Effect of Failure to File Proper Claim

40.7.5 - Effect of Failure to File Proper Claim (Rev. 11550; Issued: 08-12-22; Effective: 10-13-22; Implementation:10-13-22) The term "proper claim" means one that is filed in a timely manner and meets all other filing requirements specified by the GHP (e.g., mandatory second opinion, prior notification before seeking treatment). When a provider, physician, supplier, or beneficiary (who is not physically or mentally incapacitated) receives a reduced third-party payment because of failure to file a proper claim, the Medicare secondary payment is the amount that Medicare would have paid if the GHP had paid on the basis of a proper claim. The provider, physician, supplier, or beneficiary must inform CMS that a reduced payment was made and the amount that the GHP would have paid if a proper claim had been filed. If the A/B MAC (Part B) or the DME MAC makes a greater secondary payment because the physician, supplier, or beneficiary fails to provide such notice and later discovers that the third-party payment was a reduced amount because of failure to file a proper claim, the difference between the Medicare payment and the amount that Medicare should have paid on the basis of a proper claim for third party payment is an overpayment. The A/B MAC (Part B) or the DME MAC recovers this amount, plus any applicable interest, from the party determined to be liable for the overpayment in accordance with the Medicare Pub. 100-06, Financial Management Manual, Chapter 3, §200. EXAMPLE: A beneficiary receives services for which the physician's charges are $1,000. The primary payer's allowed charge is also $1,000, of which it would pay 80 percent or $800. However, the primary payer requires that the beneficiary receive a second opinion regarding the medical need for this service as a condition for filing a proper claim. Since the beneficiary failed to do so, the primary payer rejected the claim and refused to pay the beneficiary for the service. Medicare determines its secondary payment, in this case, as if the primary payer had paid on the basis of a proper claim. The Medicare fee schedule amount for this service is $800. The secondary payment is calculated as follows: A. Actual charge by the physician minus what the GHP would have paid on the basis of a proper claim: $1,000 - $800 = $200. B. The Medicare payment is determined in the usual manner: .80 x $800 = $640. C. The primary payer's allowable charge of $1,000 (which is higher than Medicare's fee schedule amount of $800) minus the $800 the primary payer would have paid on the basis of a proper claim equals $200. D. Medicare pays $200 (lowest of amounts in steps A, B, or C). The beneficiary can be billed $800 by the physician (the amount of the third-party payment reduction). The adjustments, related to the proper claim rules and in the above example, appear in the CAS segment on ASC X12 837 MSP claims. The CAS claim adjustment reason code should appear as follows: Billed: $1000 CARC: PR1 $ 200 CARC: OA61 $800 Primary Pays: $0 Medicare then takes the $800 penalty adjustment from the CAS for not getting a second opinion and adds this adjustment to the primary payer amount of zero. The $800 payment is sent to MSPPAY. Another example would be if a Part A provider submitted the MSP claim on paper to seek payment for the hospital stay, the payment amount, what the primary payer would have paid if a claim was properly filed, would be placed in Value Codes by the provider. For example, if the employed beneficiary is working aged over 65 a VC 12 would be used in Value Codes. However, the beneficiary did not get a second opinion as required by the primary insurance so a $500.00 penalization applies. So, if the primary payer paid $6750.00 on the claim, but it would have paid $7250.00 if the claim was properly filed, then $7250.00 is placed in Value Codes with VC12. The manual explains this under 100- 04/25/75.3. The beneficiary is held liable for the $500 penalty amount. When failure to file a proper claim is due to the physical or mental incapacity of the beneficiary, the A/B MAC and DME MAC considers the primary claim to have been properly filed and pays secondary benefits without regard to any third-party benefit reduction attributable to failure to file a proper claim.