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Monday, April 8, 2013

Medicare Secondary Payer: Coordination of Benefits

Suzanne M. Kirchhoff
Analyst in Health Care Financing

Hinda Chaikind
Section Research Manager

Medicare is a federal program that covers medical services for qualified beneficiaries. Established in 1965 to provide health insurance to individuals age 65 and older, Medicare has been expanded to include permanently disabled individuals under 65. Medicare now consists of four parts (A-D) that cover hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, hospice care and other treatments. Generally, Medicare is the “primary payer” for medical services, meaning that it pays health claims first. If a beneficiary has other health insurance, that insurance is billed after Medicare has made payments, to fill all, or some, of any gaps in Medicare coverage. In certain situations, however, federal Medicare Secondary Payer (MSP) law prohibits Medicare from making payments for an item or service when payment has been made, or can reasonably be expected to be made, by another insurer such as an employersponsored group health plan. Congress initiated MSP in 1980 to ensure that certain insurers met their contractual obligations to beneficiaries and to reduce Medicare expenditures, thus extending the life of the Medicare Trust Fund. According to the Department of Health and Human Services (HHS), private insurers designated legally primary to Medicare now pay about $8 billion in claims from Medicare recipients each year.

In general, Medicare is the secondary payer for beneficiaries who are also covered through (1) a group health plan based on their own or their spouse’s current employment; (2) auto and other liability insurance; (3) no-fault liability insurance; and (4) workers’ compensation programs, including the Federal Black Lung Program. Additionally, Medicare is prohibited from covering items and services paid for directly, or indirectly, by another government entity, such as the Department of Veterans Affairs (subject to certain limitations). In cases when Medicare is the secondary payer but primary payment is delayed or in dispute—for example, a medical liability lawsuit—Medicare can step in to cover claims to ensure that beneficiaries do not experience a gap in coverage. Medicare must be reimbursed for these conditional payments when a primary insurer makes payment.

To identify cases where Medicare is the secondary payer and prevent improper Medicare payments, HHS matches information about Medicare recipients against data from the Social Security Administration and Internal Revenue Service. The Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-173) requires private insurers such as group health plans, liability insurers, no-fault insurers, and workers’ compensation plans to regularly submit coverage information to HHS regarding Medicare beneficiaries. In December 2012, Congress approved, and the President signed into law, H.R. 1845 (P.L. 112-242), which includes provisions designed to speed up the process for settling Medicare conditional claims in liability, no-fault, and similar cases. Title II of P.L. 112-242 requires HHS to establish a secure website that beneficiaries and their representatives can access to view information on conditional payments relating to a potential settlement, judgment, or award. The law made additional changes to the MSP statute and current HHS procedures, including data reporting requirements, appeal rights, use of Social Security numbers, and statutes of limitations. Separately, HHS has been attempting to create streamlined processes for settling smaller-dollar liability and workers’ compensation cases involving Medicare beneficiaries. In June 2012, HHS published a proposed rulemaking to expedite certain liability and workers’ compensation settlements that include coverage for future medical bills. This report examines the MSP system, reporting requirements, liability issues, and issues for Congress.

Date of Report: March 22, 2013
Number of Pages: 33
Order Number: RL33587
Price: $29.95

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