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Recent CMS webinar clarifies rule on CMPs

January 29, 2024 · Medicare Insights Team

On January 18, 2024, CMS hosted a webinar to clarify the civil money penalties and provide a Question and Answer session. This was the first opportunity for Non-Group Health Plans (“NGHP”) stakeholders to publicly ask CMS about its civil money penalties rule published on October 11, 2023.  In the webinar, CMS provided some valuable clarification on the final rule, as well as its timelines and audits.

Triggers for Reporting Obligations

CMS placed a heavy emphasis on what triggers a claim to be reportable, which specifically is acceptance of ongoing responsibility for medicals (“ORM”) and total payment obligation to the claimant (“TPOC”). CMS also stated the determination of whether a claim is subject to a penalty will be based on the ORM or TPOC record.  

Final Rule is Prospective rather than Retrospective

Because civil money penalties only affect prospective claims, retrospective claims will not be subject to civil money penalties. In the Q&A session, CMS explicitly stated that any record closed prior to October 11, 2024, will not be subject to a civil money penalty. In other words, a reported claim will not incur a civil money penalty if the reportable event of ORM acceptance or TPOC occurs before October 11, 2024. To illustrate this point, CMS provided several examples of when a claim would be subject to a civil money penalty or timely reported.  An example of the prospective nature of the rule involved a claim settled on October 1, 2023, but not reported until December 1, 2024. While the claim was not reported within the 365-day reporting window from the reportable date of October 1, 2023, the claim is not subject to a civil money penalty since the reportable event did not occur prior to the applicability date of October 11, 2024. While such older claims may not be subject to penalties, they could still result in other consequences, including False Claims Act allegations.

CMS Audits

On April 1, 2026, CMS will be begin auditing claims for civil money penalties. From then on  audits will be conducted quarterly with a random sample of 250 new RRE records added.  The 250 records per quarter will be , consisting of a mix of group health plan (“GHP”) and NGHP records on a pro-rata basis. It is possible (though unlikely) that a single claim could be pulled multiple times based on entry of an ORM and TPOC (or multiple TPOC entries on the same claim). The timeliness of reporting will be reviewed by CMS, and the substantive decision making will be done by CMS as well.   

RREs Need to Ensure Claims are Actually Reported

CMS emphasized that the final rule does not change any Section 111 reporting requirements. When it comes to penalties, RREs must ensure that their claims are actually reported to CMS.  It is important to remember that omissions of data or incorrect information often result in a claim not being successfully reported and that the RREs failure to correct a record rejected by CMS for errors will not be exempt from penalties.  It is ultimately the RRE’s responsibility to ensure the record is corrected and the subsequent reporting attempt is accepted by CMS.  Similarly, if the RRE uses a TPA to report claims to CMS, the TPA must ensure the claims are successfully reported by the reportable date.

Safe Harbor and Mitigating Factors Notes

Since there are a number of unique situations, CMS doesn’t want to limit how it can apply mitigating factors, and thus will review all reasonable evidence to support why a civil money penalty should not be imposed because For instance, a disputed claim with ORM being disputed or a claim reported late because the jurisdiction allows for a lengthy period for a claimant to report the claim could justify a decision not to impose a civil money penalty. Consequently, CMS has decided to take a case-by-case approach and review any mitigating evidence submitted.

CMS also clarified some aspects of the safe harbor, which requires the RRE to make three attempts to obtain the necessary information from the claimant or their attorney needed to report the claim.  For example, if the RRE is missing a Social Security number, the RRE must make three attempts (once in writing, once by mail and once by reasonable means) to obtain this information. . The attempt in writing may be by postal mail or email. The attempt by mail, should be by postal mail (ex: USPS). 

CMS Informal vs. Formal Notices

The informal notice to impose a civil money penalty will include a letter emailed to the RRE’s authorized representative, with a copy sent to the RRE’s account manager.  CMS will identify the non-compliant record and give the RRE 30 days from receipt of the informal notice to submit mitigating factors. The purpose of this informal notice is not to impose a penalty, but rather a signal of intent and opportunity for the RRE to present evidence supporting mitigating factors.

After the 30 day period, CMS will issue a formal notice via certified mail, in which it imposes a civil money penalty. The RRE will no longer be able to present evidence informally and instead will have formal appeal options available from the ALJ level. 

Penalties are tiered, from $250 per day for the first year beyond the 365-day reportable period, increasing to $500 per day if the claim is reported two to three years late. After three years, the penalties increase to $1,000 per day with a maximum penalty of $365,000. These penalties have been in place for years and, accounting for year-over-year inflation, are significantly higher in 2024.  The current value of these penalties is as follows:

Penalty in rule Present day value with inflation
$250 $357
$500 $714
$1,000 $1,428
$365,000 (max penalty) $521,220

Optum can help you prepare for CMPs and Appeal CMPs

Optum is fully committed to helping with your MSP compliance needs, (including claim reporting) and can assist in navigating CMS’ evolving requirements in this area.  As experts in the field, we have been the trusted Section 111 reporting agent for many companies and can ensure that your compliance needs are met. 

Our specialists will assist you with analyzing, appealing or otherwise resolving CMPs. They have been working with RREs and their TPAs for years, resolving conditional payments, Treasury debts, and working with CMS on various Section 111 inquiries. We are prepared to assist you with any CMP issues should they arise.

Contact Optum for more information on how we can help with your Section 111 reporting, Civil Money Penalty or other Medicare Secondary Payer compliance needs. For additional information, please contact Michael Flower, Optum MSP Compliance Counsel, at (p) 813-627-2406.

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