Paul Sanchez
Medicare Secondary Payer (MSP) is the term used to describe when the Medicare program does not have primary payment responsibility, meaning another entity has the responsibility for paying before Medicare. When an individual has two insurers, they benefit from broader healthcare coverage. For example, if a person has Medicare and another health insurance, each type of coverage is called a payer. The primary payer pays up to the limits of its coverage, then sends the rest of the balance to the secondary payer. There are several situations in which Medicare becomes the secondary payer, including when an individual is aged 65 or older and has an employer retirement plan, or when an individual is entitled to Medicare and is covered under Workers' Compensation.
| Characteristics | Values |
|---|---|
| When Medicare is a secondary payer | When another entity has the responsibility for paying before Medicare |
| Medicare Secondary Payer (MSP) | The term used when Medicare does not have primary payment responsibility |
| Primary payer | The insurance that pays first up to the limits of its coverage |
| Secondary payer | The insurance that pays second and covers some or all of the remaining costs that the primary payer leaves unpaid |
| Coordination of Benefits rule | Decides which insurance pays first when someone has more than one health insurance plan |
| Conditional payment | When Medicare makes a payment before recovering payments from the primary payer |
| Out-of-pocket expenses | Costs that an individual must pay when Medicare does not cover the full amount or offer coverage |
| Medicare Advantage | Medicare coverage provided through a private company |
| Original Medicare | Health coverage provided directly through the federal government |
| TRICARE | A program that pays for Medicare-covered services for active-duty military personnel; Medicare pays second for these individuals |
| TRICARE for Life (TFL) | Expanded medical coverage for Medicare-eligible uniformed services retirees 65 or older, their eligible family members, survivors, and certain former spouses; requires Medicare Part A and B |
| Group Health Plan (GHP) | If an individual is 65 or older and covered by a GHP through their or their spouse's employment, Medicare may be the secondary payer depending on the number of employees |
| Employer retirement plan | If an individual is 65 or older and has an employer retirement plan, Medicare pays primary and retiree coverage pays secondary |
| No-fault or liability insurance | If an individual is entitled to Medicare and was in an accident or other situation where no-fault or liability insurance is involved, Medicare pays secondary |
| Workers' Compensation | If an individual is entitled to Medicare and is covered under Workers' Compensation for a job-related illness or injury, Medicare pays secondary |
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What You'll Learn
Medicare Secondary Payer (MSP)
The term is used when another entity has the responsibility for paying before Medicare. Medicare remains the primary payer for beneficiaries who are not covered by other types of health insurance or coverage. When Medicare was introduced in 1966, it was the primary payer for all claims except for those covered by Workers' Compensation, Federal Black Lung benefits, and Veteran’s Administration (VA) benefits. In 1980, Congress passed legislation that made Medicare the secondary payer to certain primary plans, shifting costs from Medicare to the appropriate private sources of payment. The MSP provisions have protected the 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.
There are several situations in which Medicare and other health insurance or coverage may be present, and it is important to establish which entity will be the primary or secondary payer. For example, if an individual is aged 65 or older and has an employer retirement plan, Medicare pays primary and retiree coverage pays secondary. If an individual is entitled to Medicare and has a no-fault or liability insurance claim, the insurance company must try to get paid by the insurance company before billing Medicare. If an individual is entitled to Medicare and is covered under Workers' Compensation because of a job-related illness or injury, Workers' Compensation pays primary and Medicare pays secondary.
If the primary payer pays up to the limits of its coverage, the secondary payer will pay the remaining balance. If the secondary payer does not cover the remaining balance, the individual may be responsible for the remaining costs.
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Primary and secondary payers
Medicare is a federal government health insurance program that provides health care coverage for people aged 65 or older, or those who meet other specific criteria. When an individual has Medicare and another type of insurance, each type of coverage is called a "payer". The "primary payer" pays up to the limits of its coverage, then sends the remaining balance to the "secondary payer".
The primary payer is the insurer that has the primary responsibility for paying a claim. Medicare is the primary payer for beneficiaries who are not covered by other types of health insurance or coverage. When Medicare is the primary payer, it pays for any covered healthcare services first, and if there are remaining costs, the bill goes to the secondary payer.
Medicare can also be a secondary payer when another entity has the responsibility for paying before it. This could be another insurance provider or an employer. For example, if an individual is aged 65 or older and has an employer retirement plan, Medicare pays primary and retiree coverage pays secondary. If an individual is entitled to Medicare and has a no-fault or liability insurance claim, the insurance company must try to pay before billing Medicare.
The Coordination of Benefits rule decides which payer pays first when an individual has more than one health insurance plan. If the primary payer does not pay the claim within 120 days, the healthcare provider may send a bill to the secondary payer. If this is Medicare, it may make a conditional payment, which it will later recover from the primary payer.
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Out-of-pocket costs
Out-of-pocket (OOP) costs refer to the expenses you are responsible for beyond what is covered by Medicare. These costs can vary depending on your specific Medicare plan and other factors. It's important to note that there is usually no yearly limit on what you pay out-of-pocket unless you have supplemental coverage, such as a Medicare Supplement Insurance (Medigap) policy or a Medicare Advantage Plan.
Medicare Part A (Hospital Insurance) typically doesn't require a premium if you've worked for more than 10 years and paid Social Security taxes. However, if you don't qualify for premium-free Part A, you may have to pay up to $518 per month in premiums. Additionally, there is a deductible of $1,676 per benefit period for hospital stays in 2025.
Medicare Part B (Medical Insurance) comes with a standard monthly premium of $185 for most beneficiaries in 2025. The Part B deductible is $257 per year, and the coinsurance is 20% of the cost for each Medicare-approved service or item. This can significantly contribute to your total out-of-pocket expenses.
Medicare Part D covers prescription drugs and has varying annual premiums, with an average of around $46.50 per month for standard coverage in 2025. The Part D deductible is capped at $590 per year, and after reaching the out-of-pocket limit of $2,000, you won't have to pay anything for covered drugs for the rest of the year. It's important to note that eligibility for the Medicare Part D Low-Income Subsidy (LIS) has been expanded, providing relief to those with incomes up to 150% of the federal poverty level.
Medigap policies can be purchased to supplement Medicare Parts A and B, providing additional benefits like coverage for international travel. Additionally, if you have limited income and resources, you may be eligible for assistance from your state in covering premiums, deductibles, coinsurance, and copays. This support is also available for drug costs, ensuring that you won't incur a Part D late enrollment penalty.
It's worth mentioning that Medicare Secondary Payer (MSP) situations occur when another insurance plan has primary payment responsibility, making Medicare the secondary payer. This usually happens when an individual has other insurance coverage in addition to Medicare, such as employer-provided insurance or worker's compensation. In these cases, the primary payer pays up to its limits, and then the secondary payer covers the remaining balance, if applicable.
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Coordination of Benefits rule
The Coordination of Benefits (COB) rule, also known as the Medicare Secondary Payer (MSP) provisions, determines the payment responsibilities of different insurance plans when an individual has coverage under multiple plans. This rule ensures that claims are paid correctly and that the primary payer, whether Medicare or other insurance, pays first.
The COB process identifies the health benefits available to a Medicare beneficiary and coordinates the payment process. It ensures that the primary payer covers expenses up to the limits of its coverage, after which the remaining balance is sent to the "secondary payer". If the secondary payer does not cover the remaining balance, the individual may be responsible for the remaining costs.
The primary payer is typically the insurance with primary responsibility for paying a claim. Medicare is usually the primary payer for beneficiaries who are not covered by other types of health insurance. However, in certain situations, Medicare becomes the secondary payer. For example, if an individual has a group health plan or retiree coverage as the secondary payer, they may need to sign up for Medicare Part B before receiving payments.
The number of employees in an employer's plan can also determine whether Medicare or the employer's plan is the primary payer. Generally, if an individual is 65 or older and their employer has fewer than 20 employees, Medicare pays primary. If the employer has 20 or more employees, the employer's plan pays primary, and Medicare pays secondary.
Additionally, in situations involving no-fault or liability insurance claims, workers' compensation, or TRICARE (for active-duty military personnel), the coordination of benefits rule dictates that these entities become the primary payer, with Medicare paying secondarily.
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Primary payer responsibilities
When Medicare is the secondary payer, another entity has the responsibility for paying before Medicare. This is known as the "primary payer", and it pays up to the limits of its coverage. If there are any remaining costs that the primary payer does not cover, the secondary payer will pay for it. However, if the secondary payer does not cover the remaining balance, the patient may be responsible for the remaining costs.
There are various situations in which Medicare becomes the secondary payer. For instance, if an individual is aged 65 or older and has an employer retirement plan, Medicare pays primary while retiree coverage pays secondary. In the case of an accident or other situation where no-fault or liability insurance is involved, no-fault or liability insurance pays primary, and Medicare pays secondary.
Medicare is also the secondary payer for individuals entitled to Medicare and covered under Workers' Compensation due to a job-related illness or injury. In such cases, Workers' Compensation pays primary for healthcare items or services related to job-related illness or injury claims. Medicare generally will not pay for an injury, illness, or disease covered by workers' compensation. However, if a claim is denied by workers' compensation on the grounds that it is not covered, a claim may be filed with Medicare.
For those on active duty with Medicare, TRICARE pays first for Medicare-covered services or items, and Medicare pays second. If an individual is not on active duty, Medicare pays first, and TRICARE may pay second. TRICARE also provides expanded medical coverage to Medicare-eligible uniformed services retirees aged 65 and older, their eligible family members and survivors, and certain former spouses through TRICARE For Life (TFL). To receive TFL benefits, beneficiaries must have Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance).
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Frequently asked questions
The primary payer is the insurer that has the primary responsibility for paying a claim. In other words, they are billed first for any healthcare services provided to the insured.
Medicare becomes the secondary payer when an individual has another form of insurance that is the primary payer. For example, if an individual has insurance through their employer or is covered under workers' compensation, Medicare becomes the secondary payer.
The Coordination of Benefits rule decides which insurance pays first when an individual has more than one health insurance plan. The primary payer pays up to the limits of its coverage, and then sends the remaining balance to the secondary payer.
If the primary payer does not cover all your expenses, the secondary payer will cover some or all of the remaining costs. However, if the secondary payer does not cover the remaining costs, you may be responsible for any remaining out-of-pocket expenses.
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