Medicare is a secondary payer by law. In other words, it pays for benefits after other entities, such as insurance, have been exhausted or in the event the insurance does not cover an injury. However, it may make a conditional payment even though a primary payer exists. This is to help insure that the individual receives timely care. In these circumstances, Medicare will look to the primary payer for re imbursement. In addition, in those circumstances where an individual will receive future benefits as a result of an injury, Medicare may require that the individual set aside a portion of any reward they receive to compensate them for the injury. In this manner, Medicare can insure that they do not become the primary payer in the future.
In 2007, Congress passed the Medicare Secondary Payer (MSP) Act. The purpose of the act was to help identify those circumstances where Medicare had paid benefits or would pay benefits and was entitled to reimbursement. In this fashion, Medicare could recoup some of the billions of dollars in payments that were actually the responsibility of other primary payers. When the act comes into full effect in 2011, it will require that all workers compensation payments, liability payments, no-fault payments, and other payments meant to reimburse an injured person for their medical care be reported to the Centers for Medicare and Medicaid Services (CMS). If these payments are not reported, fines and other damages can accrue ageist the entity that failed to report.
The MSP Act comes into play whenever a Medicare beneficiary receives an award, payment, or any other type of settlement for a liability, workers' compensation, or no-fault case. This responsibility relates only to plaintiffs who are Medicare beneficiaries and who receive a payment. The primary insurance plans that cover the plaintiff must provide reimbursement to Medicare when necessary and must furnish documentation that will allow Medicare to avoid paying out benefits that have already been provided.
Requirements under the MSPA may arise in one of five scenarios:
(1) If Medicare pays for services(known as conditional payments) that are deemed to be covered by another primary payer, it will issue a demand for reimbursement from that entity.
(2) In the event Medicare has paid for services and an individual has received a settlement or verdict that includes these services Medicare will require reimbursement from the individual.
(3) If Medicare pays for services (known as conditional payments) that are deemed to be covered by another insurer, it will issue a demand for reimbursement to the appropriate primary payer.
(4) When a primary insurer provides payment for a claim to a Medicare-eligible individual, it must also simultaneously provide information about that payment to CMS, to ensure that the recipient cannot claim the same damages twice.
(5) When future treatment expenses are anticipated following the settlement, the primary insurer must also file with CMS because Medicare would become the de facto insurer once the individual's insurance runs out.
Compliance with the MSP Act will be difficult and complex, hence the extension of the compliance deadline; however, insurers need to prepare for these stipulations. Court cases in Pennsylvania have already ruled that negligence or a lack of understanding of the Act do not constitute sufficient grounds for exemption.