Medicare Secondary Payer law

Since 1980, Medicare pays after another responsible entity pays certain health care claims for Medicare beneficiaries. This is known as Medicare Secondary Payer (MSP). Although the issue arises in other contexts, for Elder Law Attorneys, it usually comes up when an injury claim or a worker’s compensation claim is resolved. For that reason, this post only addresses liability cases.

In liability cases, 42 USC 1395y(b)(2)(A) provides: “Payment under this subchapter may not be made … to the extent that … payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” To further buttress this result, the subsection defines “Primary plan” to include ” a workmen’s compensation law or plan, an automobile or liability insurance policy.” Subsection (b)(2)(B)(iv) provides that the “United States shall be subrogated (to the extent of payment made under this subchapter for such an item or service) to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan.” This subrogation right is commonly referred to as a Medicare Lien.

While a case is ongoing, Medicare frequently makes conditional payments which are subject to its lien. After you settle your case, Medicare wants its money back. “Medicare may make a conditional payment when there is evidence that the primary plan does not pay promptly conditioned upon reimbursement when the primary plan does pay.”

In addition to getting back any conditional payments made while you worked to resolve your case, Medicare will continue to be secondary as long as you have money it says should be used to pay for medical expenses. The result is that many settlements (especially in worker’s compensation cases) include a Medicare Set-Aside Arrangement. When these arrangements are set up, funds are usually placed in a Medicare Set-Aside Trust. Funds in the trust are then used to cover expenses associated with the injury until they are depleted. Once they are depleted paying applicable expenses, Medicare coverage is no longer secondary. Most beneficiaries of these trusts use an attorney to make sure Medicare approves the arrangement when it is initially established and use an agency to protect future Medicare coverage by making sure the trust only pays expenses covered by the MSP law. Reporting on these set-asides is now done electronically.