Title XVIII of the Social Security Act established Medicare as the primary payer of covered health services for the elderly (those over age 65) and individuals with disabilities. A primary payer is the insurer that pays first and has the initial obligation to cover medical expenses for the beneficiary. To protect the Medicare Trust Fund, Congress adopted a “Coordination of Benefits” program for Medicare similar to those private health insurers’ use. Congress subsequently made Medicare the secondary payer in certain situations. The specific laws that make Medicare a secondary payer are listed below.
Tax Equity and Fiscal Responsibility Act (TEFRA)
(Enacted 01/01/83)* — Working Aged Beneficiary/Spouse with Group Health Plan (GHP) Coverage
Medicare Secondary Payer Manual (CMS Pub. 100-5, Ch.1 §§-50 and 70)
The TEFRA law affects employers with twenty or more full- or part-time employees. Under TEFRA, employers must offer their employees with a current employment status, or the spouses of their employees, ages 65 through 69, the same primary health care coverage as their younger employees.
*See the note under OBRA.
Deficit Reduction Act (DEFRA) law
The DEFRA law extended the TEFRA ruling to include employees’ spouses, ages 65 through 69, regardless of the age of the employee. The spouse has the same choices as allowed in TEFRA. The employer must have twenty or more full- or part-time employees to be affected by this law.
*See the note under OBRA.
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986*
The COBRA law extended the TEFRA and DEFRA laws even further by extending the working age for both employees and spouses beyond age 69. The employee and spouse over age 65 have the same choices as in TEFRA and DEFRA. The twenty or more full- or part-time rule applies to this law. This provision of the law became effective on May 1, 1986. A second provision of this law allows private health care carriers to pay VA hospitals for non-service-related illnesses or injuries. (Services provided to disabled veterans are exempt.) This provision of the law was effective on October 1, 1986, and applies to both in- and outpatient services. Another COBRA provision requires employers to offer certain terminated employees and/or their families the opportunity to continue receiving the employer’s health plan benefits (called an extension of benefits). Employers are not required to offer this extension of benefits to individuals who are eligible for Medicare.
*See the note under OBRA.
Omnibus Budget Reconciliation Act (OBRA) of 1986
(Enacted 1-1-87)* — Disabled Beneficiary Under Age 65 with coverage by a Large Group Health Plan (LGHP)
Social Security Act §1862(b)(4)
The OBRA law affects employers with 100 or more full- or part-time employees. Under OBRA, employers must offer their employees, or their spouses who are under age 65 and entitled to Medicare due to disability, the same primary health care coverage as other employees. As of August 10, 1993, the employee must have current employment status in order to choose Medicare as a secondary payer.
*Note: Individuals are exempt from TEFRA, DEFRA, COBRA and OBRA laws if they are not entitled to Medicare Part A. Employees affected by TEFRA, DEFRA, COBRA, or OBRA laws may choose Medicare as their primary insurer. If an individual chooses Medicare as primary, he or she is not eligible to continue on the employer’s health care plan. If the employee selects a Medicare supplemental policy after being dropped from the employer’s plan, Medicare is primary, and the supplemental plan is secondary.
End-Stage Renal Disease
Medicare Secondary Payer Manual (CMS Pub. 100-5, Ch.2 §20)
End-stage renal disease (ESRD) is part of OBRA legislation enacted in 1981 which provides for the coordination of benefits between Medicare and group health insurance plans for individuals entitled to Medicare solely on the basis of ESRD. If an individual is entitled to Medicare because of ESRD and is covered by a Group Health Plan (GHP), the GHP insurance is primary for the first thirty months (see note). The GHP is primary regardless of the number of employees in the group, and regardless of employment status.
Note: Prior to March 1, 1996, the coordination period was eighteen months. The Balanced Budget Act (BBA) of 1997 extended the eighteen-month period to thirty months for beneficiaries whose coordination period began on or after March 1, 1996. If your beneficiary was diagnosed on or after February 1, 1990, or before April 1, 1996, the GHP is primary for eighteen months. Prior to February 1, 1990, the GHP was primary for twelve months.
The coordination period begins when the beneficiary could have enrolled in Medicare, even if he/she did not enroll at the time (i.e., the date self-course of dialysis began on the date of the transplant, three months after dialysis starts, even though the beneficiary may not have enrolled in Medicare). To determine if your beneficiary is primary with Medicare or a GHP, consult first with your beneficiary. The chart below may help you determine the time period that the GHP is primary.
|Start Date of Medicare Entitlement||End of 30 Month Coordination Period||Start Date of Medicare Entitlement||End of 30 Month Coordination Period|
ESRD Beneficiaries and OBRA 93
The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) resulted in changes in the coordination period for ESRD beneficiaries with “dual entitlement.” Dual entitlement means the beneficiary is eligible for Medicare because of ESRD and age or disability. Before OBRA 93, Medicare became the primary payer for an ESRD beneficiary at the time his/her “dual entitlement” began. Effective August 10, 1993, OBRA 93 allows Medicare to remain the secondary payer for all end stage renal disease (ESRD) beneficiaries, regardless of other Medicare entitlements, during the first thirty months of ESRD Medicare Coverage. At the end of the thirty months, Medicare becomes and remains the primary payer as long as the beneficiary still has ESRD. If the beneficiary’s condition changes and he or she loses ESRD entitlement, other MSP laws may apply. (A beneficiary may lose ESRD entitlement if he or she receives a kidney transplant and the transplant is successful for thirty-six months.)
For example, an ESRD beneficiary may be 65 and an active employee (i.e., working aged) of an employer group affected by the TEFRA law, which normally requires the GHP to be the primary insurance. The TEFRA law would not affect the beneficiary as long as he or she had ESRD. However, if the beneficiary loses ESRD entitlement, the TEFRA law would apply and the GHP would become the primary payer. Keep in mind, if an ESRD beneficiary had dual entitlement before the date of this change (August 10, 1993), and eighteen months (the coordination period prior to March 1, 1996) have not passed since his or her ESRD entitlement began, OBRA 93 makes Medicare the secondary payer beginning August 10, 1993 for the remainder of the eighteen months. (Although Medicare becomes secondary on August 10, 1993, the eighteen months begins the same date the individual was entitled to Medicare by reason of ESRD, even if he or she did not enroll at that time.) The following examples demonstrate how this would work.
An individual, with coverage under a group health plan (GHP), became eligible to enroll in Medicare based on ESRD effective January 1, 1993. Medicare becomes the secondary payer on January 1, 1993, for the eighteen months under the ESRD MSP provision. During June, the beneficiary turned 65 years of age. Under the prior dual entitlement provisions of the MSP law, Medicare would become the primary payer. However, on August 10, 1993, Medicare becomes the secondary payer again (due to OBRA 93), and remains the secondary payer through the end of the eighteenth month of ESRD entitlement, which ends on June 30, 1994.
An individual has coverage under a GHP and is entitled to Medicare because of disability or age. Medicare is the secondary payer under the disability of working aged MSP provisions. Effective May 1, 1992, the beneficiary is also entitled to Medicare because of ESRD. Medicare became the primary payer (or remained the primary payer in the case of a retiree plan) on May 1, 1992, under the dual entitlement MSP provision. On August 10, 1993, Medicare becomes the secondary payer again (due to OBRA 93) and remained the secondary payer through October 31, 1993, which was the end of the eighteenth month of ESRD entitlement. The eighteen months were calculated from the date of the ESRD entitlement (May 1, 1992). In this example, Medicare was the secondary payer for two months and three weeks out of the eighteen months of ESRD entitlement because OBRA 93 laws making Medicare secondary only applied from August 10, 1993 (OBRA effective date) through October 31st (end of ESRD coordination period). As a result of OBRA 93, Medicare will recover payments for any claims processed incorrectly as Medicare primary on or after August 10, 1993, for dual-entitled Medicare beneficiaries.
Note: For beneficiaries that become entitled to Medicare due to ESRD and the coordination period began on or after March 1, 1996, the GHP insurance will be primary for the first thirty months of Medicare entitlement. For beneficiaries who did not complete the eighteen-month coordination period by July 31, 1997, the coordination period is extended to thirty months.
COBRA Extension of Benefits and ESRD Beneficiaries
Employers are not required to extend COBRA benefits to terminated employees or family members who are entitled to Medicare. However, if COBRA coverage is provided to a terminated employee who is also an ESRD Medicare beneficiary, the employer health plan is primary for the lesser of thirty months or the termination of COBRA coverage.
Medicare Secondary Payer Manual (CMS Pub. 100-5, Ch.1 §20 and Ch.3 §30.2.2)
Medicare has no liability for work-related injuries or illness covered by Workers’ Compensation until the Workers’ Compensation benefits are exhausted. However, Medicare can pay conditionally (i.e., pay the claim as if Medicare was primary) if the Workers’ Compensation case is in litigation and the providers do not wish to wait for a settlement. Medicare will pay covered services as primary if a beneficiary’s injury is not work-related or if the beneficiary is ineligible for Workers’ Compensation benefits.
Medicare Benefits Policy Manual (CMS Pub. 100-2, Ch.16 §50.1.1)
The Veterans Administration (VA) may authorize private physicians and other suppliers to provide services at federal expense to certain veterans with service-connected or non-service-connected disabilities. An authorization issued by the VA generally binds the VA to pay for the services provided, and payments are not made by Medicare. Medicare can pay for services where neither the physician/supplier nor the beneficiary has claimed benefits from the VA. Medicare may also pay for services that the VA does not cover. For example, a veteran may be authorized for care at VA expense for a service-connected back injury. If he or she receives treatment for a condition that the VA does not pay for, Medicare may pay the service(s) not reimbursable by the VA.
Black Lung Disease
Medicare Secondary Payer Manual (CMS Pub. 100-5, Ch.1 §10.4 and Ch.2 §50.1)
The Federal Coal Mine Act established black lung medical benefits under the Department of Labor. This Federal program was set up to pay medical benefits to coal miners with conditions related to black lung. Medicare will not pay primary or secondary for services covered by the Federal Black Lung program. The following is a complete list of Black Lung diagnosis codes.
|Black Lung Diagnosis Codes|
Injuries Covered by Auto/No-fault or Liability Insurance
MSP Manual (CMS Pub. 100.5, Ch.2 §§40.3B & 60; Ch.3 §30.2.1; and Ch.5 §20.1)
For injuries involving auto or liability insurance, Medicare is secondary. Auto insurance is the beneficiary’s own insurance they carry on their own automobile or the automobile in which they are a passenger. Liability insurance is the insurance that provides payment when responsibility is established for injury or illness. No-fault insurance pays medical expenses for injuries sustained on the property or premises of the insured or in an automobile, no matter who was at fault. Examples of no-fault insurance include auto no-fault and homeowners medical payment insurance. Medicare will pay claims conditionally for all auto or liability insurer claims; that is, Medicare will pay first and request a refund of any overpayment after the auto or liability insurer has paid. You may request a conditional payment if you know an auto or liability insurance is involved.