Understanding Medicare Secondary Payer (MSP) Rules

Navigating healthcare insurance can be complex, especially when more than one plan is involved. The Medicare Secondary Payer (MSP) rules determine when Medicare pays first (primary payer) and when another insurance plan pays first (secondary payer). Understanding these Medicare Secondary Payer rules is crucial for beneficiaries, healthcare providers, and employers to ensure proper Medicare coordination of benefits and avoid claim denials. The fundamental principle behind MSP is rooted in federal law, specifically the Medicare Secondary Payer (MSP) Act, which mandates that Medicare does not pay for services when another entity has primary responsibility for payment.

Key Scenarios Where Medicare is Secondary

There are specific circumstances under which Medicare becomes the secondary payer, meaning another insurance plan pays before Medicare. Knowing the difference between Medicare primary vs secondary insurance is vital for accurate billing and coverage.

Group Health Plan (GHP) Coverage

When you have coverage through an employer or union, your Group Health Plan (GHP) may be primary to Medicare depending on several factors, including your age, disability status, or if you have End-Stage Renal Disease (ESRD). This often falls under employer group health plan Medicare coverage considerations.

• Working Aged: If you or your spouse work and are covered by a GHP, that GHP is generally primary to Medicare if the employer has 20 or more employees. Medicare will pay secondary to the GHP. If the employer has fewer than 20 employees, Medicare is usually primary.
• Disability (Large Group Health Plan): If you are under 65 and disabled, and you are covered by a Large Group Health Plan (LGHP) – typically from an employer with 100 or more employees – the LGHP is primary for the first 30 months of your Medicare entitlement. After this 30-month period, Medicare becomes primary.
• End-Stage Renal Disease (ESRD): For individuals with ESRD, there is a specific 30-month coordination period. During this period, a GHP (if one exists) is primary to Medicare for the first 30 months of ESRD eligibility or Medicare entitlement, whichever comes first. After the 30-month period, Medicare becomes primary.

  Example: Sarah has ESRD and Medicare. She also has a GHP from her employer. For the first 30 months following her ESRD diagnosis (and eligibility for Medicare based on ESRD), her employer’s GHP pays first. After 30 months, Medicare will take over as the primary payer.

No-Fault and Other Liability Insurance

No-fault insurance (common in auto accidents) and other liability insurance (such as homeowner’s or general liability insurance) are typically primary to Medicare if they cover medical expenses. This often comes into play during a Medicare liability insurance settlement.

• No-Fault Insurance: This type of insurance, often associated with motor vehicle accidents, pays for medical treatment regardless of who was at fault. If a no-fault policy covers your medical expenses, it pays first, and Medicare pays secondary for any remaining covered costs.
• Liability Insurance: This covers injuries or illnesses caused by another party’s negligence. If you are injured and receive a settlement or judgment from a liability insurer, that insurer is generally responsible for your medical costs related to the injury, making Medicare the secondary payer.

  Example: John is injured in a car accident. His no-fault auto insurance policy covers his initial medical bills. Once his no-fault benefits are exhausted or if specific services are not covered, Medicare can then pay for remaining eligible services as the secondary payer.

Work-Related Illness or Injury

If your medical condition is work-related, other programs are designated as primary payers before Medicare. Understanding Medicare and workers’ compensation benefits is essential here.

• Workers’ Compensation: This insurance program provides medical and wage benefits to employees who are injured or become ill as a direct result of their job. Workers’ Compensation is always primary to Medicare for services related to the work-related injury or illness. Medicare will only pay secondary if the Workers’ Compensation claim is denied or if the benefits are exhausted.
• Black Lung Benefits: For individuals with black lung disease (pneumoconiosis) caused by coal mine employment, benefits provided under the Federal Black Lung Program are primary to Medicare for services related to the black lung condition.
• Veterans Benefits: If you are eligible for medical care through the Department of Veterans Affairs (VA) for a service-connected condition, VA benefits are primary to Medicare for those specific services. For non-service-connected conditions, you can choose to use either VA benefits or Medicare.

  Example: Maria sustains a back injury at work. Her employer’s Workers’ Compensation insurance covers all her treatment and rehabilitation for the injury. Medicare would not pay for these services unless her Workers’ Compensation claim was denied or her benefits were exhausted.

Understanding Your Explanation of Benefits (EOB) for Secondary Claims

When Medicare is the secondary payer, correctly submitting claims is critical. An Explanation of Benefits (EOB) is a statement sent by your primary insurance plan detailing the services received, the amount billed, the amount paid by the primary insurer, and any remaining balance or denial reasons. It is NOT a bill.

For a claim to be considered for Medicare secondary payer benefits, a copy of the primary payer’s EOB notice must be forwarded along with the claim form to Medicare. This allows Medicare to determine its secondary payment responsibility. The general process for submitting secondary claims involves first submitting the claim to the primary insurer, waiting for their EOB, and then submitting the claim along with the EOB to Medicare for secondary payment. The importance of timely filing cannot be overstated, as there are strict deadlines for submitting claims to Medicare after the primary insurer has processed them. For more details, you can consult our article on EOBs.

Responsibilities for Reporting Medicare Secondary Payer Situations

All parties involved have a responsibility to correctly identify and report primary insurance coverage to ensure proper Medicare coordination of benefits:

• Beneficiaries: Are responsible for informing their healthcare providers and Medicare about any other health insurance they may have.
• Healthcare Providers: Must ask beneficiaries about other insurance coverage at the time of service and accurately bill the correct primary payer before billing Medicare.
• Employers: Have obligations to accurately report employee health coverage information to Medicare through various data-matching programs.

Understanding these Medicare Secondary Payer rules helps streamline claims processing, prevents delays, and ensures that beneficiaries receive the full benefits they are entitled to. By following these guidelines, you contribute to the efficient operation of the healthcare system.