Medicare Secondary Payer Act

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September 11, 2012 — 1,685 views  
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On January 1, 2012, Medicare began requiring insurers to report any settlements, awards and judgments that involve a Medicare beneficiary to the Centers for Medicare and Medicaid Services (CMS). This amendment to the Medicare Secondary Payer (MSP) Act of 1980 states Medicare is the secondary payer on all claims when another source of insurance is involved. This allows Medicare to be reimbursed for any payments made when another insurer has primary responsibility (www.Rand.org).

The amendment is being phased in over three (3) years. During 2012, claims under $5,000 are exempt from reporting, which was the law prior to the amendment. In 2013, the threshold drops to $2,000. In 2014, the threshold drops again to $600 so that by 2015 all payments must be reported to the CMS. 

According to a paper by the RAND Corporation, “proponents of this new reporting requirement view it as a way for Medicare to obtain funds that it is legally owed by Medicare beneficiaries but has been traditionally unable to collect, and thus as providing a new source of revenue to enhance the program’s fiscal sustainability.” While some believe that the cost of compliance will outweigh the amounts collected, some estimate the CMS could recover nearly $1 billion annually for the most common types of claims, such as automobile injuries. These estimates do not take into account any reductions that may be made by other programs such as Worker’s Compensation.

Medicare beneficiaries will need to respond quickly to letters from Medicare regarding other coverage, such as coverage from an employer, auto insurer or Worker’s Compensation so that Medicare can process the claim in a timely manner. Each state’s Medicare program has a firm that oversees its Coordination of Benefits (COB), the name of which is provided to Medicare beneficiaries. Any changes to other coverage, such as Medigap coverage, should be reported to the COB provider as well as any information regarding an auto accident or Worker’s Compensation claim. 

Medical providers will also need to request COB information to ensure claims are filed with the correct insurance entity in the proper order. Providers must provide COB information to Medicare so that their payment for service can be promptly processed.

While the MSP Act adds additional paperwork for employers, insurers and providers, it will enable Medicare to recoup expenses for which they have made duplicate payments. These steps will help to ensure that Medicare can continue to provide coverage for the foreseeable future while utilizing the same cost-containment measures used by private insurers.

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