Medicare Secondary Payer Act

As a condition of eligibility, Medicare providers must agree  “not charge . . . any individual or any other persons for items or services for which such individual is entitled to have payment made under this subchapter.”[1]  Said differently, a Medicare provider may not charge a Medicare beneficiary for items or services if it is covered by Medicare. Providers may still bill beneficiaries for deductible and co-insurance obligations, but not any other amount absent an applicable exception.[2]

Medicare Secondary Payer Program (MSP)

Enacted by Section 953 of the Omnibus Budget Reconciliation Act of 1980,[3] the MSP program directs the Secretary of Health and Human Services (HHS) to withhold payment from a Medicare provider for items and services furnished to a Medicare beneficiary if another primary payer, e.g., a group health plan, liability insurer, or liability settlement, is reasonably expected to pay for the beneficiary’s medical costs.[4]  Implicit within the MSP program is that providers should not bill Medicare for items and services furnished to beneficiaries where there is a reasonable expectation that another primary payer will pay for the Beneficiary’s medical expenses.

Provider Duty to Identify Potential Primary Payers Other Than Medicare

As part of the MSP program, providers are required to identify potential primary payers other than Medicare.  The regulations state: “The provider agrees . . . maintain a system that, during the administration process, identifies primary payers other than Medicare, so that incorrect billing and Medicare overpayments can be prevented.  (g) To bill other primary payers before Medicare.”[5]

Chapter three of the Medicare Secondary Payer Manual directs Providers “to determine whether Medicare is a primary or secondary payer for each inpatient admission of a Medicare beneficiary and outpatient encounter with a Medicare beneficiary prior to submitting a bill to Medicare.”[6]

While a provider must ascertain whether a beneficiary is covered by a payer other than Medicare, if none exist then the requirements under the MSP program do not apply, and the provider must bill Medicare as required by 42 U.S.C. § 1395cc(a)(1)(A)(i).  If such a secondary payer exists, then  42 U.S.C. § 1395y controls.

Operation of the MSP Program Where a Liability or Similar Insurer is a Potential Primary Payer

Medicare will not pay a provider if “payment has been made, or can reasonably expected to be a made under a . . . automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.”[7]  The “Conditional Payment” provisions of the MSP statute offer assistance in ascertaining whether a reasonable expectation of payment exists.  Medicare may pay and providers may bill for items and services furnished to beneficiaries if payment by a potential primary payer other than Medicare (any of the entities listed in 42 U.S.C. § 1395y(b)(2)(A)(ii)  “cannot reasonably be expected to make payment with respect to such item or service promptly.”[8]  Promptly means “within 120 days after the earlier of the following: (1) The date a claim is filed with an insurer or a lien is filed against a potential liability settlement.  (2) The date the service was furnished or, in the case of inpatient hospital services, the date of discharge.”[9]

If the provider bills Medicare, recovery is limited by the amount Medicare pays and the Provider cannot recover actual costs,[10] even if the Provider filed a lien or claim.[11]

[1] 42 U.S.C. § 1395cc(a)(1)(A)(i) (2011).

[2] Holle v. Moline Public Hosp., 598 F. Supp. 1017, 1019 (C.D. Ill. 1984); see also Rybicki v. Hartley, 792 F. 2d. 260, 263 (1st Cir. 1986).

[3] Pub. L. 96-499.

[4] 42 U.S.C. § 1395y (2013).

[5] 42 C.F.R. § 489.20(f-g) (2012).

[6] Centers for Medicare & Medicaid Services, Medicare Secondary Payer Manual, at Chapter 3 Section 20.1 (2012).

[7] 42 U.S.C. § 1395y(b)(2)(A)(ii) (2013).

[8] 42 U.S.C. § 1395y(b)(2)(B)(i) (2013).

[9] 42 C.F.R. § 411.50(b) (2006).

[10] See Holle v. Moline Public Hosp., 598 F. Supp. 1017, 1019 (C.D. Ill. 1984); see also Rybicki v. Hartley, 792 F. 2d. 260, 263 (1st Cir. 1986).

[11] See Oregon Ass’n of Hosps. v. Bowen, 708 F. Supp. 1135, 1142 (D. Or. 1989) (“[CMS] has no authority under the statute to prevent [Provider] from recovering its actual charges from a liability insurer . . .”).  See also  Laska v. General Cas. Co. of Wis., 830 N.W. 2d. 252, (Wis. Ct. App. 2013); Speegle v. Harris Methodist Health System, 303 S.W. 3d. 32 (Tex. App. 2009); Parkview Hosp. Inc. v. Roese, 750 N.E. 2d 384 (Ind. Ct. App. 2001); Joiner v. Medical Center East, Inc., 709 So. 2d 1209 (Ala. 1998).