When Is Medicare a Secondary Payer?
When your health insurance is covered by Medicare and you are in the middle of a workers’ compensation or liability case for an injury or illness, it can be confusing to figure out who should be paying your health care bills. To better understand Medicare’s role in the payment process, we need to first explore its history.
Medicare was started under the Social Security Act of 1965. It is a government-provided health insurance program designed to assist those who are age 65 or older, those younger than 65 with certain disabilities, and people of all ages with end-stage kidney disease. It helps with the costs of hospital care, medical services, and other expenses.
At its beginning, Medicare was the primary payer or party responsible for paying its beneficiaries’ health care bills. The only exceptions to this were when the beneficiary was also covered by workers’ compensation, Federal Black Lung benefits, or veterans’ benefits. If any of those were involved, then Medicare either did not pay toward the health care claims or it became the secondary payer, meaning the other entity was billed first. This setup caused Medicare to be very costly for the federal government.
Congress passed The Medicare Secondary Payer Act in 1980 to help curb federal spending and ensure the appropriate party was held responsible for paying the medical claims. Some of the instances in which Medicare is the secondary payer include injuries covered under:
- A worker’s compensation plan
- No-fault insurance
- An automobile or liability insurance policy or plan (including a self-insured plan)
- A structured settlement annuity
- Greater than $25,000 if you’re a Medicare beneficiary at time of settlement OR
- Greater than $250,000 if you’re not a Medicare beneficiary at time of settlement but expect to enroll within 30 months of settlement
- A group health plan (either held by you or as a dependent through a spouse or guardian)
- Through an employer with 20 or more employees OR
- Through an employer with 100 or more employees if the beneficiary is disabled OR
- During the first 30 months of treatment for ESRD
Providers (ex. hospitals, doctors, and medical suppliers) who bill Medicare are responsible for determining whether Medicare or another entity is considered the primary payer for items and services rendered to beneficiaries. Generally, when payment for a beneficiary’s medical expenses has already been made or can reasonably be expected, Medicare will not pay or will pay as the secondary payer. When Medicare pays as the secondary payer, they pay either the difference between the total cost and what the primary payer paid or the difference between what the primary payer paid and the gross amount payable by Medicare. However, if the billing provider accepts a lower payment from the primary payer than they charged, then Medicare is not required to make an additional payment.
If you’re a Medicare beneficiary and you’re about to receive a settlement from a workers’ compensation or liability (such as personal injury) case, then you’ll need to consider Medicare as a secondary payer. For some, the easiest way to comply is by setting up a Medicare set-aside.
A Medicare set aside (MSA) is an account funded by a portion of the settlement that follows Medicare’s rules. The MSA pays toward future health care expenses associated with the workers’ compensation or liability claim that Medicare would otherwise have to pay. That way, Medicare remains the secondary payer and the beneficiary does not risk losing benefits. Once the money in the MSA is gone, then Medicare resumes paying for the covered claim-related medical costs. It can sound overwhelming, but it’s very manageable, especially with the help of a seasoned professional. For liability settlements, Milestone’s goal is to get to a zero MSA.
Milestone stays up to date with the latest guidelines by the Centers for Medicare and Medicaid Services (CMS) governing settlements and Medicare set asides. For more information regarding Medicare compliance, read our free ebook, Complying with Medicare After Settlement or call our team at 716.883.1833 or toll-free at 855.836.2676.