Paul Sanchez
Conditional payments are payments made by an insurer that are subject to repayment if and when the primary payer makes a payment. In the context of Medicare, this means that Medicare will make a conditional payment for services covered by Medicare when another insurer is the primary payer. This can occur in situations where the primary payer will not pay or will not pay promptly, such as in the case of workers' compensation or liability insurance. Conditional payment clauses are also commonly used in construction contracts, where they condition payment on some other event, such as a contractor including a clause that conditions payment to a subcontractor on receiving payment from the project owner.
Characteristics and Values Table for Conditional Payments in Insurance
| Characteristics | Values |
|---|---|
| Definition | A conditional payment is a Medicare payment for Medicare-covered services for which another insurer is the primary payer. |
| Conditions | Conditional payments are made with the understanding that they are subject to repayment if and when the primary payer makes payment. |
| Purpose | Conditional payments prevent patients from using their own money to pay claims when the primary insurer does not pay or delays payment. |
| Recovery | Medicare has the right to recover any conditional payments made. |
| Timeframe | In third-party liability cases, providers can bill Medicare for conditional payments after 120 days if the primary insurer has not paid. |
| Construction Contracts | Conditional payment clauses in construction contracts condition payment on another event, such as a contractor receiving payment from the project owner before paying subcontractors. |
| Terminology | "Pay-if-paid" (PIP) and "pay-when-paid" (PWP) are terms used to describe different types of conditional payment clauses with distinct legal consequences. |
| Legal Obligations | PIP clauses relieve contractors of the obligation to pay subcontractors if the owner fails to pay the contractor. |
| Timing | PWP clauses establish a reasonable timeframe for payment to subcontractors in the event of owner non-payment, without setting an express condition precedent. |
| Regulatory Process | The Medicare Secondary Payer Recovery Contractor (MSPRC) provides beneficiaries with a Conditional Payment Letter (CPL) or Notice (CPN) outlining recovery rights and next steps. |
| Reimbursement | In the case of Tort Claimants, the Trustee must reimburse the Medicare Trust Fund and submit required information to the appropriate US government agency. |
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What You'll Learn
Conditional payments are made when another insurer is the primary payer
In the case of third-party liability (TPL), the provider may, after 120 days, bill Medicare for conditional payments while withdrawing all claims against the liability insurer. Alternatively, the provider can maintain all claims against the liability insurer and choose to not bill Medicare until a settlement is reached. If workers' compensation, no-fault, or liability insurance will not pay or does not pay promptly (within 120 days), Medicare makes conditional payments to prevent the patient from using their own money to pay the claim. However, Medicare has the right to recover any conditional payments made.
When Medicare is pursuing recovery directly from the insurer or workers' compensation entity, the beneficiary and their attorney or representative will receive a copy of the recovery correspondence sent to the insurer. The beneficiary does not need to take any action on this correspondence. However, if Medicare is pursuing recovery from the beneficiary, the BCRC will send recovery correspondence directly to the beneficiary.
A Conditional Payment Letter (CPL) or Conditional Payment Notice (CPN) is issued to the beneficiary, explaining Medicare's recovery rights and outlining the next steps in the process. The CPL includes a Payment Summary Form that lists all items or services related to the pending claim and the total conditional payment amount, which is considered interim as Medicare may make additional payments while the beneficiary's claim is pending. If a settlement, judgement, award, or other payment occurs, it should be reported to the BCRC as soon as possible so that they can identify any new, related claims.
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Medicare conditional payments are subject to repayment
Conditional payments are a type of Medicare payment for services covered by Medicare, but for which another insurer is the primary payer. Conditional payments are made with the understanding that they are subject to repayment by the primary payer. In other words, Medicare will make a conditional payment when the primary payer fails to pay promptly or at all. However, Medicare has the right to recover any conditional payments made.
There are specific procedures in place for requesting conditional Medicare payments. For example, in cases of injury resulting from an automobile accident, the provider must first bill the liability insurer or no-fault insurer before requesting conditional Medicare payments. Similarly, if there is an indication of primary coverage under a group health plan (GHP), the provider must bill the GHP before turning to Medicare. In third-party liability (TPL) cases, the provider has the option to bill Medicare for conditional payments after 120 days, while withdrawing all claims against the patient's liability insurance settlement. Alternatively, the provider can maintain all claims against the patient's liability insurance settlement, but Medicare may not be billed until the settlement is reached and only if no money was paid to the patient.
When requesting conditional Medicare payments, providers must submit a written request along with supporting documentation that clearly shows the reason for non-payment or payment delay by the primary payer. This can include an Explanation of Benefits (EOB) statement or other relevant information. Additionally, specific fields must be completed for a conditional Medicare payment request, such as entering the date the claim was adjudicated by the primary payer and the reason code for any services not paid by the primary payer.
It's important to note that there are different entities involved in the recovery of conditional payments made by Medicare. The Benefits Coordination & Recovery Center (BCRC) and the Commercial Repayment Center (CRC) are responsible for conducting conditional payment recoveries. The CRC issues conditional payment notices (CPNs) when a recovery amount is owed, and the Responsible Reporting Entity (RRE) must respond within 30 days to avoid a debt being established. The BCRC, on the other hand, typically recovers conditional payments when there is a settlement, judgment, award, or other payment made to the Medicare beneficiary.
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Conditional payment clauses in construction contracts
Conditional payment clauses, also known as "pay-when-paid" or "pay-if-paid" clauses, are provisions in construction contracts that make the payment from one party (Y) to another (X) contingent on X receiving payment from a third party (Z). In the construction industry, for instance, a general contractor may include a clause that makes their payment to a subcontractor dependent on receiving payment from the project owner.
These clauses have become standard in the construction industry, but there is confusion about their functioning, and legal distinctions between "pay-when-paid" and "pay-if-paid" clauses are important in the event of payment disputes. A "pay-when-paid" clause establishes a reasonable time frame for the contractor to pay the subcontractor if the owner doesn't pay, and it is interpreted as requiring the contractor to pay the subcontractor within that time frame even if the owner never pays. On the other hand, a "pay-if-paid" clause creates a condition precedent to payment from the contractor to the subcontractor, meaning the contractor has no obligation to pay the subcontractor unless the owner pays them first. If a "pay-if-paid" clause is enforced, the financial risk of the owner's non-payment is shifted to the subcontractor.
The enforceability of conditional payment clauses varies among states and jurisdictions. In Malaysia, for example, Section 35 of the Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) nullifies conditional payment provisions in construction contracts to prevent unfair cash flow practices. The Court of Appeal in JDI Builtech held that these clauses are void in adjudication proceedings but may still be upheld in arbitration or court proceedings to prioritise parties' freedom of contract. However, another court decision in Khairi Consult Sdn Bhd v GJ Runding Sdn Bhd took a broader view, suggesting that Section 35 applies not only to adjudication but also to court proceedings for construction contracts or construction consultancy contracts as defined under CIPAA.
Given the legal complexities and varying interpretations of conditional payment clauses, it is advisable for parties in the construction industry to avoid using such clauses in their contracts or, at the very least, be aware of the potential for these clauses to be deemed void and unenforceable.
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Conditional payment letters (CPL)
Conditional payments are Medicare payments for services covered by Medicare for which another insurer is the primary payer. These payments are made with the condition that they are subject to repayment if and when the primary payer makes a payment. Medicare makes conditional payments to prevent the patient from using their own money to pay the claim.
A Conditional Payment Letter (CPL) is a letter that identifies Medicare's current conditional payment amount. The letter will be mailed to each authorised individual or entity associated with the case, including the beneficiary and each individual or entity with a Verified Proof of Representation or Consent to Release on file for the case. The letter will be sent to the address that Medicare has on file, which may differ from the address listed on the MSPRP.
The CPL includes a Payment Summary Form that lists all claims paid by Medicare that are being claimed and/or released with respect to the accident, illness, injury, or other incident. It also includes the interim total conditional payment amount and explains how to dispute any unrelated claims. The total conditional payment amount is considered interim as Medicare might make additional payments while the beneficiary's claim is pending.
A copy of the CPL can be obtained from the BCRC or from the Medicare Secondary Payer Recovery Portal (MSPRP). To obtain conditional payment information from the BCRC, one can call 1-855-798-2627.
A Conditional Payment Notice (CPN) is issued in lieu of a CPL when a settlement, judgement, award, or other payment has already occurred. After a CPN is issued, the recipient has 30 days to respond.
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Conditional payment notices (CPN)
Conditional payments are payments made by Medicare for services covered by Medicare but for which another insurer is the primary payer. These payments are conditional and subject to repayment when the primary payer makes the payment. Medicare makes these payments to prevent patients from using their own money to pay the claim.
A Conditional Payment Notice (CPN) is issued to the beneficiary in place of a Conditional Payment Letter (CPL) when a settlement, judgement, award, or other payment has already occurred. The CPN provides conditional payment information and outlines the actions to be taken because of the settlement, judgement, award, or other payment. The beneficiary's attorney or other representative will also receive a copy of the CPN.
The CPN includes a Payment Summary Form that lists all the items or services identified as being related to the pending claim. It also includes the total conditional payment amount, which is considered interim as Medicare might make additional payments while the beneficiary's claim is pending. The beneficiary can obtain the current conditional payment amount and copies of the CPN from the BCRC or the Medicare Secondary Payer Recovery Portal (MSPRP).
If the beneficiary or their attorney believes that any claims included in the CPN should be removed from Medicare's conditional payment amount, supporting documentation must be sent to the BCRC.
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Frequently asked questions
A conditional payment is a payment made by an insurer that is not primarily responsible for the expense, with the condition that the primary insurer will reimburse the covering insurer at a later date.
A conditional payment is typically made when the primary insurer has not paid within 120 days or is unable to pay.
A conditional payment clause is a provision in a contract that conditions payment on some other event. For example, in construction contracts, a contractor may include a clause that conditions payment to a subcontractor on the owner first paying the contractor.
A CPL (Conditional Payment Letter) or CPN (Conditional Payment Notice) is a letter sent by an insurer to outline Medicare's recovery rights with respect to conditional payments and the next steps in the process.
A PIP (pay-if-paid) clause creates a condition precedent to payment, meaning the contractor has no obligation to pay the subcontractor if the owner does not pay the contractor. On the other hand, a PWP (pay-when-paid) provision establishes a reasonable time frame for the contractor to pay the subcontractor in the event of owner non-payment.
