Jane Dotson
Medicare beneficiaries do not have to rely exclusively on Medicare for their healthcare coverage and can use other insurance plans to access more services and lower their healthcare spending. When Medicare is the primary payer, it pays for any covered healthcare services first, and if there are any remaining costs, the secondary payer covers some or all of the remaining expenses. However, when Medicare is the secondary payer, the primary payer pays up to the limits of its coverage, and then the remaining balance is sent to Medicare.
| Characteristics | Values |
|---|---|
| Primary payer | Pays up to the limits of its coverage |
| Secondary payer | Pays only if there are costs the primary payer didn't cover |
| Order of payment | Coordination of benefits |
| Conditional payment | Medicare may make a conditional payment if the insurance company doesn't pay the claim promptly |
| Medicare as primary payer | For beneficiaries who are not covered by other types of health insurance or coverage |
| Medicare as secondary payer | When Medicare is not the beneficiary's primary health insurance coverage |
| Medicare and other insurance | Having two insurers can provide broader healthcare coverage, as each insurer could cover services that the other does not |
| Medicare and employer group health plan | If an individual is 65 or older and covered by a GHP through their current employment, Medicare pays primary if the employer has less than 20 employees; GHP pays primary if the employer has 20 or more employees |
| Medicare and retiree coverage | If an individual is 65 or older and has an employer retirement plan, Medicare pays primary and retiree coverage pays secondary |
| Medicare and no-fault or liability insurance | If an individual has an open ongoing responsibility medicals case, no-fault or liability insurance must pay first |
| Medicare and workers' compensation | Workers' compensation pays primary for healthcare items or services related to job-related illness or injury claims; Medicare generally won't pay for an illness or injury covered by workers' compensation |
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What You'll Learn
Medicare as a secondary payer
Medicare Secondary Payer (MSP) refers to situations where Medicare does not have primary payment responsibility—that is, when another entity is responsible for paying before Medicare. When Medicare was established in 1966, it was the primary payer for all claims except those covered by Workers' Compensation, Federal Black Lung benefits, and Veteran's Administration (VA) benefits. However, in 1980, legislation was passed that made Medicare the secondary payer to specific primary plans, with the goal of shifting costs from Medicare to the appropriate private payment sources.
The MSP provisions ensure that Medicare does not pay for items and services that certain health insurance or coverage is primarily responsible for. These provisions apply when Medicare is not the beneficiary's primary health insurance coverage. For example, if an individual has Medicare and is covered under Workers' Compensation for a work-related illness or injury, Workers' Compensation is the primary payer, and Medicare is the secondary payer. Similarly, if an individual is entitled to Medicare and has a no-fault or liability insurance claim, the liability or no-fault insurance must pay first, and Medicare is the secondary payer.
In certain cases, Medicare may make a conditional payment, which is when Medicare pays for services that another payer may be responsible for to ensure the beneficiary doesn't have to use their own money. This conditional payment must be repaid to Medicare when a settlement, judgment, award, or other payment is made. For instance, if Medicare pays for medical claims without knowing they are related to a workers' compensation settlement, they must be reimbursed from the Workers' Compensation Medicare Set-aside Arrangement.
The order of payment, known as "coordination of benefits," is determined by whether insurance is the primary or secondary payer. The primary payer pays up to the limits of its coverage, and if there are any remaining costs, the secondary payer covers them. If the secondary payer doesn't cover the remaining balance, the individual may be responsible for the remaining costs. It is important for individuals to inform their doctors and healthcare providers if they have coverage in addition to Medicare to ensure proper billing and avoid delays.
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Primary payer responsibilities
The primary payer is responsible for paying a claim up to the limits of its coverage. This means that the primary payer will cover the costs of the services up to a certain amount, which is determined by the insurance plan. If the costs exceed the limit of the primary payer's coverage, the remaining balance is sent to the secondary payer. The secondary payer then covers any costs that the primary payer did not cover.
It is important to note that the designation of primary and secondary payers depends on the specific insurance plans involved and the situation. For example, if an individual has Medicare and is also covered by a group health plan (GHP) through their employer or spouse's employer, the GHP is typically the primary payer if the employer has 20 or more employees. In this case, Medicare would be the secondary payer. However, if the employer has fewer than 20 employees, Medicare pays primary and the GHP pays secondary.
Medicare is also the primary payer for beneficiaries who are not covered by other types of health insurance or coverage. This includes individuals who are aged 65 or older and have an employer retirement plan, in which case Medicare pays primary and retiree coverage pays secondary. Similarly, if an individual is entitled to Medicare and has a no-fault or liability insurance claim, no-fault or liability insurance pays primary and Medicare pays secondary.
In certain situations, Medicare may make a conditional payment, which is a payment for services that another payer may be responsible for. This can occur if there is evidence that the primary payer will not pay promptly, or if the primary payer denies payment for a claim. Medicare makes conditional payments to ensure that the beneficiary does not have to use their own money to pay the bill. However, these payments must be repaid to Medicare once a settlement, judgment, or award is made.
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Secondary payer benefits
The term “secondary payer” is generally used when the Medicare program does not have primary payment responsibility. In other words, when another entity has the responsibility for paying before Medicare, that entity is the "primary payer". The primary payer covers the costs of the bill up to the limits of its coverage, then sends the remaining balance to the secondary payer. If the secondary payer doesn’t cover the remaining balance, the patient may be responsible for the rest of the costs.
Medicare is the primary payer for beneficiaries who are not covered by other types of health insurance or coverage. It is also the primary payer in certain instances, provided several conditions are met. For example, if you are aged 65 or older and have an employer retirement plan, Medicare pays primary and retiree coverage pays secondary. If you are entitled to Medicare and were in an accident or other situation where no-fault or liability insurance is involved, no-fault or liability insurance pays primary, and Medicare pays secondary.
In 1980, Congress passed legislation that made Medicare the secondary payer to certain primary plans. This was done in an effort to shift costs from Medicare to the appropriate private sources of payment. The MSP provisions have protected Medicare Trust Funds by ensuring that Medicare does not pay for items and services that certain health insurance or coverage is primarily responsible for paying.
If your provider knows you have a no-fault or liability insurance claim, they must try to get paid by the insurance company before billing Medicare. If your accident or injury is an open ongoing responsibility medical case, then the liability or no-fault insurance must pay first. However, if your liability or no-fault case doesn’t get ongoing responsibility for medical expenses, processing your bill may take a long time. If the insurance company doesn't pay the claim promptly, your provider may bill Medicare. Medicare may make a conditional payment to pay the bill, and then will recover any payments the primary payer should have made later.
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Conditional payments
In such cases, Medicare makes a conditional payment to pay the bill and then recovers any payments the primary payer should have made later. This is not the same as when a worker's compensation case has been settled, and funds from a Workers' Compensation Medicare Set-aside Arrangement are used. Conditional payment rules also do not apply to open and active ongoing responsibility for medical cases, accident and injury cases, or open Workers' Compensation Medicare Set-aside Arrangement cases.
If Medicare pays claims that are related to a worker's compensation settlement, Medicare must be repaid from the Workers' Compensation Medicare Set-aside Arrangement. Medicare may also make a conditional payment if the workers' compensation insurance company denies payment for medical bills, pending the insurance company's review of the claim.
The total conditional payment amount is considered interim, as Medicare might make additional payments while the beneficiary's claim is pending. The beneficiary will receive a Conditional Payment Letter (CPL) within 65 days of the Rights and Responsibilities letter, which includes a Payment Summary Form listing all items or services related to the pending claim. The letter also explains how to dispute any unrelated claims. If a settlement, judgment, award, or other payment occurs, it should be reported to the Benefits Coordination & Recovery Center (BCRC) as soon as possible so that any new, related claims can be identified.
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Medicare and other insurance plans
Medicare beneficiaries do not have to rely exclusively on Medicare for their healthcare coverage. People can use other insurance plans to access more services and lower their healthcare spending. If an individual has two different forms of coverage, the primary payer covers most costs, and the secondary payer then steps in to cover some or all of the remaining expenses.
The primary payer pays up to the limits of its coverage, after which the secondary payer covers some or all of the remaining costs. This is called the "coordination of benefits". If the secondary payer doesn’t cover the remaining balance, the patient may be responsible for the rest of the costs.
Medicare is usually the primary payer, although sometimes it can act as the secondary payer. For example, if an individual has an employer group health plan (GHP) and is aged 65 or older, Medicare pays primarily if the employer has fewer than 20 employees. However, if the employer has 20 or more employees, GHP pays first, and Medicare pays secondarily.
In 1980, Congress passed legislation that made Medicare the secondary payer to certain primary plans to shift costs from Medicare to the appropriate private sources of payment. The MSP provisions have protected Medicare Trust Funds by ensuring that Medicare does not pay for items and services that certain health insurance or coverage is primarily responsible for paying.
It is important to tell your doctor and other healthcare providers if you have coverage in addition to Medicare. This will help them send your bills to the correct payer and avoid delays.
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Frequently asked questions
The primary payer is the insurer that pays first, up to the limits of its coverage.
The secondary payer is the insurer that pays second, covering some or all of the remaining costs that the primary payer does not cover.
Medicare is the secondary payer when a person has two different forms of coverage. For example, if an individual has employer group health coverage in addition to Medicare, the group health coverage may be the primary payer.
It is important to inform your doctor and other healthcare providers of any coverage you have in addition to Medicare. This will help them send your bills to the correct payer and avoid delays.
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