often busy insurance executives may fail to give Medicare compliance the emphasis it deserves. Here are some important reasons why both the CEO and the VP of Claims should bring Medicare compliance up a notch or two in their list of priorities.
It’s a money issue, not just a compliance issue.
Unlike the other risks insurance executives are used to, Medicare compliance can have a direct impact on the company’s bottom line.
Penalties for non-compliance are strong, and are becoming more readily assessed through more stringent and more frequently ordered auditing procedures. If the carrier is found to be non-compliant on a Medicare-related personal injury claim, fines can be as high as double the initial settlement amount, plus interest.
On higher-value claims, that kind of penalty can put a serious dent into annual financials.
It increases cycle times, paid costs, and reserves.
These three items create the perfect storm for insurance executives, and Medicare touches all three due to how potentially time consuming and complex the claims can be, and how easily inexperienced adjusters (who realistically only see one of these claims once or twice a month) can make errors in processing them.
Cycle times are higher for Medicare claims as compared to non-Medicare claims which can take 7-9 months to process. Medicare claims can take the average adjuster months and sometimes years to process. This has the dual effect of increasing this important KPI for reporting purposes and increasing the likelihood of human error since the adjuster will be rushing to close the case as quickly as possible and could very well overlook something important.
Paid costs and reserves may both increase because Medicare’s rules are constantly changing, and they are not limited by the same policy limits and “hold-harmless” language that can control costs in other circumstances. If Medicare’s lien meets or exceeds policy limits, it can and will go recover more than the full amount owed.
In addition, many carriers inadvertently set reserves too high for Medicare claims because they fail to properly itemize all the claim costs that should and should not be included in Medicare’s reimbursement.
It can mean the VP’s job and the CEO’s reputation.
Bringing the matter closer to home, a VP of Claims presiding over a claims processing enterprise that suffers from ballooning cycle times, paid costs, and reserves could very well lose their job over the situation.
The CEO will likely take heat from the board if the situation continues long enough. Plus, the long-term financial and operational efficiency of the company is at stake, which has a direct impact on the CEO’s reputation and success as a leader.
What makes this situation especially unfortunate is that it can and should be resolved through a very simple and straightforward step: outsource the personal injury claims process when it involves Medicare beneficiaries.