Amount of Secondary Payment

40.5.3 - Amount of Secondary Payment (Rev. 11550; Issued: 08-12-22; Effective: 10-13-22; Implementation:10-13-22) The amount of the Medicare secondary payment is computed and is based on the amount of the primary payer's liability, as determined by the receiver, and the terms of the payments made by the receiver on behalf of the primary payer. If the receiver determines that the provider or physician/supplier may pursue collection of the portion of the charge not paid by the receiver, a Medicare secondary payment may be made. The Medicare secondary payment is computed based on the amount the receiver pays on behalf of the bankrupt or insolvent entity (i.e., the amount paid by the receiver constitutes the primary payment on which Medicare bases its secondary payment). In effect, this means that the Medicare secondary payment makes up for the liability of the primary payer that was not satisfied because of lack of funds. EXAMPLE: A participating physician furnishes a service for which the approved charges of the primary payer and Medicare are $100 and $90, respectively. The primary payer would normally pay 80 percent of $100, or $80, and Medicare would make a secondary payment of $100 minus $80, or $20. However, the primary payer is bankrupt and, after a long delay, its receiver pays the physician only $32. Medicare pays the physician $100 minus $32, or $68, which is $48 more than its normal liability (i.e., $68 minus $20). If the receiver determines that the fractional payment must be accepted as full discharge of the amount the primary payer would have been obligated to pay were it not bankrupt or insolvent, the Medicare secondary payment amount would be the amount payable had the receiver paid the full primary payment (i.e., Medicare pays only $100 minus $80, or $20). If the receiver determines that the provider and physician or other supplier is required to accept the fractional payment as full discharge of the entire bill, Medicare may not make a secondary payment. Thus, in the above example, the receiver might determine that the physician must accept the $32 it pays as payment. In the above example, the receiver might determine that the $32 it pays fully discharges the liability of the primary payer for the $80 the primary payer would have paid if it were solvent (i.e., in this situation, the full discharge of the physician's bill). In this case, Medicare makes no secondary payment.