CMS Proposes Rules For Repayment Plans Based on Hardship and Extreme Hardship

On November 27, 2006, the Centers for Medicare & Medicaid Services (CMS) published a Proposed Rule in the Federal Register to implement a provision of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) pertaining to the use of Medicare repayment plans (or extended repayment schedules (ERS)).

Under current ERS policy, CMS primarily focuses on a provider's or supplier's ability to repay a Medicare overpayment, by conducting a review of the debtor's financial status.  However, the MMA added statutory criteria for CMS to evaluate whether a provider or supplier should be granted a repayment schedule based on "hardship" or "extreme hardship."

According to the MMA, a provider or supplier deemed to be in "hardship" is to be granted a repayment period of at least six months but not longer than three years.  However, a provider or supplier may be granted a repayment schedule of  thirty-six months and up to five years if repaying an overpayment would constitute an "extreme hardship."

Under the MMA, a provider or supplier is deemed to be in "hardship" if the aggregate amount of Medicare overpayments exceed ten percent of the Medicare payments made for the cost reporting period covered by the most recently filed cost report (for a provider that files cost reports) or for the previous calendar year (in the case of another provider or supplier).  The MMA does not define "extreme hardship," but leaves the definition to agency discretion. 

In the Proposed Rule, CMS declines to propose a definition of "extreme hardship" using a specific numerical threshold.  CMS is seeking public comments as to the definition of “extreme hardship.”  Public comments on the Proposed Rule must be received by January 26, 2007.