Common Examples of Primary Plans Failing to Recognize Medicare as Secondary Payer
CMS instructs providers to determine if individuals have an additional policy outside of Medicare before a health care claim is filed. Providers are supposed to supply beneficiaries with an MSP questionnaire covering the reason for their claims (injuries, for example) and whether or not they have additional coverage, including liability insurance.
Once it is determined that a beneficiary has liability insurance covering the incident or accident that triggered the claims, the following five scenarios are most common:
The liability insurance policy pays the health care provider as the primary
payer for their insured’s medical services.
In paying for services, the policy fulfilled its primary payer obligation.
The liability insurance policy agrees to a settlement with the insured
to pay for their health care services.
In agreeing to the settlement with the insured, the policy is obligated to make primary payment for medical services required by their insured. If the policy does not offer payment and Medicare provides a conditional payment to cover medical costs, the policy is required to inform Medicare that it is the primary payer and Medicare is the secondary payer, then reimburse Medicare for the medical costs.
The liability insurance policy pays their insured to cover their medical costs.
If a liability insurer pays someone other than Medicare for the cost of the health care coverage (i.e. the insured), the party receiving the funds must repay Medicare within 60 days of Medicare’s final demand for repayment of the conditional payments (less procurement costs).
The liability insurance policy and Medicare both pay the provider to cover
the insured’s medical costs.
The MSP requires that the liability insurance policy notify Medicare if it learns that Medicare made a conditional payment for services that the primary payer should have made. Medicare can also recover the conditional payment made to the provider if the provider fails to file a claim with the insurance policy, and Medicare is unable to recover payment from the insurance policy.
The liability insurance policy does not pay for the insured’s medical
costs and Medicare makes a conditional payment to cover costs.
The liability insurance policy is required to pay Medicare back for the conditional payment. Failure to do so could result in double-damage recovery and fines.
For a better understanding of how these scenarios play out in the real world, check out the examples below:
A 70-year-old woman is stopped at a traffic light when a box truck viciously rear-ends her vehicle. Under the woman’s auto insurance policy, she has Personal Injury Protection (PIP) coverage. At age 70, she also receives Medicare benefits as an enrollee in a Medicare Advantage Organization.
In this example, the woman’s medical expenses related to the accident should be covered by her auto insurance policy up to its limit. The auto insurance policy is the primary payer and Medicare is the secondary payer.
A 67-year-old man falls off a ladder working a construction job and is hospitalized. The hospital determines that the man has coverage outside of Medicare through a Workers’ Comp policy.
Generally speaking, a Workers’ Comp policy would be the primary payer on the beneficiary’s health care claim for the work injury with Medicare as a secondary payer.
MSP Act Allows for Double Recovery
As we have seen, there are circumstances in which the primary payer fails to pay providers and Medicare is forced to submit conditional payments to ensure that the injured beneficiary receives the appropriate care. When insurance policies fail to inform Medicare that it will serve as the primary payer and fails to pay for the care, Medicare can recover twice the amount of conditional payments made, plus interest, if forced to take legal action to compel a primary payer to reimburse Medicare.
Medicare Secondary Payer Class Action Lawsuits
Several class action lawsuits filed across the country on behalf of Medicare Advantage Organizations accuse auto insurance companies of failing to reimburse Medicare for injury claims arising from auto accidents.
According to the MSP class actions, the auto insurance companies derived substantial profits by forcing MAOs to cover medical treatments and failing to reimburse Medicare for the costs, as stated in the Medicare Secondary Payer Act. The lawsuits seek double damages plus statutory damages of $1,000 per day of noncompliance.