Coding & Reimbursement

When Medicare Pays Second

By Suzanne L. Corcoran, COE

Most of us are accustomed to thinking of Medicare as the primary payer at all times. But there are cases where another payer is primary and Medicare is secondary. Here is what you need to know in these instances.

Q. What is Medicare Secondary Payer (MSP)?

A. MSP is the term used to describe the patients Medicare benefit when Medicare is not responsible for paying first. The term is sometimes confused with “Medicare supplement,” used to describe secondary coverage that fills in the “gap” when Medicare is the primary payer.

Be sure your staff understands the difference between MSP coverage and a secondary insurance coverage.

Q. Who is likely to present with MSP coverage in our office?

A Medicare beneficiaries who retain primary insurance coverage from their (or their spouse's) employer, or those with commercial health benefits, may enroll in Medicare for secondary coverage. It is the patient's responsibility to respond to Medicare s Initial Enrollment Questionnaire and MSP claims development letters in a timely manner to ensure correct payment of Medicare claims.

In addition to Medicare beneficiaries who are still working, the MSP provision for disabled beneficiaries allows MSP coverage if the beneficiary has group health insurance through his or her spouse's employer.

Medicare is always secondary to an accident or injury claim. File the claim to the appropriate medical or liability insurer. If that claim is denied, you may submit the claim to Medicare with the denial.

Finally, Medicare is secondary to all claims for work-related injury as long as worker compensation funds are available.

Q. How do we identify patients with MSP coverage?

A. You must interview patients and obtain insurance and demographic information, ask specific questions about primary and secondary insurance, and about coverage through an employer or spouse's employer. Document all responses and make copies of all insurance cards.

Q. What information is necessary for Medicare to process a claim for MSP payment?

A. When submitting an MSP claim, you must include an EOB from the primary insurer.

► The primary insurer's name and address, and an explanation of all remark codes used, must appear on the EOB.

► The “total charge” billed to Medicare must be the same as initially billed to the primary insurer in order for Medicare to correctly coordinate benefits.

Medicare will deny secondary claims that do not include all information necessary to coordinate benefits with the primary payer.

Q. How do we calculate what MSP will pay on a claim?

A. Medicare will pay the lower of: (1) the primary insurer's copayment due, based on the allowed amount set by the primary payer, or (2) the amount Medicare would have paid (80% of Medicare's allowed amount) if Medicare had been primary.

The calculation is performed as follows:

1. Subtract the primary insurer's payment from the actual submitted charge.
2. Determine what Medicare would have paid by taking the Medicare allowable less deductible and co-payment.
3. Subtract the primary insurer's payment from the higher of two amounts: (A) the primary payer's allowed amount, or (B) Medicare's allowed amount.
4. Medicare's payment is the lowest of these three calculated amounts (i.e., lowest of: your charge, the primary payer's payment, or Medicare's payment).

Example: Your charge for an eye exam is $200. The patient is covered by her employer. The primary insurance approved $190 and paid $152 (80%). The Medicare allowed amount for this service is $ 100; the deductible was met. The MSP calculation is:

1. Subtract the primary insurer's payment ($152) from the original charge ($200) and get $48.
2. Calculate what Medicare would have paid ($100 x 80% = $80).
3. Since the primary insurer's payment is higher, subtract the payment ($152) from the higher allowed amount ($190) and get $38.
4. MSP will pay $38.

By comparison, Medicare would have paid $80 as the primary payer for the same service. If the patient had not met the Medicare deductible, the employer's plan payment would be applied to any Medicare deductible first. OM

Suzanne L. Corcoran is vice president of Corcoran Consulting Group. She can be reached at (800) 399-6565 or www.corcoranccg.com.