CMS Administrator Marilyn Tavenner (CMS photo)

Officials at the Centers for Medicare & Medicaid Services (CMS) want to set up a formal system for handling disputes with private insurers about what it sees as payment data errors. CMS would use a new “payment offset” system to resolve conflicts with issuers of Medicare Advantage plans and Medicare Part D prescription drug plans.

Today, CMS sends Medicare Advantage issuers cash up front through a risk score program. The program compensates issuers for covering high-risk enrollees.

The issuers are supposed to reconcile the actual cost of covering the enrollees with the projected cost and pay any extra cash received back to CMS.

CMS sends cash to Medicare drug plan issuers up front in connection with a reinsurance program, a risk-sharing program and two subsidy programs. Like Medicare Advantage issuers, drug plan issuers are supposed to help CMS reconcile projected costs with actual costs and send back any extra cash back to CMS.

When CMS tells issuers about reconciliation errors, they usually fix the errors, officials say in a discussion of the payment offset proposal, which starts on page 578 in a large batch of draft CMS regulations.

But, if an issuer refuses to fix an error, CMS wants to be able to deduct the disputed amount from other payments it would normally owe the issuer. The issuer would have 30 days to appeal the payment offset.

CMS runs similar projection-based payment systems for the Patient Protection and Affordable Care Act (PPACA) risk score program for insurers, and the government is providing cash payments based on projections for the PPACA exchange plan premium subsidy program and a PPACA program the helps low-income exchange plan users pay deductibles, co-payments and coinsurance amounts. 

See also: Another PPACA subsidy system takes shape

The regulations are set to appear in the Federal Register July 14. Comments will be due 60 days after the official publication date.