A. Interest Calculation
Sections 1815(d) and 1833(j) of the Social Security Act (the Act) require that, whenever a payment to a provider, supplier, or other entity is more than (overpayment) or less than (underpayment) the amount that was due to the provider, supplier, or other entity, we assess interest on the amount of the overpayment that the provider, supplier, or other entity owes to us or the underpayment that we owe to the provider, supplier, or other entity. This interest becomes due if the overpayment amount owed to us or the underpayment amount owed by us is not paid within 30 days of the date of the final determination of the overpayment or underpayment.
Payments we receive are applied first to accrued interest and then to principal. Interest we collect on overpayments and Medicare Secondary Payer (MSP) recoveries goes to the Treasury as general revenue. The principal amount we recover is used to reimburse the applicable Medicare trust fund—the Federal Hospital Insurance Trust Fund or the Federal Supplementary Medical Insurance Trust Fund. Interest we pay on Medicare underpayments comes from the applicable Medicare trust fund.
We determine the rate of interest in accordance with 42 CFR 405.378 by comparing the Private Consumer Rate with the Current Value of Funds Rate and assessing the interest at the higher of the two rates that is in effect on the date of the final determination of the amount of the overpayment or underpayment.
Interest is calculated from the date of the final determination and is owed if the amount of the overpayment or underpayment is not paid within 30 days. Interest accrues daily but is assessed and calculated in 30-day periods. A period that is less than 30 days is considered to be a full 30-day period.
In this final rule, we are changing the method of calculating the amount of interest that is assessed on overpayments and underpayments to better align our practices to a commercial business model. Previously, we assessed interest prospectively (30 days into the future). Under private sector practices, interest is assessed on delinquent debts retrospectively.
Effective with this final rule, periods of less than 30 days will not be treated as a full 30-day period. We will assess interest only for full 30-day periods
when payment is not made on time. The date of the final determination is the first day of the first 30-day period. As an example, if a Medicare overpayment is not paid within the 30-day time period specified in the demand letter, the debtor would owe interest for one 30-day period on day 31. No interest would be due on day 29 or day 30.
The change in the method of calculation applies only to overpayments and underpayments whose date of final determination occurs on or after the effective date of this final rule.
B. Technical Correction
We are making a technical correction to correct a reference that was cited in a previous revision of the Code of Federal Regulations (CFR). In § 411.24, the rate of interest to be assessed on Medicare Secondary Payer debts is incorrectly referenced as appearing in § 405.376(d), rather than § 405.378(d), which is the correct reference.
C. Clarification of Application to Medicare Secondary Payer (MSP) Debt
Section 1862(b)(2)(B)(i) of the Act provides express authority to assess interest on MSP debts. Our longstanding policy and practice have been to calculate interest on MSP debt using the method applicable to Medicare overpayments and underpayments as set forth in § 405.378. Specifically, interest is calculated in 30-day periods, and a period that is less than 30 days is considered to be a full 30-day period for MSP debts as well as for Medicare overpayments and underpayments.
It was and remains our intent to use the revised methodology set forth in this final rule for both types of debts: MSP recoveries and non-MSP Medicare overpayments and underpayments. Specifically, periods of less than 30 days will no longer be treated as a full 30-day period. However, the proposed rule published in the Federal Register (68 FR 43995) on July 25, 2003 did not make this intent explicit, even though the regulatory impact analysis in that proposed rule included MSP debts in assessing the costs and benefits of this regulatory change.
Therefore, this final rule amends § 411.24 to clarify that this change in the methodology for calculating interest applies to MSP debts, as well as Medicare overpayments and underpayments under § 405.378. As an example, where a group health plan based MSP debt is not paid within the 60-day time period specified in the recovery demand letter, under the current practice the debtor would owe interest for three 30-day periods on day 61, for four 30-day periods on day 91, and so forth. Under this final rule, the debtor would owe interest for two 30-day periods on day 61, for three 30-day periods on day 91, and so forth.
This change in the method of calculation applies only to those MSP debts where the debt is established on or after the effective date of this final rule. MSP debts are routinely established as of the date of the recovery demand letter.
Federal Register / Vol. 69, No. 146 / Friday, July 30, 2004 / Rules and Regulations 45605