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Medicaid Cross-Over Claims and Bad Debts

The Centers for Medicare Services & Medicaid (CMS) issued Program Memorandum A-98-18, dated June, 1998, indicating that in States where Medicaid does not fully pay for dually eligible beneficiaries’ cost sharing (cross-over claims), providers may claim the difference as a bad debt for purposes of Medicare payment. Final Reimbursement for bad debts is determined at year-end through the Medicare cost report settlement.

Medicare Policy on Bad Debts

According to Chapter 3 of the Provider Reimbursement Manual (PRM), CMS Publication 15-1, and the Code of Federal Regulations (CFR) 42, Section 413.80, a Medicare bad debt must meet the following minimum requirements:

  • The bad debt must be related to Medicare covered services for coinsurance and deductible amounts. Bad debts relating to noncovered services or to physician charges are non-reimbursable bad debts.
  • Documentation must clearly indicate that a reasonable collection effort was made. Documentation of collection effort should include copies of letters, follow-up letters, reports of telephone and personal contacts, etc. The collection effort must be “genuine”, rather than a token effort. Your facility’s collection effort for Medicare deductible and coinsurance amounts should be similar to the effort made for the collection of amounts from non-Medicare patients. If your facility refers non-Medicare claims to a collection agency, all Medicare claims should also be referred to a collection agency. (This collection effort is not required if the beneficiary is indigent – see item 4 below.)
  • The bad debt must be actually uncollectible when claimed as worthless. According to PRM, Part I, Section 310.2, a bill is presumed to be uncollectible if a reasonable effort was made to collect the bill and the bill remains unpaid for more than 120 days from the date the first bill was mailed to the beneficiary.
  • A Medicare bad debt can only be written off prior to the 120 days from the date of the first patient bill if the patient has been determined to meet the requirement of indigence. Patient files should contain documentation of the method by which indigence was determined in addition to all information supporting the determination. PRM Part I, Section 312 states the following regarding indigency as: “Providers can deem Medicare beneficiaries indigent or medically indigent when such individuals have also been determined eligible for Medicaid as either categorically needy individuals or medically needy individuals, respectively.” If the patient is on Medicaid, then Medicaid eligibility documentation should be maintained in the file, including the date of the Remittance Advice from the Medicaid fiscal intermediary processing the claim.
  • The uncollectible amount must be charged off as a bad debt in the accounting period in which the account is deemed to be worthless. If your facility recovers an amount that was previously written off and claimed as a Medicare bad debt, your current year’s bad debts should be reduced by the amount recovered.

When filing your Medicare cost report, you are required to complete a CMS-339 questionnaire. The questionnaire indicates that if bad debts are claimed on the cost report, a supporting schedule must contain the following:

  • Patient Name and HIC Number
  • Date of Service
  • Coinsurance and Deductible Amounts
  • Date of First Patient Billing
  • Amounts Recovered from Beneficiary
  • Identification of Indigent Bad Debt
  • Date of Write-off
  • Date the Collection Agency Ceased Collection Efforts

Submitting Interim Payments for Bad Debts

To submit interim rate changes information for bad debts, go to the Provider Audit and Reimbursement / Financial section of the “Write Us” page to obtain the address for “Interim Payments for Bad Debts.”

If you have questions about an audit-related issue, go to the Provider Audit and Reimbursement Contact Information on the “Phone Us” page and telephone the number listed under “Interim Payments for Bad Debts.”

Page last updated: November 5, 2013