No Legal Obligation to Pay for or Provide Services

40 - No Legal Obligation to Pay for or Provide Services (Rev. 13593; Issued: 01-26-26; Effective:02-26-26; Implementation:04-27-26) Each of Medicare’s payment exclusions (for example, 42 CFR § 411.4, § 411.6, § 411.8, etc.; see §10 of this IOM chapter for a list of the General Exclusions from Coverage) stand on their own; therefore, an analysis of each payment exclusion must be made before a determination can be made about whether Medicare can pay. If any payment exclusion applies, then Medicare payment is prohibited. Section 1862(a)(2) of the Social Security Act (“the Act”) and the regulations at 42 CFR § 411.4 prohibit Medicare payment when neither the individual beneficiary nor any other person or organization (by reason of such individual’s membership in a prepayment plan/insurance or otherwise) has a legal obligation to pay for the item or service. This exclusion applies where items and services are furnished at no cost to an individual or individuals (that is, the provider or supplier does not pursue payment from an individual or individuals and their insurance (if any)), such as free x-rays or immunizations provided by health organizations. However, Medicare reimbursement is not precluded merely because a provider, physician, or supplier waives the charge in the case of a particular individual or group or class of individuals, as the waiver of charges for some individuals does not impair the right to charge others, including Medicare beneficiaries. The determinative factor in applying this exclusion is the reason the particular individual is not charged. The following sections illustrate the applicability of this exclusion to various situations involving services other than those paid for directly or indirectly by a governmental entity. (For a discussion of the latter, see §50.)