The Medicare Secondary Payer (MSP) provision is a federal requirement designed to protect the financial integrity of the Medicare program. This regulation ensures that Medicare pays for healthcare services only after any other responsible primary payer, such as an employer group health plan or liability insurance, has met its obligation. This process coordinates benefits, confirming the correct payment hierarchy before a claim is submitted to the Centers for Medicare & Medicaid Services (CMS).
Defining the Medicare Secondary Payer Requirement
The Medicare Secondary Payer requirement is mandated by federal law under the Social Security Act. Its goal is to identify situations where Medicare is not the primary insurer for a beneficiary’s medical expenses. This regulation shifts the financial burden from the federal Medicare Trust Funds to private insurance sources when appropriate.
This coordination of benefits is necessary because certain types of coverage are legally required to pay a beneficiary’s claims first. These primary payers include employer group health plans, workers’ compensation, no-fault insurance, and liability insurance. The MSP provisions apply to beneficiaries who have Medicare due to age, disability, or End-Stage Renal Disease (ESRD) but also hold one of these other types of coverage.
To manage this requirement, hospitals and providers must administer a screening process, often using the standardized MSP Questionnaire. The provider is obligated to ask the patient or their representative about the presence of other insurance coverage at the time of service. This screening helps determine if a condition, such as an injury from an auto accident, may be covered by a separate policy that is primary to Medicare.
The information gathered through this screening updates the beneficiary’s coverage record and determines how the claim must be billed. Without this initial determination, the hospital cannot correctly submit a claim to Medicare. This framework ensures the correct entity is billed first, minimizing improper payments by the Medicare program.
The Standard Frequency Rule for Hospital Stays
The standard frequency rule established by the Centers for Medicare & Medicaid Services (CMS) for inpatient hospital services is clear: the Medicare Secondary Payer screening must be completed at the time of every inpatient admission. This requirement is non-negotiable for institutional providers billing under Medicare Part A. Screening must occur regardless of how recently the patient was previously admitted to the facility.
Hospitals must demonstrate that they performed this screening and recorded the information accurately in the patient’s file. The process involves asking the beneficiary or their representative specific questions to uncover any potential primary insurance coverage. Hospitals are encouraged to use the CMS model questionnaire or a similar tool that covers the required information to ensure compliance.
The requirement for screening at every admission exists because a patient’s insurance status can change between hospital stays. For example, a patient may have retired, changing their Group Health Plan status, or they may have been involved in a new accident implicating a liability insurer. Even if the patient asserts their insurance information has not changed, the hospital is still obligated to perform and document the screening process.
Hospitals must use the information collected during the admission screening to determine the accurate payer order. If a primary payer is identified, the hospital must bill that entity first before submitting a secondary claim to Medicare. This consistent screening process upon each admission is a central component of a hospital’s compliance program.
Specific Admission Scenarios and Frequency Adjustments
While the “every admission” rule is the baseline for formal inpatient stays, different rules apply to patients receiving ongoing, recurring services or those readmitted shortly after discharge. These adjustments acknowledge the nature of continuous care and administrative efficiency.
For Medicare beneficiaries receiving recurring outpatient services, such as chemotherapy, dialysis, or physical therapy, the MSP screening must be completed initially. For these recurring services, CMS policy permits the provider to verify the patient’s MSP information once every 90 days. This quarterly verification balances the need for current information with the administrative burden of frequent screenings.
This quarterly verification allows hospitals to attest that the MSP status remains accurate for a patient receiving continuous treatment. The hospital must document that they collected MSP information no older than 90 days when submitting the bill for these services. This allowance for recurring outpatient services is a practical exception to the “every admission” rule for inpatient care.
In the case of a patient readmitted to the hospital within a short period (e.g., 30 or 60 days), the general rule of screening at every inpatient admission still applies. Although a hospital may have recent MSP data on file, they must still engage the patient to confirm the information has not changed since the prior discharge. The MSP requirement is a separate administrative process that must be executed upon the start of the new inpatient stay.
Consequences of Non-Compliance on Billing
Strict adherence to the MSP frequency rules is directly linked to a hospital’s financial health and compliance standing. Failure to correctly identify and bill the primary payer first can result in a claim rejection by Medicare. This rejection requires the hospital to correct and resubmit the claim, leading to payment delays and increased administrative costs.
If a hospital improperly bills Medicare as the primary payer when another insurer was responsible, the hospital may face costly recovery efforts. CMS has the authority to demand the return of improperly paid funds, known as recoupment. If a primary payment is received after Medicare has already paid, the provider must refund Medicare within 60 days of receiving the duplicate payment to avoid accruing interest.
Systemic non-compliance or a pattern of submitting claims with incorrect MSP status can lead to severe financial penalties. The government can pursue action under the False Claims Act, which may result in substantial fines and double damages. Consistently performing the MSP screening at the correct frequency is a fundamental requirement for legal and fiscal compliance in healthcare billing.