What is Medicare Secondary Payer (MSP)?

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Basics of Medicare

The goal of Medicare is to help the elderly, and those living under very specific conditions, pay for a majority of their medical bills. Sometimes, though, seniors are fortunate enough to have acquired benefits in their elderly age through companies they’ve worked for or continue to work for as they near retirement. In these cases, elderly people can have two sources of insurance: benefits through a private insurer, a spouse’s insurance, or other federal agency like the Department of Veterans Affairs (VA), and then Medicare as a secondary payer, so long as you qualify. Medicare Secondary Payer (MSP) is the term generally used when the Medicare program does not have primary payment responsibility – that is when another entity has the responsibility for paying before Medicare.

Medicare Secondary Payer (MSP)

Being a “secondary payer” means that Medicare is second-in-line to paying your healthcare claims. The primary payer – whoever else you’re insured by on top of Medicare – will be the primary source responsible for covering your bills. They will pay up to their limits, and after that, the secondary payer will do its best to cover the remainder of the claim (if there’s anything left over). This doesn’t mean that Medicare will cover all the remaining costs, though, and it also won’t cover the same things the primary payer covered. Primary payers are those who have the primary responsibility for paying a claim. Medicare remains the primary payer for beneficiaries who are not covered by other types of health insurance or coverage. Medicare is also the primary payer in certain instances, provided several conditions are met.

Primary vs. Secondary Payer Responsibility

The following list identifies some common situations when Medicare and other health insurance or coverage may be present, and which entity will be the primary or secondary payer.

Working Aged (Medicare beneficiaries age 65 or older) and Employer Group Health Plan (GHP)
- An individual is age 65 or older, is covered by a GHP through current employment or spouse’s current employment AND the employer has less than 20 employees: Medicare pays Primary, GHP pays secondary
- An individual is age 65 or older, is covered by a GHP through current employment or spouse’s current employment AND the employer has 20 or more employees (or at least one employer is a multi-employer group that employs 20 or more individuals): GHP pays Primary, Medicare pays secondary
- An individual is age 65 or older, is self-employed and covered by a GHP through current employment or spouse’s current employment AND the employer has 20 or more employees (or at least one employer is a multi-employer group that employs 20 or more individuals): GHP pays Primary, Medicare pays secondary
Disability and Employer GHP
- An Individual is disabled, is covered by a GHP through his or her own current employment (or through a family member’s current employment) AND the employer has 100 or more employees (or at least one employer is a multi-employer group that employs 100 or more individuals): GHP pays Primary, Medicare pays secondary
End-Stage Renal Disease (ESRD)
- An individual has ESRD, is covered by a GHP, and is in the first 30 months of eligibility or entitlement to Medicare. GHP pays Primary, Medicare pays secondary during a 30-month coordination period for ESRD.
- An Individual has ESRD, is covered by a Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA plan), and is in the first 30 months of eligibility or entitlement to Medicare. COBRA pays Primary, Medicare pays secondary during the 30-month coordination period for ESRD
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
- An Individual has ESRD, is covered by COBRA, and is in the first 30 months of eligibility or entitlement to Medicare. COBRA pays Primary, Medicare pays secondary during the 30-month coordination period for ESRD.
- An individual is age 65 years or older and covered by Medicare & COBRA. Medicare pays Primary, COBRA pays secondary
- An individual is disabled and covered by Medicare & COBRA. Medicare pays Primary, COBRA pays secondary
Retiree Health Plans
- An individual is age 65 or older and has an employer retirement plan. Medicare pays Primary, Retiree coverage pays secondary.
No-fault Insurance and Liability Insurance
- An individual is entitled to Medicare and was in an accident or other situation where no-fault or liability insurance is involved. No-fault or Liability Insurance pays primarily for accident or other situation-related health care services claimed or released, Medicare pays secondary
Workers’ Compensation Insurance
- An individual is entitled to Medicare and is covered under Workers’ Compensation because of a job-related illness or injury. Workers’ Compensation pays Primarily for health care items or services related to job-related illness or injury claims. Medicare generally will not pay for an injury or illness/disease covered by workers’ compensation. If all or part of a claim is denied by workers’ compensation because it is not covered by workers’ compensation, a claim may be filed with Medicare.
- Medicare may pay a claim that relates to a medical service or product covered by Medicare if the claim is not covered by workers’ compensation. Before settling a workers’ compensation case, parties to the settlement should consider Medicare’s interest related to future medical services and whether the settlement is to include a Workers’ Compensation Medicare Set-aside Arrangement (WCMSA).

When there is evidence that the no-fault insurer, liability insurer, or workers’ compensation plan will not pay promptly, Medicare may make a conditional payment. A conditional payment is a payment Medicare makes for services another payer may be responsible for. Medicare makes this conditional payment so that the beneficiary won’t have to use his own money to pay the bill. The payment is “conditional” because it must be repaid to Medicare when a settlement, judgment, award, or other payment is made. Federal law takes precedence over state laws and private contracts. Even if an entity believes that it is the secondary payer to Medicare due to state law or the contents of its insurance policy, the MSP provisions would apply when billing for services.

Providers’ Responsibilities under MSP

As a Part A institutional provider (i.e., hospitals), you should:

Obtain billing information before providing hospital services. It is recommended that you use the CMS questionnaire or a questionnaire that asks similar types of questions; and
Submit any MSP information to the intermediary using condition and occurrence codes on the claim.

As a Part B provider (i.e., physicians and suppliers), you should:

Follow the proper claim rules to obtain MSP information such as group health coverage through employment or non-group health coverage resulting from an injury or illness;
Inquire with the beneficiary at the time of the visit if he/she is taking legal action in conjunction with the services performed; and
Submit an Explanation of Benefits (EOB) form with all appropriate Medicare Secondary Payer (MSP) information to the designated carrier. If submitting an electronic claim, provide the necessary fields, loops, and segments needed to process an MSP claim.

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What is Medicare Secondary Payer (MSP)?