Medicare Secondary Payment Calculation Methodology for

40.7.3 - Medicare Secondary Payment Calculation Methodology for Services Reimbursed on Reasonable Charge or Other Basis Under Part B (Rev. 11550; Issued: 08-12-22; Effective: 10-13-22; Implementation:10-13-22) When a proper claim has been filed (i.e., a claim that is filed in a timely manner and meets all other filing requirements of the GHP), the amount of secondary benefits payable is the lowest of the: • Actual charge by the physician/supplier (or the amount the physician/supplier is obligated to accept as payment in full if that is less than the charges) minus the amount paid by the GHP; • Amount Medicare would pay if services were not covered by a GHP. (In determining this amount, the payment limitations are found in IOM 100-02, Medicare Benefit Policy Manual, Chapter 6, §70, for non-inpatient psychiatric services apply; and the payment limitations in 100-02, Medicare Benefit Policy Manual, Chapter 15, for physical therapy services that apply.); or • Higher of the Medicare fee schedule or other amount that would be payable under Medicare (without regard to any Medicare deductible and/or coinsurance amounts) or the GHP's allowable charge (without regard to any copayment imposed by the policy or plan) minus the amount actually paid by the GHP. NOTE: In general, WC medical benefits constitute a service benefit (i.e., the payment constitutes full discharge of the patient's liability for services). In such cases, physicians/suppliers are obligated to accept the WC payment as payment in full and no secondary Medicare benefits are payable. However, if WC pays for Medicare covered services and, under the WC plan, the physician/supplier is not obligated to accept the payment as payment in full, Medicare secondary benefits may be payable. To calculate the amount of Medicare secondary benefits payable on a given claim, it is generally necessary to have the following information not otherwise required in processing Medicare claims: • The amount paid by the GHP; • The amount the provider is obligated to accept as payment in full (OTAF) if the OTAF is lower than the submitted charges; and • The GHP's allowable charge. This information can generally be derived from the GHP's explanation of benefits. In the event that the GHP's allowable charge cannot readily be determined from its explanation of benefits, the A/B MAC (Part B) assumes, in the absence of evidence to the contrary, that the actual charge is the GHP's allowable charge. In the following examples, all physicians/suppliers have accepted assignment. EXAMPLE 1 An individual received treatment from a physician who charged $175. The individual's Part B deductible had been met. As a primary payer, an employer allowed $150 of the charge and paid 80 percent of this amount or $120. The fee schedule amount for this treatment is $125. The Medicare secondary payment is calculated as follows: A. Actual charge by the physician minus the third party payment: $175 - $120 = $55. B. The Medicare payment is determined in the usual manner: .80 x $125 = $100. C. Employer plan's allowable charge of $150 (which is higher than Medicare's fee schedule amount of $125) minus the employer plan's payment of $120 equals $30. D. Medicare pays $30 (lowest of amounts in steps A, B, or C). EXAMPLE 2 An individual received treatment from a physician who charged $150. The individual's Part B deductible had been met. As a primary payer, an employer plan allowed a fee schedule payment of $100. The Medicare fee schedule amount for the treatment is $110. The Medicare secondary payment is calculated as follows: A. Actual charge by the physician minus the third party payment: $150 - $100 = $50. B. The Medicare payment is determined in the usual manner: .80 x $110 = $88. C. Medicare's fee schedule amount of $110 (which is higher than the employer plan's allowable charge of $100) minus the employer plan's payment of $100 equals $10. D. Medicare pays $10 (lowest of amounts in steps A, B, or C). EXAMPLE 3 An individual received treatment from a physician who charged $300. The individual's unmet Part B deductible was $233. As primary payer, an employer plan allowed $225 and paid 80 percent of this amount or $180. The Medicare fee schedule amount for his treatment is $250. The Medicare secondary payment is calculated as follows: A. Actual charge by the physician minus the third party payment: $300 - $180 = $120. B. The Medicare payment is determined in the usual manner: $250 - $233 = $17 x .80 = $13.60. C. Medicare’s allowable charge of $250 (which is higher than employer’s plan allowable amount of $225) minus the employer plan's payment of $180 equals $70. D. Medicare pays $13.60 (lowest of amounts in steps A, B, or C). The beneficiary's Medicare deductible is credited with $233, which is the amount that would have been credited to the deductible based on the fee schedule amount of $250 if Medicare had been primary payer. (See Chapter 1, §40.) The beneficiary can be charged $56.40 (the $250 fee schedule amount minus the sum of the $180 primary payment plus the $13.60 Medicare payment). (See Chapter 3, §10.2.1.) EXAMPLE 4: An individual received treatment from a physician who charged $250. The individual's unmet Part B deductible was $50 to accommodate the remaining deductible amounts for the calendar year. As primary payer, an automobile insurer allowed the $250 charge in full. The insurer deducted $100 from the $250 physician charge to meet its own deductible and paid 80 percent of the remaining $150, or $120. The Medicare fee schedule amount for this treatment is $200. The Medicare secondary payment is calculated as follows: A. Actual charge by the physician minus the third party payment: $250 - $120 = $130. B. The Medicare payment is determined in the usual manner: $200 - $50 = $150 x .80 = $120. C. GHP's allowable charge of $250 (which is higher than Medicare's fee schedule amount of $200) minus its payment of $120 equals $130. D. Medicare pays $120 (lowest of amounts in steps A, B, or C). The beneficiary's Medicare deductible is credited with $50, the amount that would have been credited to the deductible based on the fee schedule amount of $200 payable if Medicare had been primary payer. All of the beneficiary deductible except $50 had been previously met. (See Chapter 1, §40.) The physician cannot bill the beneficiary because the sum total of the primary payment ($120) and the Medicare payment ($120) exceeds the fee schedule amount ($200). EXAMPLE 5: An individual received treatment from a physician who charged $600. The individual paid the physician $50 and the physician also filed a claim with a GHP. The individual's unmet Medicare deductible was $233. The GHP's allowable charge was $450 and, as a primary payer, it paid the physician $400. The claim showed the total charge and other amounts paid by the GHP and the individual. The Medicare fee schedule amount for the treatment is $500. The Medicare secondary payment is calculated as follows: A. Actual charge by the physician minus the third party payment: $600 - $400 = $200. B. The Medicare payment is determined in the usual manner: $500 - $233 = $267 x .80 = $213.60 C. Medicare's fee schedule amount of $500 (which is higher than the EGHP's allowable charge of $450) minus the GHP's payment of $400equals $100. D. Medicare pays $100 (lowest of amounts in steps A, B, or C). Since the physician collected $50 from the individual, the $100 Medicare payment is split: $50 goes to the individual and $50 goes to the physician. The beneficiary's Medicare deductible is credited with $233, the amount that would have been credited to the deductible based on the fee schedule amount of $500 if Medicare had been primary payer. (See Chapter 1, §40.) The physician cannot bill the beneficiary because the sum total of the primary payment ($400) and the Medicare payment ($100) equals the fee schedule amount ($500). (See Chapter 3, §10.2.1.) EXAMPLE 6: An individual received treatment from a physician who charged $175. The individual's Part B deductible had been met. As a primary payer, an employer plan allows $160 but has a preferred physician arrangement under which the physician agrees to accept 90 percent of the plan's allowable amount as payment in full (i.e., $144 ($160 x .90)). The plan also has a $50 deductible for physician services, which yet has not been satisfied in any part. Thus, the plan pays $94 ($144 preferred physician rate minus $50 deductible). The fee schedule amount for this treatment is $150. The Medicare secondary payment is calculated as follows: A. The amount the physician is obligated to accept as payment in full minus the third party payment: $144 - $94 = $50. B. The Medicare payment is determined in the usual manner: $150 x .80 = $120. C. Employer plan's allowable charge of $160 (which is higher than Medicare's fee schedule amount of $150) minus the employer plan's payment of $94 equals $66. D. Medicare pays $50 (lowest of amounts in steps A, B, or C). EXAMPLE 7: Mr. Jones belongs to an employer-sponsored HMO that is primary to Medicare. He had 2 visits with a doctor for which he paid a $10 co-payment per visit. He has not met his Medicare deductible. He wishes Medicare to make secondary payments to reimburse him for these co-payments. Mr. Jones submits a paper claim to his A/B MAC (Part B) for reimbursement. The Medicare allowable amount for each of Mr. Jones visits was $32 giving a total of $64 for the 2 visits. To determine whether a Medicare secondary payment can be made, the following calculation is used: A. Determine the Medicare payment in the usual manner: .80 x $64 ($32 per visit x 2 visits) = $51.20. B. The co-payments for the 2 visits total $20. C. If the deductible had been met, the lowest of steps 1 or 2 would be payable. Since it was not met, the amount credited toward the deductible is: • The Medicare allowable amount for the covered services if they had been furnished on a fee-for-service basis ($32 x 2 = $64). • To this amount, add the total co-payments for those covered services: $64 + ($10 x 2) = $84. Mr. Jones is credited with $84 toward his deductible. Since Mr. Jones has not met the Medicare deductible, no MSP amount is payable.