What Is a Medicare Secondary Payer?

Understanding Medicare Secondary Payer

Medicare Secondary Payer (MSP) refers to rules determining when Medicare pays for healthcare services as the primary insurer, and when another insurer is responsible for paying first. This framework ensures the correct party bears the initial financial responsibility for medical costs. The purpose of MSP is to prevent Medicare from paying for services when another entity, such as an insurance company, should have paid.

When Medicare is the “primary payer,” it pays healthcare claims first, with any other insurance covering remaining costs like deductibles or copayments. When Medicare is the “secondary payer,” another insurance plan pays first. Medicare then covers services the primary insurer did not fully pay for, up to Medicare’s approved amounts. This distinction is crucial for understanding how your medical bills are processed and paid.

The concept of MSP was established through federal legislation, notably the Medicare Secondary Payer Act, to shift costs from Medicare to other responsible private sources of payment. In some instances, Medicare may make a “conditional payment” if a primary payer is expected to pay but has not done so promptly. These conditional payments are made with the expectation of recovery from the primary payer once their responsibility is established.

Common Situations for Medicare Secondary Payer

Medicare acts as a secondary payer in common scenarios where other health coverage is available. One frequent situation involves employer group health plans (EGHPs). If an individual is 65 or older and covered by an EGHP through current employment, or their spouse’s current employment, and the employer has 20 or more employees, the EGHP pays first, and Medicare is secondary. If the employer has fewer than 20 employees, Medicare typically pays primarily.

Workers’ compensation is another instance where Medicare is secondary. For job-related injuries or illnesses, workers’ compensation insurance is responsible for paying for related medical services first. If the workers’ compensation claim denies coverage, a claim may be submitted to Medicare.

No-fault insurance, often associated with automobile accidents, also takes precedence over Medicare. If a Medicare beneficiary is injured in an accident where no-fault insurance is involved, that insurance pays for medical expenses regardless of who was at fault. Similarly, liability insurance, which provides payment based on a policyholder’s legal responsibility for an injury or illness, is primary to Medicare. This includes types of insurance, such as homeowners’ liability or general casualty policies, that cover medical costs resulting from an incident where a third party is responsible.

Individuals with End-Stage Renal Disease (ESRD) also experience a specific MSP coordination period. For the first 30 months of ESRD eligibility, a group health plan (GHP) covering the individual, or a family member, pays primarily, and Medicare is secondary. After this 30-month coordination period, Medicare generally becomes the primary payer for ESRD-related services.

The Coordination of Benefits Process

The coordination of benefits (COB) process is how Medicare and other insurers work together to ensure claims are paid correctly when a beneficiary has multiple health coverages. This process determines which plan pays first and the extent to which the other plan will contribute. Medicare identifies primary payers through mechanisms, including questionnaires sent to beneficiaries and information received from providers and other health plans. Accurate reporting of all health coverage helps the Benefits Coordination & Recovery Center (BCRC) maintain correct records.

When a beneficiary has multiple coverages, claims must be submitted to the primary payer first. This primary insurer processes the claim according to its policy terms. If the primary payer does not cover the entire cost, the remaining balance is then submitted to Medicare. Medicare will then assess the claim and may pay for services that the primary insurer did not fully cover, up to Medicare’s approved payment amounts.

In some situations, Medicare may make a conditional payment for services that another payer should have covered. This happens when the primary payer’s responsibility is unclear or delayed. Medicare has a right to recover these conditional payments once the primary payer’s responsibility is confirmed. The BCRC manages this recovery process, identifying instances where Medicare has paid for services that were the responsibility of another insurer.

If there is a dispute regarding payment responsibility or the amount owed, beneficiaries have the right to appeal Medicare’s decisions. The appeals process allows individuals to challenge payment determinations or recovery demands.

Individual Rights and Responsibilities

Medicare beneficiaries play an active role in the Medicare Secondary Payer process. A primary responsibility is to accurately and promptly report all other health insurance or coverage they may have. This includes coverage through current employment, a spouse’s employment, or any other type of health benefit plan. Reporting this information ensures that Medicare’s records are current and that claims are routed to the correct payer.

Beneficiaries should also respond to any inquiries from Medicare or its contractors, such as the Benefits Coordination & Recovery Center (BCRC). These inquiries might include questionnaires to gather information about other available insurance. Providing timely and accurate responses helps prevent delays in claim processing and potential issues with payment recovery.

Reviewing Explanation of Benefits (EOB) statements from both primary and secondary payers is another important step. These documents detail what services were billed, what was paid by each insurer, and any remaining balance. Comparing EOBs helps beneficiaries confirm that claims have been processed correctly and that financial responsibilities are appropriately assigned.

If questions or disputes arise regarding Medicare Secondary Payer rules or specific claims, resources are available for assistance. Beneficiaries can contact Medicare directly for clarification. State Health Insurance Assistance Programs (SHIPs) also offer free, unbiased counseling to help individuals understand their Medicare benefits and navigate complex situations.