Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 requires liability insurers, no-fault insurers, workers’ compensation carriers, and self-insured entities to report settlements, judgments, and awards involving Medicare beneficiaries to CMS. The reporting captures the beneficiary’s identity, the settlement details, and the ICD codes that define the injury, giving CMS the data it needs to enforce the Medicare Secondary Payer Act and recover conditional payments. The original 2007 statute imposed a mandatory civil money penalty of $1,000 per day per claim for noncompliance, with no discretion given to CMS. The SMART Act of 2013 changed that mandatory penalty to a discretionary one, capped the daily amount at $1,000, and directed CMS to publish regulations setting out when and how penalties would be imposed. Those regulations became applicable on October 11, 2024, and the first audits and informal notices arrived in 2026, which is why the penalty regime that has sat dormant for nearly two decades is finally live.
The first informal notices of intent to impose civil money penalties under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act began mailing in March. CMS closed its second quarterly audit cycle on April 1. The trade press has framed all of this as an insurer compliance issue. That framing is wrong. Acting on it will cost plaintiff firms money, time, and client outcomes over the next twelve months.
I have spent almost two decades working with trial lawyers on Medicare Secondary Payer compliance. I have watched every false start CMS made on enforcement going back to 2007. This one is different. The audit process is running. The penalty exposure is significant. And the pressure falls hardest on plaintiff lawyers, even though plaintiff lawyers are not the ones being audited.
Here is what is actually happening, and what to do about it.
Where Things Stand This Week
Here is the timeline without the regulatory clutter. October 11, 2024, was the date CMS implemented the final rule for Civil Money Penalties for Section 111 reporting. Since there is a 12-month window in which to report a Total Payment Obligation to Claimant (TPOC) or Ongoing Responsibility for Medicals (ORM), a civil money penalty could not be assessed until October 11, 2025. Reports that should have been filed by then but were not, are now exposed.
CMS opened the first random audit in early 2026. The agency pulls 250 records per quarter, 1,000 per year, across both group health and non-group health plan reporting. Selection is random. The 250 records are drawn from the entire universe of accepted records, not from each Responsible Reporting Entity.
The first informal notices of intent to impose a penalty went out in March. RREs have 30 days to respond with mitigating evidence. If the response is rejected or absent, CMS issues a Notice of Proposed Determination and the formal process begins.
The tiered penalty itself runs from $250 per day per record up to $1,512 per day after the January 2026 inflation adjustment. The single-instance cap at this time is $551,880.
Workers’ compensation TPOC enforcement, including the new WCMSA reporting fields that went live April 2025, are in full scope starting in July.
That is where things stand. Now the part that has been missed.
Why This Is a Plaintiff Problem
The carrier is the entity at risk of a penalty. The plaintiff is the entity that absorbs every operational change the carrier makes to avoid the penalty. There are five specific ways this hits your practice right now.
First, settlement checks are going to sit longer. Carriers will not release funds until they are confident the reporting record is locked and clean and Medicare liens resolved. If you have built your firm’s cash flow assumptions around a 30-day disbursement window, plan for longer. The check is a downstream event of a process you do not control.
Second, ICD diagnosis code overreporting will get worse. A carrier facing $1,512 per day in penalty exposure will report a broader set of codes. That broader code set is what Medicare uses later to deny your client’s future injury-related care. The carrier’s compliance protection may become your client’s coverage problem after the case closes.
Third, release language is already getting more punitive. Hold harmless clauses, indemnity provisions, and reporting cooperation requirements are showing up in releases that did not have them six months ago. Much of this is unnecessary as a matter of law. All of it shifts risk to the plaintiff. The technical reality is that nothing in the MSP requires most of what defense counsel asks plaintiffs to sign. The practical reality is that defense counsel asks anyway, and many plaintiffs sign without pushing back.
Fourth, information demands are now formal and documented. The CMS safe harbor allows the RRE to document a refusal by the beneficiary or counsel to provide a Medicare Beneficiary Identifier or Social Security Number. That documentation is retained for at least five years. If a coverage dispute arises later, the refusal becomes evidence.
Fifth, workers’ compensation closures get harder in July. The new WCMSA reporting fields are about to be tracked for penalty purposes. Lump sum settlements that relied on informal MSA assumptions or below-threshold treatment will draw scrutiny they did not draw last year.
What to Change This Month
Most of the fixes are process work, not legal theory. They are also things every trial lawyer handling cases with Medicare beneficiaries should already be doing. The penalty era just raises the cost of not doing them.
Build Medicare beneficiary screening into intake. Pull the Medicare card, the SSDI award letter, and the MBI at the start of the case, not at the end. Do not let the carrier control the timing or the data flow. Update the Medicare beneficiary screening during the life of the case.
Negotiate ICD codes that will be reported before you sign the release. Get a closed list in writing. Push back on any code that is not directly injury related. The carrier will resist. Make them resist on the record.
Strip boilerplate Medicare compliance language from releases. Most of it cites statutes and regulations that do not say what defense counsel claims they say. A core set of provisions can address the real Medicare issues in one paragraph without onerous obligations on the plaintiff.
Open the Benefits Coordination and Recovery Center conditional payment file before settlement, not after. Final demand timing is now a settlement gating item. The conditional payment letter is preliminary and does not bind Medicare. Only the final demand binds. If you disburse on a CPL, you will pay the difference yourself.
Document everything. If your client declines an MSA, why. If the carrier asks for information, you decide not to provide, document the reason and the law you relied upon. The file should tell the story without you in the room.
The Strategic Point
The penalty era pulls every party in a Medicare case toward earlier and more careful work. The trial lawyers who treat Section 111 as an insurer compliance problem will give up leverage they did not know they had, and they will hand control of the record to the people on the other side of the table.
The trial lawyers who get ahead of it will close cases faster, protect their clients’ future Medicare access, and avoid the malpractice exposure that comes with watching someone else drive the process.
At Synergy, we have spent years helping firms rebuild their MSP intake and settlement workflows for this environment. The cost of getting the process right is small compared to the cost of getting it wrong on a single catastrophic case. The harder problem is that most firms do not yet realize the environment has changed.
The next call you should make on this is internal. Find out who in your firm owns Medicare compliance. If the answer is no one, that is the first thing to fix.
Why Synergy is the Answer to Help You Scale
Synergy exists to help firms confront the operational realities being driven by Medicare compliance pressure. By removing administrative burdens related to Medicare compliance, lien identification, verification and resolution, from your staff, we help you strengthen your practice’s capacity for high-value legal work and sustainable growth. Learn more at https://partnerwithsynergy.com/medicare-compliance/
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