Medicare As Secondary Payer
Until 1980, Medicare was the primary payer for all Medicare covered services except for services covered by workers’ compensation or black lung benefits or paid for by the Department of Veterans Affairs or other government entities. Since 1980, a series of changes in the Medicare law has shifted costs from the Medicare program to private sources of payment. Presently, Medicare is the secondary payer for individuals:
Who are aged 65 or older and currently working with coverage under an employer-sponsored or employee organization (such as a union) group health plan.
Who are aged 65 or older and are covered by a working spouse’s employer group health plan or employee organization (such as union) group health plan.
Who are under age 65, disabled, and are covered by a large group health plan due to their own or other family member’s current employment status.
With kidney failure. Medicare is the secondary payer during the Coordination of Benefits (COB) period if they have coverage
under their own, a spouse’s, or other family member’s employer-sponsored or employee organization group health plan.
Who receive services covered under Workers’ Compensation, Federal Black Lung, automobile, no-fault, or liability insurance plans.
Who receive services covered under the Veteran Administration.
a. Working Aged
Medicare is secondary payer for individuals aged 65 or older who are currently working and have coverage through an Employer Group Health Plan (EGHP). Medicare is also secondary if the beneficiary has coverage through an employed spouse of any age. In order to meet the Working Aged provision, the employer must have at least 20 employees working for the company. At times, 2 or more smaller employers combine to provide coverage. As long as at least 1 employer has 20 or more employees, the requirement is met.
Medicare is primary in the following situations:
Individuals who are enrolled in Medicare Part B only.
Individuals enrolled in Medicare Part A on the basis of a monthly premium.
EGHP plans where there is less than 20 employees and the employer does not combine with another employer with more than 20 employees.
Individuals covered by a health plan that is not provided by Group Health Plan (GHP). An example would be a plan that is purchased by an individual privately rather than through a group plan.
A plan provided through retirement resulting from past employment. For Medicare to be secondary, the coverage must be the result of current employment status. The Medicare beneficiary may be retired and have retiree coverage. If the spouse is still employed and provides coverage, this coverage will be primary to Medicare.
a.1 Vow of Poverty Provision
The Omnibus Budget Reconciliation Act of 1993 makes an exemption from MSP provisions for members of a religious order who have taken a vow of poverty retroactive to 1981. Employers must certify that an individual has taken a vow of poverty. Medicare is then considered the primary payer for such individuals, (i.e., nuns, priests, etc.)
b. Disability
Effective August 10, 1993, Medicare is secondary payer for individuals under age 65 who are entitled to Medicare due to disability and are covered by a Large Group Health Plan (LGHP). Medicare secondary payer status for disabled Medicare beneficiaries is based on the “current employment status” of the beneficiaries, their spouses or any other family member. An individual has “current employment status” if the individual is actively working as an employee, the employer, or is associated with the employer in a business relationship.
Prior to August 10, 1993, Medicare was secondary for active individuals under age 65, entitled to Medicare due to disability and covered by a LGHP through a relationship to an employer (i.e. employed or retired beneficiary, spouse or other family member). This provision was based on the “active individual” concept rather than the employment status.
Those disabled beneficiaries who have LGHP coverage as a result of their own or a family member’s “current employment status” will continue to have Medicare as the secondary payer. Those disabled beneficiaries who do not have primary coverage with a LGHP because they do not have nor does a family member have “current employment status” will have Medicare as the primary payer.
A LGHP is defined as a plan sponsored or contributed to by an employer or employee organization (union). A LGHP provides medical benefits to employees who are currently working for an employer with 100 or more employees. If more than one employer combines to provide health coverage to their employees and at least one of the employers has 100 or more employees, the requirement is met.
Medicare is primary in the following situations:
Individuals who work for employers of fewer than 100 employees;
Individuals who are covered by a LGHP as the result of past employment (i.e. former retired employee or family member) and whose coverage is not based on “current employment status;”
Individuals who are covered by a health plan that is not provided by a LGHP. An example would be a plan that is purchased privately by an individual rather than through a group plan;
Individuals who have COBRA continuation coverage since it is not based on “current employment status.”
c. End Stage Renal Disease (ESRD)
Medicare is secondary payer to group health plans (GHP) for individuals eligible for or entitled to Medicare based on ESRD during a Coordination of Benefits (COB) period. This provision differs from other MSP laws as it applies regardless of the number of employees employed by the employer or their employment status, active or retired. The ESRD provision applies to former as well as current employees. The provision applies where an individual is eligible for Medicare based on ESRD but who has not filed an application for entitlement to Medicare. This provision also applies when an individual is entitled based on ESRD only.
c.1 Coordination of Benefits Period
The Coordination of Benefits period defines the time frame that Group Health Plan benefits pay first, or primary, and Medicare pays second. The COB period begins with the earlier of the first month of entitlement or eligibility for Medicare Part A based on ESRD. Eligibility refers to the first month the individual would have become entitled to Medicare Part A on the basis of ESRD if the individual had filed an application for such benefits.
The length of the coordination of benefits periods has changed several times through the enactment of Medicare laws. If entitlement began before November 5, 1990, Medicare was the second payer for 12 months. If the COB began between November 5, 1990 and March 1, 1996, Medicare was the second payer for 18 months based on the OBRA 1990 law. Effective March 1, 1996, coordination of benefit period is in effect for 30 months. Section 4631(b) of the Balanced Budget Act of 1997, permanently extends the COB for 30 months.
c.2 Dual Entitlement
Medicare entitlement based on ESRD and aged or disability is considered dual entitlement. For example: An individual may be entitled to ESRD and then become entitled based on aged or disability. Or, an individual may be entitled to Medicare based on aged or disability and then develop ESRD.
Anytime an individual is entitled to Medicare for 2 different reasons, they are considered dually entitled. Prior to August 10, 1993, Medicare became primary or first payer on the first day of the month an individual became dually entitled.
The enactment of OBRA 1993 on August 10,1993, changed how dual entitlement affects the coordination of benefits period. Under this law, group health plans must continue to pay primary benefits even if the individual becomes dually entitled during the COB period. If the individual’s entitlement to Medicare was on the basis of aged or disability, and then they became entitled based on ESRD, GHPs were required to pay primary for the COB period. If the GHP was a supplemental plan at the time the individual became entitled based on ESRD, the GHP had to convert to primary payment for the COB period. If the individual did not have GHP coverage, Medicare remained primary in this situation.
c.3 Court Injunction
On May 5, 1995, a lawsuit was filed in the United States District Court, challenging the implementation of one aspect of the OBRA’93 provisions involving beneficiaries who have supplemental group health plan coverage. The court issued a preliminary injunction order on June 6, 1995 that prevents Medicare from applying the rule to services furnished between August 10, 1993 and April 24, 1995 to claims involving GHP retirement coverage pending the court’s decision.
c.4 ESRD Entitlement Notes
If an individual has more than one period of Part A eligibility or entitlement based on ESRD, a coordination period is determined for each period of eligibility when the individual has GHP coverage.
Entitlement/Eligibility to Medicare based on ESRD ends 12 months after the month the individual no longer requires maintenance dialysis or 36 months after the month of a successful kidney transplant.
c.5 Effect of COBRA Continuation Coverage on ESRD MSP Provision
COBRA (Consolidated Omnibus Budget Reconciliation Act) requires that certain GHPs offer continuation of plan coverage for 18 to 36 months after the occurrence of certain qualifying events. An example of such an event would be loss of employment or reduction of employment hours. These events could result in loss of GHP coverage unless the individual is given the opportunity to elect continued plan coverage at their own expense. Typically Medicare is primary to COBRA plans with limited exceptions.
COBRA plans may terminate coverage upon entitlement to Medicare with one exception. The exception is that a COBRA plan may not terminate continuation coverage of an individual and his/her qualified dependents if the individual retires on or before the date the employer eliminates regular plan coverage by filing for Chapter 11, Bankruptcy. In this instance, if COBRA coverage overlaps the ESRD MSP coordination period, Medicare is secondary. Medicare will also be secondary if the COBRA plan voluntarily chooses to remain in effect even though they are not obligated to do so under COBRA provisions.