Know Your Secondary Payer Rules
By Joe McTernan, AOPA Government Affairs Department

Medicare payment rules are confusing enough by themselves. The introduction of the National Provider Identifier (NPI), a newly revised CMS 1500 claim form, and multiple contractor changes make getting paid for O&P services challenging. 

When Medicare takes a back seat to other insurance, the rules become still more confusing. However, these rules can be navigated, if you understand the basic facts. 

MSP’s biggest category: the working aged
Medicare Secondary Payer (MSP) provisions are separated into six distinct categories, each with their own set of rules: the working aged, end-stage renal disease (ESRD) beneficiaries, disabled beneficiaries, liability insurance, workers’ compensation, and no-fault insurance. 

The working aged constitute the biggest category of MSP claims. Medicare defines “working aged” as those beneficiaries who maintain other insurance, either due to the beneficiary’s continued employment or the working spouse’s insurance plan. 

Group health plans come first 
When a Medicare beneficiary is enrolled in a Group Health Plan (GHP) either through his own employment or his spouse’s, the GHP must consider the claim before it can be submitted to Medicare. Regardless of whether the GHP pays the claim—in part or in full—or denies the claim, Medicare is the secondary payer.

While Medicare beneficiaries may choose not to enroll in their employer’s group health plan, they cannot elect the GHP as secondary coverage after Medicare. Employers are prohibited by law from offering a GHP as other than primary coverage. 

If the Medicare beneficiary chooses not to participate in his employer’s GHP, he must pay his Medicare 20 percent coinsurance fee through personal funds or through a separately purchased Medigap policy. 

When Medicare stays primary
However, there are several important exceptions in which Medicare remains primary. Medicare remains primary in each of the following instances. 

• The GHP covers less than 20 employees. 
• The Medicare beneficiary is not eligible for Medicare Part A or pays a monthly premium to maintain Medicare Part A coverage. 
• The beneficiary has GHP coverage as a retiree and is not currently employed by the company offering the GHP. 
• The Medicare beneficiary has GHP coverage as a result of his or her spouse’s employment status.

Avoid mistakes through the COBC
In an effort to eliminate situations where Medicare mistakenly pays primary benefits, CMS has created a Coordination of Benefits Contractor (COBC).
The COBC does not actually process any MSP claims. This responsibility remains with the Durable Medical Equipment Medicare Administrative Contractors (DME MACs). Here’s what it does do:

1. Update the Common Working File (CWF) when a Medicare beneficiary obtains insurance primary to Medicare. The CWF creates frontline edits that prevent Medicare from paying primary benefits on claims where Medicare is secondary. 
2. Identify claims where Medicare paid primary benefits but should have paid secondary benefits. 
3. Respond to general inquiries regarding MSP rules. The COBC will not answer questions regarding specific claims; these should be directed to the appropriate DME MAC. 

You may call the COBC contractor at (800) 999-1118, or write to:

    Medicare Coordination of Benefits
    P.O. Box 5041
    New York, NY 10274-5041

Detailed instructions on how to complete claim forms for MSP claims are available in the DME MAC supplier manual for your jurisdiction.

Learn the rules
Ignorance of MSP rules will lead to unnecessary claim denials and confusion about proper reimbursement for your services. This can lead to unnecessary payment refunds and delays in claim payment. Contact the COBC, and see the sidebar below, “Calculating Medicare Secondary Payments,” in order to thoroughly understand how to apply MSP rules.

On the other hand, a thorough understanding of Medicare Secondary Payer provisions will help you to ask appropriate questions during the intake process. This will help you to determine not only who is responsible for paying your claim, but how much you will ultimately be reimbursed.

Knowing the rules before you submit your claim will help you obtain proper payment for the services you provide.

Calculating Medicare Secondary Payments

If Medicare is the secondary payer, here’s how the secondary payment is calculated. Medicare determines what it would pay if it were the primary payer, taking into account any applicable coinsurance or unmet deductible. It then determines whether Medicare’s or the primary payer’s allowable charge is higher.  The amount paid by the primary payer is subtracted from the amount determined in step 2.  Medicare pays the lower of step 1 or step 3 as its secondary payment.  The following examples demonstrate some typical MSP calculations. Example 1: (Medicare deductible has been satisfied)         Submitted charge: $500         Unmet Medicare deductible: $0         Medicare allowable: $375         Primary allowable: $500         Primary paid: $400         Medicare secondary payment: $100 Medicare primary payment is $375 x .80 = $300. (Medicare allowable minus patient’s 20 percent coinsurance)  Primary allowable of $500 is the higher allowable amount.  Primary allowable minus primary paid is $500-$400 = $100.  The lower of Step 1 or 3 is $100.  In the example above, the primary payer’s allowable charge ($500) is higher than Medicare’s allowable charge ($375). The difference between the primary payer’s allowable and its payment is $100 ($500-$400). This difference is lower than what Medicare would have paid as a primary payer ($375). The Medicare secondary payment for this claim is $100. Example 2: (Medicare deductible has been satisfied)         Submitted charge: $300         Unmet Medicare deductible: $0         Medicare allowable: $250         Primary allowable: $200         Primary paid: $160         Medicare secondary payment: $90 Medicare primary payment is $250 x .80 = $200.  Medicare allowable of $250 is the higher allowable amount.  Medicare allowable minus primary paid is $250-$160 = $90.  The lower of Step 1 or 3 is $90.  In this example, the primary payer’s allowable charge ($200) is lower than Medicare’s allowable charge ($250). The difference between Medicare’s allowable and the primary payer’s payment is $90 ($250-$160). This difference is lower than what Medicare would have paid as a primary payer ($200). The Medicare secondary payment for this claim is $90. Example 3: (Medicare deductible has not been satisfied)         Submitted charge: $350         Unmet Medicare deductible: $131         Medicare allowable: $320         Primary allowable: $350         Primary paid: $320         Medicare secondary payment: $30 Medicare primary payment is $320-$131 (deductible) x .80 = $151.  Primary allowable of $350 is the higher allowable amount.  Primary allowable minus primary paid is $350-$320 = $30.  The lower of Step 1 or 3 is $30. In this example, the primary payer’s allowable ($350) is more than Medicare’s allowable ($320). The difference between the primary allowable ($350) and the primary paid amount ($320) is $30. This is lower that what Medicare would have paid if it was the primary payer. On an assigned claim, Medicare payment is $30 and the $131 annual Medicare deductible is satisfied by the primary insurance payment. The patient has no financial responsibility for this claim. Example 4: (Medicare deductible satisfied; primary deductible not satisfied)         Submitted charge: $200         Unmet Medicare deductible: $0         Medicare allowable: $120         Unmet primary deductible: $150         Primary paid: $0         Medicare secondary payment: $96 Medicare primary payment is $120 x .80 = $96.  Primary allowed of $150 is the higher allowable amount.  Primary allowed minus primary paid is $150-$0 = $150.  The lower of Step 1 or 3 is $96. In this example, the primary payer’s allowable ($150) is more than Medicare’s allowable ($120). The difference between the primary paid amount ($0, due to an unmet primary deductible) and the primary allowable ($150) is $150. On an assigned claim, the Medicare secondary payment is $94, with a balance of $24 due from the patient. The $24 represents the difference between Medicare's paid amount ($96) and the Medicare allowable ($120). As a general rule, Medicare rarely pays more as a secondary payer than it would have paid if it was primary.

 
Joe McTernan is director of reimbursement services for AOPA.