Benefits Exhausted Situations When Medicare Is Secondary

40.8.9 - Benefits Exhausted Situations When Medicare Is Secondary Payer for Reasonable Cost Providers (Rev. 11550; Issued: 08-12-22; Effective: 10-13-22; Implementation:10-13-22) If Medicare has secondary liability for an inpatient stay, services that would otherwise not be covered because the beneficiary had exhausted benefits may be covered after the impact of the primary payment on utilization is determined. Since the primary payment extends the covered portion of the beneficiary's stay, it affects Medicare covered charges in situations where benefits are exhausted. At the same time, the ratio of Medicare covered charges to total charges determines the portion of the primary payment that is allocated to Medicare covered services. The A/B MAC (Part A) considers the primary payment's effect upon Medicare covered services before allocating the primary payment. To determine Medicare covered charges in benefits exhausted situations in other than a PPS hospital, the A/B MAC (Part A) proceeds as in the example below, in which Medicare benefits were exhausted after the seventh hospital day. For PPS hospitals, see §40.8.8. EXAMPLE: Total Charges $5,000 Medicare Covered Charges (without regard to benefits exhausted) $4,500 Medicare Covered Charges for Day 1-7 $3,000 Primary Payment (unallocated) $3,000 Remaining Benefit Days 3 Covered Medicare Days (without regard to benefits exhausted) 10 Current Medicare Payment Rate $ 480 Step 1. The A/B MAC (Part A) determines what the current Medicare payment would be if benefits were not exhausted (and no primary payments were involved). EXAMPLE: $480 X 10 days = $4,800 Step 2. The A/B MAC (Part A) determines the amount of the primary payment that would apply to Medicare services if benefits were not exhausted. • If the primary payer's allocation can be determined, the A/B MAC (Part A) uses it. EXAMPLE: The primary payer's explanation of benefits indicates that the $3,000 primary payment was for the first 5 days of the stay. Medicare, in the absence of a primary payer would have paid $3,000 for 7 days. Since the primary payer paid for 5 of the 10 days of the stay, Medicare has responsibility for the 5 remaining days. Medicare would have covered $3,000 for 7 days. It covers 5/7 of $3,000, or $2,143 for the 5 days for which it is responsible. • If the primary payer's allocation cannot be determined, the A/B MAC (Part A) applies a ratio of Medicare covered charges (without regard to benefits exhausted) to total charges for the stay to the total primary payment to determine the portion that would be attributable to Medicare. EXAMPLE: $4,500 / $5,000 X $3,000 = $2,700 Step 3. The A/B MAC (Part A) determines the Medicare secondary payment that would be made in the absence of benefits exhausted (without regard to deductible or coinsurance) by subtracting Step 2 from Step 1. EXAMPLE: $4,800 - $2,700 = $2,100 Step 4: The A/B MAC (Part A) determines the benefit days that would be chargeable absent benefits exhausted by applying a ratio of Step 3 to Step 1 to the number of Medicare covered days without regard to benefits exhausted. EXAMPLE: $2,100 / $4,800 X 10 = 4.375 Step 5: The A/B MAC (Part A) determines the number of days for which benefits are actually available. EXAMPLE: 3 days Step 6: If the number of days in Step 5 is greater than the number of days in Step 4, the primary payment extends Medicare coverage over the entire stay. The case no longer involves benefits exhaustion. All otherwise covered days and charges are reported as covered for statistical and payment purposes. The amount in Step 3 is the Medicare secondary payment (without regard to the deductible or coinsurance) and the number of days determined in Step 4 are charged to the beneficiary's utilization record. Step 7: If the number of days in Step 5 is less than the number of days in Step 4, the beneficiary does not have sufficient benefit days available to cover the entire stay. The A/B MAC (Part A) proceeds as follows: • It charges the days in Step 5 to the beneficiary's utilization record. EXAMPLE: 3 days • It multiplies the number of Medicare covered days without regard to benefits exhausted by the ratio of the number of days in Step 5 to the number of days in Step 4 to determine the days recorded as covered for statistical purposes. EXAMPLE: 3 / 4.375 X 10 = 6.86 = 7 days Charges for days 1-7 are shown as covered on the bill. Charges for days 8-10 are reported as noncovered. • The A/B MAC (Part A) re-determines the allocation of the primary payer's payment for covered services based upon the revised Medicare covered charges. EXAMPLE: $3,000 / $5,000 X $3,000 = $1,800 • The A/B MAC (Part A) determines Medicare current interim payment for days recorded as covered for statistical purposes. EXAMPLE: $480 X 7 days = $3,360 • The A/B MAC (Part A) determines Medicare's secondary payment. EXAMPLE: $3,360 - $1,800 = $1,560