Report to Congress Focuses on Medicare Secondary Payer Coordination of Benefits

On August 9, 2023, the Congressional Research Service (CRS) issued the Medicare Secondary Payer (MSP) Coordination of Benefits report. The CRS serves Congress in the legislative process by providing policy and legal analysis to committees and members of both the House and Senate, regardless of party affiliation. This report reviews the MSP system, reporting requirements, Medicare beneficiary responsibility, payer liability issues, and issues for Congress. One report section also discusses the coordination of benefits between Medicare and group health plans, which is important for employer plan sponsors to understand.

As background, Congress initiated MSP requirements beginning in 1980 to ensure certain insurers met their contractual obligations to beneficiaries and to reduce Medicare expenditures, thus extending the life of the Medicare Trust Fund that pays Medicare benefits. The MSP program spells out specific conditions under which other insurers are required to pay first, and Medicare is responsible for secondary payments. The application of these coordination of benefit rules depends on factors such as the employer size, coverage type (active or COBRA), and category of covered beneficiaries, as reflected below. (Note: Employer size is determined based on the number of employees, not the number of individuals covered under a group health plan. Further, employer size must be counted based on the size of the entire company or corporation worldwide, according to the CMS MSP Employer Size Guidelines.)

• Working Aged. For an employer with 20 or more employees, Medicare is the secondary payer for a beneficiary with group health insurance aged 65 or older who is working or whose spouse is working. Under federal law, an employer with 20 or more employees must offer workers aged 65 and older the same group health insurance coverage offered to other employees. Further, employers are not allowed to take into account that an individual (or the individual’s spouse) who is covered by the plan is entitled to Medicare benefits.
• Working Disabled. If the employer has 100 or more workers, Medicare is the secondary payer for disabled Medicare beneficiaries who are under age 65 and have employer-sponsored health insurance based on their own current employment, a spouse’s current employment, or as a dependent of an employed worker. However, if the employer has fewer than 100 workers, Medicare pays first for a disabled beneficiary under age 65 with employer-sponsored health coverage through their current employment or the current employment of a spouse or dependent.
• Persons with End-Stage Renal (ESRD) Disease. Individuals who are under the age of 65 may qualify for Medicare based on a diagnosis of ESRD, a medical condition in which the kidneys are failing, and a person cannot live without dialysis or a kidney transplant. For individuals whose Medicare eligibility is based solely on ESRD, any group health plan coverage they receive through their employer or their spouse’s/parents’ employer is the primary payer for the first 30 months that an individual is entitled to enroll in Medicare because of ESRD. After 30 months, Medicare becomes primary.
• COBRA. COBRA is generally secondary to Medicare because an individual’s insurance coverage is based on COBRA law rather than on current employment status. Employers are not allowed to terminate COBRA coverage due to Medicare entitlement if an individual who is first entitled to Medicare then enrolls in COBRA. However, employers can terminate COBRA coverage if a person who has first elected COBRA coverage subsequently becomes entitled to Medicare (with limited exceptions). When an employee loses COBRA coverage due to Medicare entitlement, however, their spouse and children still may be eligible for COBRA coverage.

This report also discusses Medicare coverage coordination of benefits with other types of insurance, including workers’ compensation and no-fault and liability insurance. For the MSP rules for other types of coverage, please refer to this report.

According to the CMS, MSP laws and regulations reduced Medicare spending by about $9.7 billion in fiscal year (FY) 2021, and about $63 billion from FY 2015 through FY 2021.

Lastly, the MSP data is collected primarily from the Section 111 mandatory reporting requirement. Insurers for fully insured plans, TPAs for self-insured plans, and plan administrators for self-insured plans that self-administer plans are responsible for submitting the reporting on a quarterly basis.

Employers should review this report to verify their coordination of benefits between administration of their plans and Medicare and be educated on the specific MSP rules.

Medicare Secondary Payer: Coordination of Benefits »