Application of the MSP Formula

40.8.3 - Application of the MSP Formula (Rev. 11550; Issued: 08-12-22; Effective: 10-13-22; Implementation:10-13-22) The Medicare payment amount is calculated by applying the following formulas: A. Prospective Payment Medicare pays the lesser of the gross amount payable by Medicare, minus the larger of: • Total Deductions (the sum of deductible and coinsurance amounts); or • The amount paid by primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 43, or 47, as appropriate, items 39-41). O R The provider's charges, revenue code 001 in item 47 (or the amount the provider is obligated to accept as payment in full when the primary payer pays a lesser amount, value code 44, Items 39 - 41) minus the larger of: • Total Deductions (the sum of deductible and coinsurance amounts); or • The amount paid by primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 43, or 47, as appropriate, items 39-41). B. Percentage of Charge Medicare pays the lesser of total charges (sum of covered and noncovered), identified by revenue code 001, less any Medicare noncovered charges times the percentage of charges used for the Medicare rate, minus the larger of: • Total Deductions (the sum of deductible and coinsurance amounts); or • The amount paid by primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 43, or 47, as appropriate, items 39-41). O R The provider's charges, revenue code 001 in item 47 (or the amount the provider is obligated to accept as payment in full when the primary payer pays a lesser amount, value code 44, Items 39 - 41) minus the larger of: • Total Deductions (the sum of deductible and coinsurance amounts); or • The amount paid by primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 42, 43, or 47, as appropriate, items 39-41). C. Periodic Interim Payments (PIP) Medicare pays the lesser of the per diem or per visit rate based on the provider's current PIP amount times the number of covered days (visits) minus the larger of: • Total Deductions (the sum of deductible and coinsurance amounts); or • The amount paid by primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 42, 43, or 47, as appropriate, items 39-41). O R The provider's charges, revenue code 001 in item 47 (or the amount the provider is obligated to accept as payment in full when the primary payer pays a lesser amount, value code 44, items 39 - 41) minus the larger of: • Total Deductions (the sum of deductibles and coinsurance); or • The amount paid by the primary payer for Medicare covered services (dollar amount entered as a value code amount associated with the value codes 12, 13, 14, 15, 16, 41, 42, 43, or 47, as appropriate, items 39-41). The A/B MAC (Part A) uses the above formulas in calculating Medicare liability for prior year claims processed in the current year. The A/B MAC (Part A) informs them of the applicable per diem (per visit) or percentage rates and of any changes. The MSPPAY module provided by CMS calculates this payment. For documentation, refer to specifications distributed with the most recent module release. EXAMPLE 1: A hospital furnished seven days of inpatient hospital care to a Medicare beneficiary. The hospital's charges for Medicare covered services totaled $25,000. The primary payer paid $20,500 for Medicare covered services. No part of the Medicare inpatient hospital deductible of $1,556 had been met. The Medicare gross payment amount without regard to the deductible is $22,000 As secondary payer, Medicare pays the lowest of: • The Medicare gross payment amount (without regard to deductible) minus the primary payer's payment: $22,000 - $20,500 = $1,500; • The Medicare gross payment amount (without regard to deductible) minus the Medicare inpatient deductible: $22,000 - $1,556 = $20,444; • The hospital's charges minus the primary payer's payment: $25,000 - $20,500 = $4,500; or • The hospital's charges minus the Medicare inpatient deductible: $25,000 - $1,556 = $23,444. Medicare pays $1,500. The combined payment made by the primary payer and Medicare on behalf of the beneficiary is $22,000. The beneficiary has no liability for Medicare covered services since the primary payer's payment satisfied the $1,556 inpatient Medicare deductible. EXAMPLE 2: A hospital furnished one day of inpatient hospital care to a Medicare beneficiary. The hospital's charges for Medicare covered services totaled $3,000. The primary payer paid $2,000 for Medicare covered services. No part of the Medicare inpatient hospital deductible of $1,556 had been met. The Medicare gross payment amount without regard to the deductible is $2,500. As secondary payer, Medicare pays the lowest of: • The Medicare gross payment amount (without regard to deductible) minus the primary payer's payment: $2,500 - $2,000 = $500; • The Medicare gross payment amount (without regard to deductible) minus the Medicare inpatient deductible: $2,500 - $1,556 = $944; • The hospital's charges minus the primary payer's payment: $3,000 - $2,000 = $1,000; or • The hospital's charges minus the Medicare inpatient deductible: $3,000 - $1,556 = $1,444. Medicare pays $500. The combined payment made by the primary payer and Medicare on behalf of the beneficiary is $2,500. The beneficiary has no liability for Medicare covered services since the primary payer's payment satisfied the $1,556 inpatient Medicare deductible. EXAMPLE 3: A hospital furnished five days of inpatient care to a Medicare beneficiary. No part of the Medicare inpatient deductible of $1,556 had been met. The hospital's charges for Medicare covered services were $15,000 and the Medicare gross payment amount (without regard to the deductible) was $14,000. The provider agreed to accept $13,000 as payment in full. The primary payer paid $12,500 due to a deductible requirement under its plan. The amount the provider is obligated to accept as payment in full (OTAF) $13,000 is considered by Medicare to be the hospital's charges in this situation. As secondary payer, Medicare pays the lowest of: • The Medicare gross payment amount (without regard to deductible) minus the primary payer's payment: $14,000 - $12,500 = $1,500; • The Medicare gross payment amount (without regard to deductible) minus the Medicare inpatient deductible: $14,000 - $1,556 = $12,444; • The OTAF amount minus the primary payer's payment: $13,000 - $12,500 = $500; or • The OTAF amount minus the Medicare inpatient deductible: $13,000 - $1,556 = $11,444. Medicare pays $500. The combined payment made by the primary payer and Medicare on behalf of the beneficiary is $13,000. The beneficiary has no liability for Medicare covered services since the primary payer's payment satisfied the $1,556 inpatient deductible. EXAMPLE 4: A hospital furnished 2 days of inpatient hospital care to a Medicare. The hospital's charges were $5,000. The deductible had been met and there is no coinsurance. The primary payer paid $3,400 for Medicare covered services. The Medicare gross payment amount without regard to deductible and coinsurance is $4,600. As secondary payer, Medicare pays the lowest of: • The Medicare gross payment amount (without regard to deductible or coinsurance) minus the primary payer's payment: $4,600 - $3,400 = $1,200; • The Medicare gross payment amount (without regard to deductible or coinsurance) minus the applicable coinsurance: $4,600 - $0 = $4,600; = $3,822 • The hospital's charges minus the primary payer's payment: $5,000 - $3,400 = $1,600; or • The hospital's charges minus the applicable coinsurance: $5,000 - $0 = $5,000. Medicare pays $1,200. EXAMPLE 5: HHA Per Visit Method A beneficiary received 5 skilled nursing visits for which the HHA's current Medicare per visit payment amount at $156 per visit was $780 (the gross payment amount). The HHA's charges were $800. The primary payer paid $600 for Medicare covered services. As secondary payer, Medicare pays the lower of: • The current Medicare gross payment amount minus the amount paid by the primary payer for Medicare covered services: $780 - $600 = $180.; or • The HHA's charges minus the amount paid by the primary payer for Medicare covered services: $800 - $600 = $200. Medicare pays $180 as secondary payer. EXAMPLE 6: HHA Percentage of Billed Charges Method A beneficiary received 5 skilled nursing visits for which the HHA charged $156 per visit for a total charge of $780.The per visit payment was 90 percent ($780 X 90 percent), which equaled $702 (the gross Medicare payment amount). The primary payer paid $600 for Medicare covered services. As secondary payer, Medicare pays the lower of: • The current Medicare gross payment amount minus the amount paid by the primary payer for Medicare covered services: $702 - $600 = $102; or • The HHA's charges minus the amount paid by the primary payer for Medicare covered services: $780 - $600 = $180. Medicare pays $102 as the secondary payer. EXAMPLE 7: HHA Billing for DME A beneficiary not under a plan of treatment purchased an item of DME for which the HHA charged $3,500. No part of the $233 Part B deductible had been met. The Medicare final payment without regard to the deductible and coinsurance for this item of DME was $3,300 (the lower of the $3,500 charges or the $3,300 fee schedule amount). The primary payer paid $3,000 for Medicare covered services. As secondary payer, Medicare pays the lower of: • The Medicare gross payment amount (without regard to the deductible or coinsurance) minus the amount paid by the primary payer for Medicare covered services: $3,300 - $3,000 = $300; • The Medicare gross payment amount (without regard to deductible or coinsurance) minus any applicable Medicare deductible and/or coinsurance amounts: $3,300 - $233 - *$613.40 = $2,453.60; • The HHA's charges minus the amount paid by the primary payer for Medicare covered services: $3,500 - $3,000 = $500; or • The HHA's charges minus any applicable Medicare deductible and/or coinsurance amounts: $3,500 - $233 - *$613.40 = $2,653.60. *The coinsurance is calculated as follows: $3,300 fee schedule amount - $233 deductible = $3,067 x 20% = $613.40 coinsurance. Medicare pays $300. The HHA may not charge the beneficiary since the deductible and coinsurance were met by the primary payer's payment. (For the Provider Statistical and Reimbursement Report (PS&R,) the A/B MAC (Part A) records $233 deductible, $613.40 coinsurance and $2,260 primary payer's payment.) EXAMPLE 8: HHA Accepted Amount Less Than Charges Same facts as in Example 7 except the HHA agreed to accept $3,200 from the primary payer and the primary payer paid $3,100 due to the deductible requirement under its plan. The amount the HHA is obligated to accept as payment in full ($3,200) is considered by Medicare to be the HHA's charges in this situation. As secondary payer, Medicare pays the lower of: • The Medicare gross payment amount (without regard to the deductible or coinsurance) minus the amount paid by the primary payer for Medicare covered services: $3,300 - $3,100 = $200; • The Medicare gross payment amount (without regard to the deductible or coinsurance) minus any applicable Medicare deductible and/or coinsurance amounts: $3,300 - $233 - $613.40* = $2,453.60; • The HHA's charges minus the amount paid by the primary payer for Medicare covered services: $3,200 - $3,100 = $100; or • The HHA's charges minus any applicable Medicare deductible and/or coinsurance amounts: $3,200 - $233 - $613.40* = $2353.60. *See Example 7 for coinsurance calculation. Medicare pays $100. The beneficiary's Medicare deductible and coinsurance were satisfied by the primary payer's payment. (For the PS&R, the A/B MAC (Part A) records $100 deductible, $640 coinsurance and $2,360 primary payer payment.)