Medicare Secondary Payer and Settlement Delay

The Medicare Secondary Payer Act of 1980 and its subsequent amendments require that insurers and self-insured companies report settlements, awards, and judgments that involve a Medicare beneficiary to the Centers for Medicare and Medicaid Services. The parties then may be required to compensate CMS for its conditional payments. In a simple settlement model, this makes settlement less likely. Also, the reporting delays and uncertainty regarding the size of these conditional payments are likely to further frustrate the settlement process. We provide results, using data from a large insurer, showing that, on average, implementation of the MSP reporting amendments led to a delay in the resolution of disputes involving auto accidents of about six months. *Eric Helland, PhD is an economics professor at Claremont McKenna College and an economist at RAND. Jonathan Klick is a Professor at the University of Pennsylvania Law School and the Erasmus Chair of Empirical Legal Studies at the Erasmus University Rotterdam. Many thanks to State Farm Insurance for providing us with the data used in this study. This research was supported by the Searle Civil Justice Institute of the Law and Economics Center at George Mason University.