5.2 Medicare as Secondary Payer

Medicare Secondary Payer (MSP) is the CMS term for situations in which Medicare does not have primary payment responsibility because another entity must pay first. CMS's MSP overview states that when Medicare began in 1966 it was primary except for workers' compensation, Federal Black Lung benefits, and Department of Veterans Affairs (VA) benefits. Congress later expanded MSP so that certain group health plans and non-group health plan (NGHP) coverages pay before Medicare. The MSP provisions protect the Medicare Trust Funds. They apply even when a state law or an insurance contract says the private plan is secondary. Federal MSP law takes precedence.

For the COC candidate, MSP is a Payment methodologies topic because the outpatient hospital claim will deny, underpay, or create a recovery demand if the coder and billers treat Medicare as primary when it is not. Independent OpenExamPrep teaching for this exam does not replace the Medicare Secondary Payer Manual (Pub. 100-05). It does teach the situations CMS publishes on its MSP pages and the claim-language hospitals use on the UB-04.

Provider duties before the claim goes out

Medicare statute and regulations require every entity that bills Medicare for items or services furnished to a Medicare beneficiary to determine whether Medicare is the primary payer. CMS tells Part A institutional providers, including hospitals, to obtain billing information before providing hospital services, using the CMS questionnaire or a questionnaire that asks similar questions, and to submit MSP information with condition and occurrence codes. Part B providers, including physicians, should ask about employer group coverage and about injury-related coverage, ask whether the beneficiary is taking legal action related to the services, and submit the primary payer's Explanation of Benefits (EOB) or the matching electronic MSP loops with the Medicare secondary claim.

If the patient has a primary payer other than Medicare, bill that payer first. CMS's institutional and professional billing booklets repeat this: for MSP, bill the correct primary insurer first. Paper claims are generally allowed for MSP only in limited Administrative Simplification Compliance Act (ASCA) situations, including certain MSP claims with more than one primary payer and more than one allowed amount.

Group health plan situations CMS publishes

A group health plan (GHP) is employer-based or employee-organization coverage. MSP does not make every GHP primary. The question is why the person has Medicare, whether coverage is based on current employment, and (except for ESRD) how large the employer is.

Working aged. CMS's published rule is specific: the individual is age 65 or older, is covered by a GHP through current employment or a spouse's current employment, and the employer-size test is 20 employees. Self-employed people covered by a GHP through current employment or a spouse's current employment follow the same 20-employee test. Current employment is the hinge. A retiree GHP is not working-aged primary coverage; CMS states that for an individual age 65 or older with an employer retirement plan, Medicare pays primary and retiree coverage pays secondary.

Disability. The large-group threshold is 100 employees, not 20. The GHP must be based on the disabled beneficiary's current employment or a family member's current employment. Do not apply the working-aged 20-employee test to a beneficiary whose Medicare entitlement is disability unless CMS's disability facts are also met.

End-stage renal disease (ESRD). CMS's ESRD MSP page is the source to trust, and it is broader than the employment-size tests. ESRD is permanent kidney failure requiring long-term dialysis or a kidney transplant. Medicare based on ESRD covers all covered services, not only kidney-related care. Medicare is secondary to GHPs for individuals entitled to Medicare based on ESRD for a coordination period of 30 months, regardless of the number of employees and whether the coverage is based on current employment status. Medicare is also secondary to GHP coverage provided through COBRA or a retirement plan during that coordination period, even if the plan document says it is secondary to Medicare. GHPs may not terminate coverage, limit benefits, or charge higher premiums because the individual has ESRD.

CMS states there is a separate 30-month coordination period each time the beneficiary enrolls in Medicare based on kidney failure. This chapter does not invent extra dual-entitlement timelines beyond that published 30-month coordination period. The Medicare Secondary Payer Manual discusses dual age/disability-plus-ESRD cases in more detail; if a test item needs a month-by-month dual-entitlement answer that is not on the CMS ESRD overview, treat it as a lookup in Pub. 100-05 rather than a guess.

COBRA for aged or disabled beneficiaries (without the ESRD coordination facts) is the opposite of ESRD-COBRA: CMS says Medicare is primary and COBRA is secondary. Do not mix those two COBRA rows.

Non-group health plan: no-fault, liability, and workers' compensation

NGHP MSP is accident- and injury-based. It is not an employer-size test.

No-fault and liability. If the individual is entitled to Medicare and was in an accident or other situation involving no-fault or liability insurance, that insurance pays primary for accident-related health care services claimed or released. Medicare pays secondary for those related services. Automobile medical-payments coverage is a common no-fault example. Premises liability after a fall in a store is a common liability example. The ED coder still assigns ICD-10-CM diagnosis codes from the documentation; MSP does not change the diagnosis code set. It changes who is billed first and which value and occurrence codes travel on the UB-04.

Workers' compensation (WC). If the individual is entitled to Medicare and is covered under workers' compensation because of a job-related illness or injury, workers' compensation pays primary for related items or services. CMS states that Medicare generally will not pay for an injury or illness covered by workers' compensation. If WC denies all or part of a claim on the grounds that it is not covered by workers' compensation, a Medicare claim may be filed, and Medicare may pay a medically necessary covered service that WC does not cover. Parties settling a WC case should consider Medicare's interest in future medicals, including whether the settlement should include a Workers' Compensation Medicare Set-aside Arrangement (WCMSA).

Conditional payment. When there is evidence that no-fault, liability, or workers' compensation will not pay promptly, Medicare may make a conditional payment so the beneficiary does not have to pay the bill out of pocket while the other insurer delays. The payment is conditional because it must be repaid to Medicare when a settlement, judgment, award, or other payment is made. Outpatient departments that treat auto accidents and work injuries see this recovery process months later if they billed Medicare as primary and skipped the NGHP payer.

How hospitals report MSP on the institutional claim

The UB-04 does not have a single checkbox labeled Medicare is secondary. NUBC condition, occurrence, and value codes carry the MSP facts. CMS's MSP Manual, Chapter 3, maps common codes. Exact code lists are NUBC-maintained; the high-level families a COC candidate should recognize are:

Payer identification on the institutional claim lists the primary payer on line A when Medicare is not first. Prior payments from the primary insurer belong in the prior-payment form locator so Medicare can calculate the secondary amount. Professional claims carry the same story with electronic 837P MSP loops or a paper EOB; they do not use revenue codes.

Outpatient-hospital scenario

A 66-year-old is a full-time accountant at a manufacturing company with 400 employees. She has Medicare because of age and remains on the employer's GHP through her own current job. She is treated in the hospital outpatient department for an elective hernia repair. This is working-aged MSP: the GHP is primary and Medicare is secondary. The hospital bills the GHP first, then Medicare with value code 12 and the GHP payment data.

Change one fact: she retired last year and the only other coverage is a retiree plan. CMS's published retiree row makes Medicare primary and the retiree plan secondary. Change the facts again: she is 66, still working at a café with eight employees, and the only GHP is that small employer's plan. The working-aged 20-employee test is not met, so Medicare is primary and the GHP is secondary. Change the facts to a 52-year-old with Medicare because of ESRD who started facility dialysis four months ago and still has a GHP, even a small-employer GHP or COBRA. During the 30-month coordination period the GHP is primary regardless of employee count. After that coordination period, Medicare is primary for the GHP relationship CMS describes on the ESRD page.

If the same 66-year-old instead arrives after a forklift injury at work, workers' compensation is primary for the work-related services even though she also has Medicare and a GHP. The ED claim needs employment-related condition and occurrence coding, value code 15, and a bill to WC before Medicare, unless Medicare is asked to consider a conditional payment because WC will not pay promptly.