Medicare Secondary Payer: Coordination of Benefits

Medicare Secondary Payer:
August 9, 2023
Coordination of Benefits
Suzanne M. Kirchhoff
Medicare is a federal program that covers medical services for qualified beneficiaries.
Analyst in Health Care
Established in 1965 to provide health insurance to individuals age 65 and older, Medicare has
Financing
been expanded to include certain disabled individuals under 65. Medicare now consists of four

parts (A-D) that cover hospitalizations, physician services, prescription drugs, skilled nursing
Scott D. Szymendera
facility care, home health visits, hospice care, and other treatments. Generally, Medicare is the
Analyst in Disability Policy
“primary payer” for medical services, meaning that it pays health claims first. If a beneficiary has

other health insurance, that insurance is billed after Medicare has made payments to fill all, or
some, of any gaps in Medicare coverage. In certain situations, however, federal Medicare

Secondary Payer (MSP) law prohibits Medicare from making payments for an item or service
when payment has been made, or can reasonably be expected to be made, by another insurer such as a liability plan. 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. MSP laws and regulations reduced
Medicare spending by about $9.7 billion in FY2021, according to the Department of Health and Human Services (HHS).
In general, Medicare is the secondary payer for beneficiaries who are also covered through (1) a group health plan (GHP)
based on their own or their spouse’s current employment; (2) auto and other liability insurance; (3) no-fault liability
insurance; and (4) workers’ compensation programs, including the Federal Black Lung Program. Additionally, Medicare is
prohibited from covering items and services paid for directly, or indirectly, by another government entity, such as the
Department of Veterans Affairs (subject to certain limitations), although Medicaid is always secondary to Medicare. In cases
when Medicare is the secondary payer but primary payment is delayed or in dispute—such as a medical liability lawsuit—
Medicare can step in to cover claims to ensure beneficiaries do not experience a gap in coverage that would threaten or delay
needed services. Medicare must be reimbursed for these conditional payments when a primary insurer makes payment.
To identify cases where Medicare is the secondary payer and prevent improper Medicare payments, HHS uses a number of
information sources including voluntary data sharing agreements with large employers. The Medicare, Medicaid, and SCHIP
Extension Act of 2007 (P.L. 110-173) requires private insurers such as GHPs, liability insurers, no-fault insurers, and
workers’ compensation plans to regularly submit coverage information to HHS regarding Medicare beneficiaries. The 2018
Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act
(SUPPORT Act; P.L. 115-271) requires health plans to report information to HHS on prescription drug benefits to ensure
better coordination with the Medicare Part D outpatient prescription drug program.
This report examines the MSP system, reporting requirements, beneficiary responsibility, payer liability issues, and issues for
Congress.
Congressional Research Service


link to page 5 link to page 8 link to page 8 link to page 8 link to page 10 link to page 11 link to page 11 link to page 13 link to page 15 link to page 15 link to page 16 link to page 17 link to page 17 link to page 18 link to page 18 link to page 19 link to page 19 link to page 21 link to page 23 link to page 23 link to page 24 link to page 24 link to page 24 link to page 25 link to page 25 link to page 25 link to page 26 link to page 27 link to page 27 link to page 28 link to page 29 link to page 29 link to page 29 link to page 30 link to page 30 link to page 31 link to page 33 link to page 33 link to page 34 link to page 35 link to page 35 Medicare Secondary Payer: Coordination of Benefits

Contents
Introduction ..................................................................................................................................... 1
MSP and Employer Group Health Plans ......................................................................................... 4
Retirees ...................................................................................................................................... 4
Working Aged ........................................................................................................................... 4

Workers in Group Health Plans with Fewer Than 20 Employees ....................................... 6
Working Disabled ............................................................................................................... 7
Persons with End-Stage Renal Disease ..................................................................................... 7
COBRA Continuation Coverage ............................................................................................... 9
No-Fault and Liability Insurance ............................................................................................. 11
Workers’ Compensation ........................................................................................................... 11

MSP and Other Federal Health Programs ..................................................................................... 12
Federal Black Lung Program .................................................................................................. 13
Department of Veterans Affairs ............................................................................................... 13

VA Facility ........................................................................................................................ 14
Non-VA Facility ................................................................................................................ 14

TRICARE ................................................................................................................................ 15
MSP and Medicare Advantage (Part C)/Part D Plans ................................................................... 15
Determining MSP Reimbursement for Claims .............................................................................. 17
MSP Conditional Payments..................................................................................................... 19
Subrogation ............................................................................................................................. 19

Private Right of Action ..................................................................................................... 20
Federal MSP Oversight and Administration ........................................................................... 20
Benefits Coordination and Recovery Center ........................................................................... 20
Commercial Repayment Center .............................................................................................. 21
Medicare MACs ...................................................................................................................... 21
Workers’ Compensation Review Contractor ........................................................................... 21

MSP Data Reporting Sources............................................................................................ 22
Section 111 Mandatory Reporting ........................................................................................... 23
Group Health Plan Section 111 Reporting .............................................................................. 23
Non-Group Health Plan Section 111 Reporting ...................................................................... 24
Section 111 and MA and Part D plans .............................................................................. 25
Resolving MSP Mistaken/Conditional Payments .......................................................................... 25
Resolving Mistaken GHP Payments ....................................................................................... 25
Resolving MSP Conditional Payments ................................................................................... 26
NGHP Conditional Payment Recovery from Beneficiaries .............................................. 26
NGHP Conditional Recovery from Payers ....................................................................... 27
Expedited Repayment Options for Conditional Claims .......................................................... 29
Workers’ Compensation Medicare Set-Aside Accounts (WCMSAs) ............................................ 29
Rulemaking on Expedited Set-Aside Accounts ...................................................................... 30
WCMSA Legislation ............................................................................................................... 31
MSP Savings ................................................................................................................................. 31

Congressional Research Service


link to page 9 link to page 13 link to page 17 link to page 36 link to page 37 link to page 37 link to page 38 Medicare Secondary Payer: Coordination of Benefits

Tables
Table 1. Medicare Secondary Payer Guidelines for Group Health Coverage ................................. 5
Table 2. Medicare Secondary Payer Rules and COBRA Continuation Coverage ........................... 9
Table 3. Medicare Secondary Payer and Other Government Programs ........................................ 13
Table 4. MSP Savings for FY2015-FY2021 .................................................................................. 32

Table A-1. Medicare Secondary Payer (MSP) Legislation ............................................................ 33

Appendixes
Appendix. Selected MSP Legislation ............................................................................................ 33

Contacts
Author Information ........................................................................................................................ 34

Congressional Research Service

Medicare Secondary Payer: Coordination of Benefits

Introduction
Medicare is a federal program that covers medical services for qualified beneficiaries. Established
in 1965 as Title XVIII of the Social Security Act to provide health insurance to individuals aged
65 and older, Medicare has been expanded to include qualified disabled individuals under the age
of 65, persons with End Stage Renal Disease (ESRD), and persons with Amyotrophic lateral
sclerosis (ALS, or Lou Gehrig’s Disease).1 Medicare now consists of four parts (A-D) that cover
hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health
visits, hospice care, and other treatments.2
Medicare Benefit Structure
Medicare has four distinct parts: Medicare Part A (Hospital Insurance), Part B (Supplementary Medical Insurance),
Part C (Medicare Advantage, or MA), and Part D (outpatient prescription drugs). In general, under Medicare,

Beneficiaries entitled to Part A receive coverage primarily for inpatient hospital services, skil ed nursing care,
hospice care, and some home health services. Most persons aged 65 or older are automatically entitled to
premium-free Part A because they or their spouse paid Medicare payrol taxes for at least 40 quarters (10
years) on earnings covered by either the Social Security or the Railroad Retirement system. Under Part A,
individuals pay cost sharing for Medicare inpatient hospital benefits per spell of il ness. Additional co-payments
and charges apply to stays of more than 60 days.

Beneficiaries entitled to Part A may enrol in Part B, which covers physician services, hospital outpatient
services, some home health services, durable medical equipment, preventive services, and prescription drugs
administered by a physician. Medicare beneficiaries generally pay a Part B premium that varies depending on
income, and there is generally 20% coinsurance for Part B services. Together, Medicare Parts A and B
represent “original” Medicare, or fee-for-service Medicare.

Beneficiaries entitled to Part A and enrol ed in Part B may receive these covered services through a Medicare
Part C, or MA, private plan. The federal government pays private health plans that choose to participate in
Part C a per person, or capitated, monthly amount to provide all services covered under Parts A and B
(except for hospice care). MA plans may provide additional items or services not covered under Part A or B.
Some MA plans charge enrol ees an additional premium. In general, cost sharing for enrol ees in an MA plan
may differ from amounts that would be charged if the beneficiary were in Medicare Part A or B.

Beneficiaries entitled to Part A and/or enrol ed in Part B may enrol in Part D, which covers outpatient
prescription drugs through private, stand-alone drug plans (PDP) or through MA plans that include a Part D
benefit (MA-PD). Part D premiums and cost sharing vary by plan and by income (i.e., whether an enrol ee
qualifies for an additional low-income subsidy or must pay an income-based premium surcharge).
When Medicare was created in 1965, it was the primary payer for all beneficiaries except those
receiving coverage through workers’ compensation programs. When Medicare acts as the primary
payer, it assumes responsibility for a beneficiary’s medical bills, with coverage not to exceed
designated Medicare program limits. If an enrollee has other insurance, the beneficiary, physician,
or other supplier can bill that insurance to fill in possible gaps in Medicare coverage only after
Medicare is billed.3 Medicare is always primary to Medicaid, the joint federal-state health

1 The Treasury and General Government Appropriations Act for Fiscal Year (FY) 2001 (P.L. 106-554) amended Social
Security Act (SSA) Section 226 to waive the Medicare 24-month waiting period for disabled individuals medically
determined to have ALS (Lou Gehrig’s disease).
2 For more information about Medicare, see CRS Report R40425, Medicare Primer.
3 Centers for Medicare & Medicaid Services (CMS), “Medicare & You 2023,” p. 21, https://www.medicare.gov/
publications/10050-Medicare-and-You.pdf.
Congressional Research Service

1

link to page 37 link to page 29 link to page 29 Medicare Secondary Payer: Coordination of Benefits

insurance program for qualifying low-income and certain disabled beneficiaries. Medicaid pays
only after Medicare and group health plans (GHP) have paid.4
Beginning with the Omnibus Budget Reconciliation Act of 1980 (P.L. 96-499; OBRA), Congress
created the Medicare Secondary Payer (MSP) program,5 which spells out specific conditions
under which other insurers are required to pay first and Medicare is responsible for qualified,
secondary payments. MSP is designed to ensure certain insurers make contractually required
payments, reduce Medicare expenditures, and thereby extend the life of the Medicare Trust Fund.
The 1980 OBRA made Medicare a secondary payer for medical claims involving what the
Centers for Medicare & Medicaid Services (CMS) terms non-group health plans (NGHP) such as
liability and no-fault insurance.6 In 1981, Congress expanded MSP to cover certain Medicare
beneficiaries in employer-sponsored GHPs including individuals eligible for Medicare on the
basis of ESRD.7 MSP has been further refined in a series of additional statutes. (See Appendix.)
In general, Medicare is now the secondary payer for an item or service when payment has been
made, or can reasonably be expected to be made, by responsible third-party payers (see shaded
text box “Medicare as Secondary Payer,” below).8 Medicare also does not cover services paid for
by another government entity, such as the Department of Veterans Affairs (VA).
Medicare as Secondary Payer
Medicare is considered a secondary payer when a beneficiary can reasonably be expected to receive payment
under

An employer group plan of 20 or more employees, based on either the beneficiary’s or a spouse’s current
employment

A large employer (at least 100 employees) GHP, for disabled current workers

An employer GHP of any size, for beneficiaries with End Stage Renal Disease

A Department of Veterans Affairs program (VA pays for VA-authorized services, and Medicare pays for
Medicare-covered services)

A medical, auto, or no-fault liability insurance plan

The Federal Black Lung Program

Workers’ Compensation
Source: CMS, “Medicare and Other Health Benefits, Your Guide to Who Pays First.”
MSP sometimes is confused with Medicare supplement, or Medigap, insurance policies, but the
two are different. MSP spells out instances where private or other types of health coverage are

4 CMS, “Medicare and Other Health Benefits, Your Guide to Who Pays First,” p. 11, https://www.medicare.gov/sites/
default/files/2021-10/02179-Medicare-and-other-health-benefits-your-guide-to-who-pays-first.pdf.
5 SSA §1862(b), 42 U.S.C. §1395y(b). Applicable regulations may be found at 42 C.F.R. Part 411.
6 CMS, in regulations and guidance that follow congressional directives, terms workers’ compensation, liability, and
no-fault insurance as “non-group health plans” for the purpose of MSP oversight. (See CMS, “Mandatory Insurer
Reporting (NGHP), https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Mandatory-Insurer-
Reporting-For-Non-Group-Health-Plans/Overview). The MSP terminology differs from other, more general definitions
of health insurance, in which non-group insurance refers to plans purchased by individuals outside of a group insurance
setting.
7 Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35), §2146.
8 Group health plans, third-party administrators, liability and no-fault insurers, and workers’ compensation must ensure
benefit payments are made in the proper order and to repay Medicare if mistaken primary payments are made or if there
is a settlement, judgment, award, or other payment made for services paid conditionally by Medicare. See “Resolving
MSP Mistaken/Conditional Payments”
in this report.
Congressional Research Service

2

link to page 23 link to page 36 link to page 33 Medicare Secondary Payer: Coordination of Benefits

primary and Medicare coverage is secondary. Medigap policies, by contrast, are private policies
that provide supplemental coverage for individuals who rely on Medicare as their primary payer.9
In certain cases where Medicare is the secondary payer but primary payment is delayed, Medicare
may step in to pay claims, thereby ensuring that beneficiaries have sufficient coverage. Examples
of such so-called conditional payments include cases where medical liability claims are contested
in court or where employer plans are slow to make payment.10 For example, in a situation where a
Medicare beneficiary is hit by a car, the driver’s insurance may be responsible for covering
medical bills related to the collision, but payment could be delayed by legal proceedings. In such
a case, Medicare may pay outstanding claims until a legal settlement is reached. Medicare is
entitled to recover its conditional payments once a beneficiary has received a settlement,
judgment, or other award. (See “MSP Conditional Payments.”)
MSP laws and regulations reduced Medicare spending by about $9.7 billion in FY2021,
according to CMS.11 The level of MSP savings has increased over the years as Congress has
expanded the scope of the MSP statute. (See Table 4.) However, businesses, insurers and
beneficiaries have told lawmakers that the resulting paperwork requirements can be onerous and
that CMS can be slow to provide a final accounting of conditional payments that must be
reimbursed, leading to delays in settling some liability cases.12
Congress has attempted to expedite the MSP payment and resolution process in statutes including
the 2012 SMART Act (P.L. 112-242), which created a new process for resolving MSP conditional
payment claims to speed up resolution of liability insurance, no-fault insurance, and similar cases.
Also, the 2020 PAID Act, enacted as part of the Further Continuing Resolution for FY2021 (P.L.
116-215), requires CMS to provide NGHPs, at their request, with the name, address and plan
number of each Part C Medicare Advantage (MA)13 and Part D outpatient prescription drug plan
in which a Medicare beneficiary (who is subject to the NGHP coverage) was enrolled in the prior
three years, in order to improve the MSP process. HHS proposed, but withdrew, regulations that
would simplify the process for resolving Medicare conditional payments and setting aside funds
for future medical bills related to workers’ compensation and NGHP (liability) settlements. (See
“Workers’ Compensation Medicare Set-Aside Accounts (WCMSAs).”)

9A Medigap policy is a private health insurance policy designed specifically to fill in some of the “gaps” in Medicare’s
coverage when Medicare is the primary payer. Medicare supplement policies typically pay for expenses that Medicare
does not pay because of deductible or coinsurance amounts or other program limits. Medicare.gov, “What’s Medicare
Supplement Insurance (Medigap)?” https://www.medicare.gov/supplements-other-insurance/whats-medicare-
supplement-insurance-medigap. See also CRS Report R47552, Medigap: Background and Statistics.
10 HHS MSP regulations at 42 C.F.R. §411.21 generally define slow payment for GHPs as claims not paid within 120
days after receipt of a claim. For NGHPs regulations at 42 C.F.R. §411.50 define prompt payment as within 120 days
after the earlier of 1) the date a claim was filed with an insurer or a lien was filed against a potential liability settlement
or 2) the date the service was furnished or, in the case of inpatient hospital services, the date of discharge.
11CMS, “Medicare Secondary Payer,” Medicare Learning Network Booklet, July 2022, p. 4, https://www.cms.gov/
outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/msp_fact_sheet.pdf. Annual savings
going back to FY2015 can be found at CMS, “Medicare and Medicaid Integrity Programs, Reports to Congress,”
https://www.cms.gov/about-cms/components/cpi/cpireportsguidance.
12 A group of businesses, law firms, and insurance companies in 2008 formed the Medicare Advocacy Recovery
Coalition, to work for changes in the MSP program. See http://www.marccoalition.com.
13 Medicare Advantage plans are managed care plans that cover Part A and Part B services. See CRS Report R40425,
Medicare Primer.
Congressional Research Service

3

link to page 9 link to page 11 link to page 11 link to page 9 link to page 37 Medicare Secondary Payer: Coordination of Benefits

MSP and Employer Group Health Plans
MSP law is not uniform; rather, the determination of whether Medicare is primary or secondary
depends on factors including employment status, disability, or a diagnosis of ESRD.14 Table 1
outlines the main instances when Medicare is the primary or secondary payer for those covered
by group insurance policies.
Retirees
Medicare is the primary payer for beneficiaries with retiree coverage under an employer GHP.15
In such cases, Medicare is billed first for covered health services, and the retiree plan and any
other coverage is billed after Medicare.
Employers are not required to provide health care coverage to their retirees but may choose to
provide such benefits to attract and retain workers. Employers that offer retiree health care may
offer lesser benefits to retirees than to current workers and may require Medicare-eligible retirees
to enroll in Medicare as a condition for employer-provided retiree coverage. 16 Employers may
design retiree health plans as wrap-around benefits to Medicare, meaning the employer plans fill
in gaps in Medicare coverage or offer supplemental benefits not covered by Medicare.
Increasingly, employers are offering retirees Medicare Advantage managed care plans. 17
There are exceptions to MSP rules for retiree coverage for individuals with ESRD. (See “Persons
with End-Stage Renal Disease.
”)
Working Aged
Medicare is the secondary payer for certain beneficiaries who are still working (often referred to
as the working aged) and who have group health insurance through an employer. Under MSP
rules, employer-sponsored health insurance18 is the primary payer (with some exceptions) for
Medicare-eligible individuals who have group coverage due to their own or a spouse’s current
employment. When a GHP is primary but does not cover a bill in full, Medicare may make a
secondary payment, as prescribed by law. (See Table 1.)
Medicare is the secondary payer for a beneficiary with group health insurance aged 65 or older
who is working, or whose spouse is working, for a company with 20 or more employees (or for a
group of employers where at least one has more than 20 workers).

14 MSP consists of laws amending the Social Security Act, as well as HHS regulations and guidance. See Appendix for
a list of the main MSP statutes.
15 See CMS, “Retiree Insurance,” https://www.medicare.gov/supplements-other-insurance/retiree-insurance.
16 U.S. Equal Employment Opportunity Commission (EEOC), “Age Discrimination in Employment Act; Retiree Health
Benefits,” 72 Federal Register, December 26, 2007, pp. 72938-72945; https://www.govinfo.gov/content/pkg/FR-2007-
12-26/html/E7-24867.htm. According to the EEOC, the final rule permits the practice of unrestricted coordination of
retiree health benefits with Medicare eligibility to continue. Under the rule, for example, employers may offer “carve-
out plans” that make Medicare or a comparable State health plan the primary payer of health benefits for retirees
eligible for Medicare or the comparable State health plan.
17 Kaiser Family Foundation, “Medicare Advantage Coverage is Rising for the Declining Share of Medicare
Beneficiaries with Retiree Health Benefits,” December 1, 2022, https://www.kff.org/medicare/issue-brief/medicare-
advantage-coverage-is-rising-for-the-declining-share-of-medicare-beneficiaries-with-retiree-health-benefits/.
18 Group plans refer to health benefits provided by employers and other entities (e.g., unions and associations) who
sponsor such benefits.
Congressional Research Service

4

Medicare Secondary Payer: Coordination of Benefits

Table 1. Medicare Secondary Payer Guidelines for Group Health Coverage
(general guidelines for Medicare coverage)
When You:
This Insurer Pays First:
Have retiree insurance coverage ...
Medicare pays first.
Are 65 or older, have group health coverage based
GHP pays first.
on your or your spouse’s current employment, and
your employer has 20 or more workers ...
Are 65 or older, have group health coverage based
Medicare pays first.
on your or your spouse’s current employment, and
your employer has fewer than 20 workers ...
Are under 65 and disabled, have group health
GHP pays first.
coverage based on your or a family member’s
current employment, and the employer has 100 or
more workers ...
Are under 65 and disabled, have GHP coverage
Medicare pays first.
based on your or a family member’s current
employment, and the employer has fewer than 100
employees ...
Have Medicare solely because of a diagnosis of End
GHP pays first for 30 months of ESRD Medicare eligibility.
Stage Renal Disease (ESRD) and are enrol ed in a
Medicare pays first after the 30-month period ends.
GHP ...
Have Medicare on the basis of simultaneous ESRD
GHP pays first for 30 months of ESRD Medicare eligibility.
and other eligibility and are enrol ed in a GHP ...
Medicare pays first after the 30-month period ends.
Have Medicare on the basis of disability or other
If Medicare was properly the primary payer at the time of
entitlement and then have a diagnosis of ESRD and
the ESRD entitlement, Medicare continues to be the
are enrol ed in a GHP ...
primary payer.
Source: Centers for Medicare & Medicaid Services (CMS), Medicare Secondary Payer and Medicare ESRD manuals,
available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs.
Under federal law, an employer with 20 or more employees19 must offer workers aged 65 and
older the same group health insurance coverage offered to other employees. Federal statutes bar
most GHPs from taking into account that an individual, or his/her spouse who is covered by the
plan, is entitled to Medicare benefits. Any individual aged 65 or older (and his/her spouse aged 65
or older) who has current employment status and is in a group plan with more than 20 workers is
entitled to equal benefits, under the same conditions, as any such individual (or his/her spouse)
under the age of 65. Such employees must be in current employment status—that is, they must be
individuals who are (1) actively working as an employee, (2) the employer, or (3) associated with
the employer in a business relationship (such as a supplier included on the employer’s GHP).20
If a working-aged individual is enrolled in an employer-provided GHP that meets certain federal
secondary payer guidelines such as group size, the employer plan is the primary payer and

19 CMS, Medicare Secondary Payer (MSP) Manual, Chapter 1 -General MSP Overview, Rev. December 21, 2022,
Section 20.1, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/msp105c01.pdf. In order to
meet this requirement, employers must have 20 or more full and/or part-time employees for each working day in each
of 20 or more calendar weeks in the current calendar year or the preceding calendar year. The 20 weeks do not have to
be consecutive. The requirement is based on the number of employees, not the number of people covered under the
group health plan.
20 Ibid.
Congressional Research Service

5

Medicare Secondary Payer: Coordination of Benefits

Medicare is secondary.21 For Medicare-enrolled employees who reject employer-sponsored
coverage, Medicare is primary. Federal statutes prohibit employers from paying for supplemental
benefits for Medicare-covered services for such employees, such as Medigap policies, so as not to
provide financial incentives for the employees to reject employer-sponsored coverage.22
The MSP requirements also apply to multiple-employer plans (plans sponsored by more than one
employer) and to multi-employer plans (plans jointly sponsored by the employers and unions
under the Taft-Hartley law, P.L. 80-101). When each of the employers in the group has less than
20 employees, Medicare is primary. When at least one employer has 20 or more employees,
Medicare is secondary. A multi-employer GHP that includes at least one employer with 20 or
more employees may prospectively request to exempt employees (and their spouses) of
employers with fewer than 20 employees from the working aged provision. In that case, Medicare
would be primary for the exempted employees, and the employer could offer those individuals
coverage that supplements Medicare.23
There are exceptions to MSP policy for the working aged. Medicare is not the secondary payer
for the working aged who are enrolled only in Medicare Part B, or who are enrolled in Part A
based on monthly premiums (rather than qualifying through work history).24
Workers in Group Health Plans with Fewer Than 20 Employees
Medicare is the primary payer for aged workers in employer-sponsored GHPs with fewer than 20
employees (unless such plans choose to offer primary coverage). GHPs with fewer than 20
employees are not required to offer the same coverage to employees over age 65 as to younger
workers.25 Some health organizations suggest that aging workers covered under GHPs with fewer
than 20 workers should enroll in Medicare when eligible to prevent possible gaps in coverage and
higher out-of-pocket costs, and to prevent possible penalties for late Medicare enrollment.26

21 Generally, individuals are entitled to Medicare Part A (Hospital Insurance) when they turn 65, and must enroll in Part
B (Supplementary Medical Insurance) during an initial enrollment period or face a permanent penalty of increased Part
B monthly premiums if instead they enroll at a later date. The law waives the Part B late enrollment penalty for
Medicare-eligible individuals who choose not to enroll in Part B because they have primary coverage through their own
or a spouse’s qualified employer-sponsored plan, based on current employment. Such individuals are eligible for a
special Part B enrollment period when their group health coverage (based on current employment) ends. As long as
they enroll in Part B during the special enrollment period, they will not be subject to the Part B late enrollment penalty.
The size of the group needed to trigger primary workplace coverage differs for disabled beneficiaries under age 65.
22 42 C.F.R. §411.103. An employer or other entity (for example, an insurer) is prohibited from offering Medicare
beneficiaries financial or other benefits as incentives not to enroll in, or to terminate enrollment in, a group health plan
that is, or would be, primary to Medicare. This prohibition precludes offering to Medicare beneficiaries an alternative
to the employer primary plan (for example, coverage of prescription drugs) unless the beneficiary has primary coverage
other than Medicare. An example would be primary coverage through his own or a spouse’s employer.
23 42 C.F.R. §411.172(b).
24 42 C.F.R. §411.172. Most persons age 65 or older are automatically entitled to premium-free Part A because they or
their spouse paid Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social
Security or the Railroad Retirement systems. Persons over age 65 who are not automatically entitled to Part A may
obtain coverage by paying a monthly premium or, for persons with at least 30 quarters of covered employment, a
reduced monthly premium. See CRS Report R40425, Medicare Primer.
25 Ibid.
26 National Council on Aging, “When is the Best Time to Enroll in Medicare?” November 8, 2022,
https://www.ncoa.org/article/when-is-the-best-time-to-enroll-in-medicare. Unitedhealthcare, “Should I get Part B if I'm
working past 65?,” https://www.uhc.com/news-articles/medicare-articles/should-i-get-part-b-if-im-working-past-65.
Congressional Research Service

6

Medicare Secondary Payer: Coordination of Benefits

Working Disabled
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.27
One major difference between the MSP requirements for the working aged and the working
disabled is the size of the employee group needed to trigger secondary payer status. The MSP
rules apply to disabled beneficiaries enrolled in large GHPs—that is, plans offered by employers
that had 100 or more employees on at least 50% or more of their business days during the
preceding calendar year. The requirement applies to smaller plans that are part of a multiple or
multi-employer plan if at least one of the employers in the plan has 100 or more employees.
Another difference from the MSP rules for the working aged is that a multiple or multi-employer
plan may not seek an exemption from MSP requirements for a disabled worker who is enrolled
via an employer with fewer than 100 employees.28
Persons with End-Stage Renal 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.29 For individuals with enrollment based solely on ESRD, MSP rules apply for
those covered by an employer-sponsored GHP, regardless of the employer size or current
employment status.30

27 Prior to the Omnibus Budget Reconciliation Act of 1993 (OBRA 93; P.L. 103-66) Medicare was the secondary payer
for “active individuals” entitled to Medicare on the basis of disability. Active individuals included people who were not
actually working, but who had employee status as indicated by their relationship to their employer. For example, the
employer might have been paying the individual sick or disability pay that was subject to Federal Insurance
Contributions Act (FICA) taxes or the individual might have participated in an insurance plan that was available only to
employees. The standard for disabled Medicare beneficiaries was changed to “current employment status” in 1993 to
be consistent with the standard for the working aged. Medicare defines employed in this case as a person whose
relationship is indicative of employment status. For background see CMS, “Medicare Program; Medicare Secondary
Payer for Individuals,” 60 Federal Register August 31, 1995, p. 45346, https://www.govinfo.gov/content/pkg/FR-1995-
08-31/pdf/95-21265.pdf#page=3/.
28 Medicare entitlement for the disabled begins after Social Security Disability benefits have been paid for 24 months.
However, if a beneficiary suffers from ALS (Lou Gehrig’s disease) he or she is entitled to Medicare the same month
they start receiving Social Security Disability benefits. See CMS, “Secondary Payer Disability Introduction,
https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-
Overview/Medicare-Secondary-Payer/Downloads/Medicare-Secondary-Payer-Disability.pdf. For information on
qualifying for Social Security Disability Insurance, see CRS In Focus IF10506, Social Security Disability Insurance
(SSDI)
.
29 Not everyone with ESRD is eligible for Medicare. In addition to a diagnosis of the condition, a person must meet
work history requirements or receive Social Security or Railroad Retirement benefits, or be the spouse or dependent
child of a person who has met work requirements or is receiving Social Security or Railroad Retirement benefits. See
CRS Report R45290, Medicare Coverage of End-Stage Renal Disease (ESRD).
30 The ESRD provisions apply to both current and former employees. Medicare entitlement based on ESRD usually
begins with the third month after the month in which an ESRD beneficiary starts a regular course of dialysis, referred to
as the three-month waiting period. This waiting period may be waived, in part or entirely, if, during that time (1) the
individual takes an approved home dialysis training program in self-dialysis; or (2) the individual is admitted to a
Medicare-approved hospital for a kidney transplant or for health care services needed before the transplant, if the
transplant takes place during that month or the following two months. If a transplant is delayed more than two months
after a beneficiary is admitted to the hospital (for the transplant or for health care services needed for the transplant),
Medicare coverage can begin two months before the transplant. Medicare.gov, “End-Stage Renal Disease (ESRD),”
https://www.medicare.gov/basics/end-stage-renal-disease.
Congressional Research Service

7

Medicare Secondary Payer: Coordination of Benefits

For individuals whose Medicare eligibility is based solely on ESRD, any GHP 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 on the basis of ESRD, which is
referred to as the 30-month coordination period.31 After 30 months, Medicare becomes primary.
(Medicare remains the secondary payer for the full 30 months for a person who was initially
covered by Medicare on the basis of ESRD even if that person becomes eligible for Medicare
during that time period due to age or other disability.)32 During this 30-month period, the GHP is
the primary insurer for all ESRD-related costs.
Similarly, for working individuals (or spouses) who qualify for, and remain eligible for Medicare,
based on both ESRD and age or disability, any GHP coverage they had been receiving through
their employer or a spouse’s employer remains the primary payer during the 30-month
coordination period. After 30 months, Medicare becomes primary, even if the individual has
employer-sponsored health insurance based on current employment status.
During the 30-month coordination period, a GHP may not take into account that an individual is
entitled to benefits solely by reason of ESRD eligibility, and may not differentiate in the benefits
provided between individuals with ESRD and other individuals covered by the plan on the basis
of the existence of ESRD, the need for renal dialysis, or in any other manner.33
There is an exception to the MSP rules for certain beneficiaries with ESRD. Medicare would
immediately become the primary payer if both following conditions were met: (1) an individual
was first entitled to Medicare on the basis of age or disability and then also became eligible on the
basis of ESRD, and (2) the MSP provisions for age or disability did not apply because the plan
coverage was not “by virtue of current employment status,” or the employer did not meet the test
of size for either the aged or disabled.34

31 If an individual does not apply for Medicare in a timely fashion and coverage under Medicare is delayed, or if the
individual chooses not to apply for Medicare, the 30-month period begins on the date the individual was first eligible to
enroll in Medicare. CMS, “MSP End Stage Renal Disease,” Electronic Correspondence Referral System, April 4, 2022,
https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-
Overview/Medicare-Secondary-Payer/Downloads/MSP-End-Stage-Renal-Disease-ESRD.pdf.
32 CMS, Medicare Secondary Payer (MSP) Manual, Chapter 1: General MSP Overview, Rev. December 21, 2022,
Section 20.2, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/msp105c01.pdf.
33 A 2022 Supreme Court ruling found that an employment-based GHP did not violate the MSP statute’s ESRD anti-
differentiation and take-into-account requirements by making all dialysis coverage out-of-network and setting low
provider reimbursement rates for outpatient dialysis services. According to the Court, because the plan’s terms
uniformly applied to all plan participants (i.e., those with and without ESRD), there was no violation of the MSP
statute. See CRS Legal Sidebar LSB10819, Supreme Court Allows Health Plans to Limit Dialysis Benefits.
34 There has been litigation and rulemaking over the years regarding the meaning of a GHP “taking into account” that
an individual is eligible for Medicare ESRD benefits, particularly after a provision in the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93; P.L. 103-66), expanded the MSP provisions to cover GHP enrollees with ESRD
who were eligible for Medicare based on more than one condition. For a broader discussion, see 60 Federal Register,
August 31, 1995, https://www.govinfo.gov/content/pkg/FR-1995-08-31/pdf/95-21265.pdf#page=14, starting on p.
45357. Under current law and guidance, the term “taking into account” can come into play in determining whether
Medicare is the primary or secondary payer for an individual with ESRD. For example, if Medicare was properly the
secondary payer for an individual under working aged/disability guidelines immediately prior to the individual’s
eligibility based on ESRD, Medicare remains secondary. If Medicare was properly the primary payer under MSP
working aged/disability guidelines immediately prior to the individual’s eligibility based on ESRD, Medicare remains
primary. If ESRD and disability/working age eligibility are simultaneous, Medicare is secondary. In short, if a GHP
continues to implement a Medicare requirement that it pay for an individual in the secondary position after that
individual also becomes eligible for Medicare based on ESRD, that does not “take into account” the later ESRD
eligibility. CMS, “MSP End Stage Renal Disease,” Electronic Correspondence Referral System, April 4, 2022,
https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-
Overview/Medicare-Secondary-Payer/Downloads/MSP-End-Stage-Renal-Disease-ESRD.pdf.
Congressional Research Service

8

link to page 13 Medicare Secondary Payer: Coordination of Benefits

Medicare coverage for those who qualify based solely on a diagnosis of ESRD ends 12 months
after the month in which a beneficiary stops dialysis treatment, or 36 months after the month a
beneficiary has a successful kidney transplant. However, if Medicare coverage ends, and then
begins again based on ESRD, the 30-month coordination period also starts again.
COBRA Continuation Coverage
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272)
requires that certain GHPs allow qualified beneficiaries to continue existing employer-sponsored
coverage if coverage would otherwise be lost as a result of an employee being laid off or working
fewer hours, or there is a change in family circumstance, such as divorce from or the death of a
covered employee enrolled in a plan. Most GHPs offered by employers that have 20 or more
employees are subject to COBRA.35 COBRA coverage typically lasts for 18 months, but can run
for 36 months, depending on the nature of the triggering event.36 Enrollees may be required to
pay as much as 100% of the premium, plus an additional 2% for the administrative costs incurred
for COBRA coverage.37
Table 2. Medicare Secondary Payer Rules and COBRA Continuation Coverage
When You:
This Insurer Pays First:
Have Medicare due to age or disability and are then
The individual’s entitlement to Medicare benefits cannot
enrol ed in COBRA coverage ...
be a basis for the employer to terminate the COBRA
continuation coverage, Medicare pays first, because
COBRA coverage is due to provisions of law rather than
employment status.
Have COBRA coverage first and then become
Employer may terminate COBRA based on Medicare
entitled to Medicare . .
entitlement. Medicare would become payer.
Have Medicare based on ESRD and are then
COBRA coverage pays first to the extent coverage
enrol ed in COBRA coverage ...
overlaps with the 30-month coordination period.
Source: U.S. Department of Health and Human Services, U.S. Department of Labor.
In general, COBRA is secondary to Medicare because an individual’s insurance coverage is based
on COBRA law, rather than on current employment status. (See Table 2.) Employers may not
terminate COBRA coverage due to Medicare entitlement if an individual who is first entitled to
Medicare, then enrolls in COBRA. However, employers may terminate COBRA coverage if a
person who has first elected COBRA coverage subsequently becomes entitled to Medicare (with

35 U.S. Department of Labor, “An Employee’s Guide to Health Benefits Under COBRA,” https://www.dol.gov/sites/
dolgov/files/legacy-files/ebsa/about-ebsa/our-activities/resource-center/publications/an-employees-guide-to-health-
benefits-under-cobra.pdf.
36 If the employer files for Chapter 11 bankruptcy, the employer is required to offer COBRA coverage to retirees who
lost their retiree health insurance due to the bankruptcy filing. In this case, the coverage can continue until the death of
the retiree. The retiree’s spouse and dependent children may purchase COBRA coverage from the former employer for
36 months after the retiree’s death. See CRS Report R40142, Health Insurance Continuation Coverage Under COBRA.
37 Ibid.
Congressional Research Service

9

Medicare Secondary Payer: Coordination of Benefits

limited exceptions).38 In cases where a person loses COBRA coverage due to Medicare
entitlement, however, his or her spouse and children still may be eligible for COBRA coverage.39
If an individual is entitled to Medicare due to ESRD, rather than age or disability, and then enrolls
in COBRA, COBRA continuation may pay first depending on when he or she became eligible for
Medicare.40 If an individual who is already entitled to Medicare enrolls in COBRA coverage prior
to the end of the Medicare ESRD coordination period, COBRA would be primary to the extent it
overlaps the 30-month coordination period. If a person still has COBRA coverage when the 30-
month coordination period ends, Medicare would pay first and COBRA coverage would pay
second.41
Individuals who are enrolled in COBRA coverage and have Medicare Part A may face a financial
penalty and a delay in coverage if they did not sign up for Medicare Part B when their non-
COBRA employer-sponsored insurance ended. Federal law allows workers to postpone signing
up for Medicare Part B, without penalty, if they are covered by insurance from a company where
they or a spouse are currently working.42 But COBRA recipients who are not currently employed
are not entitled to the special enrollment period for Medicare Part B. If those individuals do not
enroll in Part B during the initial special election period following loss of employer coverage,
they may be subject to a late enrollment penalty and may have to wait until the next open
enrollment period, from January to March each year, for coverage beginning that July.43
In addition, some individuals who are eligible for but not enrolled in Medicare Part B and have
COBRA may discover that their COBRA insurer still assumes Medicare coverage is primary. 44

38 CMS, Medicare Secondary Payer (MSP) Manual, Chapter 1 -General MSP Overview, Rev. December 21, 2022,
Section 10, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/msp105c01.pdf. See 42
C.F.R. §§411.161(a)(3) and 162(a)(3). COBRA requires that certain GHPs offer continuation of plan coverage for 18 to
36 months after the occurrence of certain “qualifying events,” including loss of employment or reduction of
employment hours. With one exception, the COBRA amendments expressly permit termination of continuation
coverage upon entitlement to Medicare. The exception is that the plan may not terminate continuation coverage of an
individual (and his or her qualified dependents) if the individual retires on or before the date the employer substantially
eliminates regular plan coverage by filing for Chapter 11 bankruptcy (26 U.S.C. 4980B(g)(1)(D) and 29 U.S.C.
1167.(3)(C)).
39 U.S. Department of Labor, “Eligible for Medicare,” https://webapps.dol.gov/elaws/ebsa/health/68.asp. According to
the DOL, a qualified beneficiary becomes entitled to Medicare benefits upon the effective date of enrollment in either
part A or B, whichever occurs earlier.
40 In general, an individual is considered entitled, rather than eligible, for Medicare when he or she enrolls in Part A or
B. While most eligibility is based on age, an individual with ESRD under age 65 is eligible for Medicare if the
individual requires regular dialysis or a kidney transplant to maintain life. The ESRD 30-month coordination period
begins on the date the individual is first eligible to enroll in Medicare due to ESRD. 42 C.F.R. §411.161(a)(3) specifies
that if an employer terminates COBRA coverage for individuals who have Medicare on the basis of ESRD when they
become entitled to Medicare benefits, such action does not violate MSP requirements that GHPs not (1) take into
account Medicare eligibility or (2) differentiate in benefits between ESRD and other Medicare beneficiaries.
41 Medicare Rights Center, “Can I Have Both COBRA and Medicare?” https://www.medicarerights.org/PartB-
Enrollment-Toolkit/Part-4-QA-COBRA.pdf; and “The 30-month coordination period for people with ESRD,”
https://assets-us-01.kc-usercontent.com/ffacfe7d-10b6-0083-2632-604077fd4eca/060baf26-c4fc-47d4-be66-
03461f5db560/CBA-ESRD-Toolkit-Handout-30-month.pdf.
42See CRS Report R40082, Medicare Part B: Enrollment and Premiums. Individuals who qualify for Medicare based
on age may sign up during the eight-month period after retirement or the ending of GHP coverage, whichever happens
first. (If an individual’s GHP coverage, or the employment on which it is based, ends during the initial enrollment
period, that individual would not qualify for a special election period.)
43 Social Security Administration (SSA), “Medicare Coverage,” https://www.ssa.gov/disabilityresearch/wi/
medicare.htm#cobra. Also SSA, “How to Apply for Medicare Part B (Medical Insurance) During Your Special
Enrollment Period,” https://www.ssa.gov/pubs/EN-05-10012.pdf.
44 According to Medicare, “If you have COBRA and you’re eligible for Medicare, COBRA may only pay a small
(continued...)
Congressional Research Service

10

link to page 23 Medicare Secondary Payer: Coordination of Benefits

For example, many state laws contain coordination of benefit provisions that allow insurers to
reduce benefits on the assumption that an individual could be enrolled in Medicare Part B.45 This
implied coverage means that COBRA could pay only a small portion of certain services that
would be covered under Medicare Part B, with the individual having to pay for most of the costs
for such services unless he or she enrolls in Part B.
No-Fault and Liability Insurance
Medicare is the secondary payer when payment has been made, or can reasonably be expected to
be made, by NGHPs including automobile insurance, and other forms of no-fault and liability
insurance.46 Medicare may make conditional payments for services when payment from these
primary payers has been delayed, subject to later reimbursement. If a beneficiary is also covered
by a GHP, the GHP, as well as the liability plan, is to be billed first before Medicare conditional
payment is requested. In cases where Medicare has made a conditional payment in a medical
liability case, HHS has a priority right of recovery from the primary payer, as well as from any
other parties that have received part of a settlement including a provider, beneficiary, supplier, or
insurer. In addition, Medicare has other recovery rights. (See “Subrogation.”)
The MSP provisions governing automobile, no-fault, and other liability insurance initially were
included in OBRA 1980, effective December 5, 1980. In general, NGHP coverage is usually
limited to care related to the underlying illness or injury at question.
Workers’ Compensation
Nearly all workers and employers in the United States are covered by workers’ compensation.
When a covered worker is injured, becomes sick, or dies as a result of his or her employment, that
worker is entitled to full medical coverage for the injury, cash benefits to replace a portion of
wages lost due to inability to work, and benefits for surviving family members in case of death.
Employers are responsible for providing workers’ compensation benefits to their workers and
generally purchase insurance to cover these costs. The federal government has only a limited role
in the provision of workers’ compensation because most workers are covered by state law.
Federal programs cover federal employees, longshore and harbor workers, and selected other
groups.47

portion of your medical costs, and you may have to pay most of the costs yourself. Contact your COBRA plan and ask
what percent they pay.” See Medicare.gov, “COBRA: 7 Important Facts,” https://www.medicare.gov/basics/get-
started-with-medicare/medicare-basics/working-past-65/cobra-facts.
45 States are the main regulators of commercial health insurance. A number of states have adopted model insurance
coordination of benefits (COB) legislation developed by the National Association of Insurance Commissioners (NAIC)
which states in part that “A COB provision may not be used that permits a plan to reduce its benefits on the basis
that:… (2) A person is or could have been covered under another plan, except with respect to Part B of Medicare. The
NAIC Coordination of Benefits Model Legislation can be viewed at https://content.naic.org/sites/default/files/inline-
files/MDL-120.pdf. As of the summer of 2020, 11 states have adopted the current NAIC model in a substantially
similar manner and 37 states have enacted some COB rules or adopted the previous NAIC model. NAIC,
“Coordination of Benefits Model Legislation,” MDL-120 (naic.org).
46 CMS, “Non-Group Health Plan Recovery,” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/
Coordination-of-Benefits-and-Recovery-Overview/Non-Group-Health-Plan-Recovery/Non-Group-Health-Plan-
Recovery. Liability insurance can include homeowner’s insurance, malpractice insurance, product liability insurance
and general casualty insurance, among others. It also includes payment under state wrongful death statutes that provide
payment for medical damages.
47 CRS In Focus IF10308, Workers’ Compensation: Overview and Issues.
Congressional Research Service

11

link to page 33 link to page 17 Medicare Secondary Payer: Coordination of Benefits

Medicare has been the secondary payer for items or services covered under a workers’
compensation law or plan of the United States or a state since Medicare was created in 1965.48 In
the case of a contested claim for benefits, a workers’ compensation agency or board must notify
the beneficiary, and pending a decision, Medicare may be billed for medical costs. A Medicare
conditional primary payment may be made if the compensation carrier will not pay promptly, but
follow-up action must be taken to recover the payment. If a beneficiary exhausts all appeals under
workers’ compensation and the claim is ultimately not approved, Medicare would be the primary
payer.
In most states, a workers’ compensation claim may be settled through a negotiated agreement
between the payer (the employer or the insurer) and the worker. Settlements can provide lump
sum or periodic payments for disability and future medical costs in exchange for a release of the
payer from all future liability. Workers’ compensation settlements generally must be approved by
a state agency or court. Settlements are not permitted under the Federal Employees’
Compensation Act (FECA), the federal workers’ compensation system for federal employees.
Beneficiaries who receive workers’ compensation settlements or other payments designed to
cover future or lifetime medical costs must, by Medicare practice, protect the Medicare program
from unnecessary expenses. Medicare does not pay for workers’ compensation-related medical
and prescription drug benefits when an individual receives a payment or settlement designed to
cover future medical expenses. In such cases, the CMS recommends that individuals set up a
Workers’ Compensation Medicare Set-aside Arrangement (WCMSA), which allocates a portion
of any workers’ compensation settlement for future medical expenses.49 The amount of the set-
aside is determined on a case-by-case basis and is reviewed by CMS, when appropriate. (See
“Workers’ Compensation Medicare Set-Aside Accounts.”)
MSP and Other Federal Health Programs
Items and services furnished by federal providers, a federal agency, or under a federal law or
contract are excluded from Medicare coverage. (See Table 3.) This includes U.S. military
hospitals, the Department of Veterans Affairs (with some exceptions), and research grants, among
others. The exclusion of these items or services from Medicare coverage does not include health
benefits offered to employees of federal entities, services made available to members of Indian
Tribes funded by or provided through the Indian Health Service, rural health clinic services,
federally qualified health centers, and other exemptions that may be specified by the Secretary of
HHS.
The federal-state Medicaid program, which covers services for some low-income and disabled
elderly beneficiaries, is always secondary to Medicare.

48 The MSP provisions also apply to workers’ compensation plans of the District of Columbia, American Samoa,
Guam, Puerto Rico, and the Virgin Islands. MSP also applies to federal workers’ compensation provided under the
Federal Employees’ Compensation Act, the U.S. Longshoremen’s and Harbor Workers’ Compensation Act and its
extensions, and the Black Lung Program. The Federal Employers’ Liability Act (FELA), which covers employees of
interstate railroads, and the Merchant Marine Act of 1920 (Jones Act), which covers merchant seamen, do not fall
under the MSP law.
49 CMS, “Workers Compensation Medicare Set Aside Arrangements,” https://www.cms.gov/Medicare/Coordination-
of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview.
Congressional Research Service

12

Medicare Secondary Payer: Coordination of Benefits

Table 3. Medicare Secondary Payer and Other Government Programs
When You:
This Program Pays First:
Have black lung disease and are covered by the
The Federal Black Lung Program pays for services related
Federal Black Lung Program ...
to Black Lung. Medicare pays for items and services that
are non-Black Lung related.
Have Medicare and are a veteran entitled to
The Department of Veterans Affairs (VA) pays for VA-
veteran’s benefits ...
authorized services. Medicare does not pay for services
paid or provided through the VA health system, but may
pay for Medicare-covered services outside the VA system.
Are covered under TRICARE ..
TRICARE pays for services at a veteran’s hospital or other
federal provider. Medicare pays for other Medicare-
covered services. TRICARE may provide secondary
coverage for Medicare beneficiaries through Tricare for
Life.
Source: Department of Health and Human Services.
Federal Black Lung Program
Medicare coordinates benefits with the Federal Black Lung Program. Medicare does not pay for
services covered under the Federal Black Lung Program for Medicare beneficiaries who are
entitled to Black Lung medical benefits, in accordance with the Federal Coal Mine Act (P.L. 91-
173). Medicare may be billed for Medicare-covered services not covered by the Federal Black
Lung Program. If the services are solely for a non-Black Lung condition, Medicare would be
billed as primary.50
Department of Veterans Affairs
Medicare coverage has been coordinated with Department of Veterans Affairs (VA) health
benefits since 1965, when the Medicare program was created. Even though a veteran may have
both VA and Medicare coverage, the two health programs are not supplementary. In general,
Medicare is prohibited from making payments to any federal health care provider who is
obligated by law or contract to render services at public expense;51 therefore, Medicare does not
pay for services provided through the VA medical system.52 VA is also statutorily prohibited from
receiving Medicare payments for services provided to Medicare-covered veterans.53
Medicare may pay for Medicare covered services provided to a VA beneficiary who chooses not
to use VA medical services and instead uses outside, Medicare-certified providers or where VA
determines that it does not have responsibility for a claim for care that was not previously
authorized.

50 CMS, Medicare Secondary Payer (MSP) Manual, “Chapter 3: MSP Provider, Physician, and Other Supplier Billing
Requirements,” Section 30.2.3, Rev. March 22, 2019, https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-
documents/msp105c03.pdf.
51 42 U.S.C. §§1395f(c), 1395n(d), and 1395f(a).
52 Veterans may have additional health care coverage (e.g., TRICARE private health insurance, Medicaid, Medicare,
among others). See CRS In Focus IF10418, Do Veterans Have Choices in How They Access Health Care?
53 42 U.S.C. §1395f(c), and 38 U.S.C. §1729(i)(1)(B)(i).
Congressional Research Service

13

Medicare Secondary Payer: Coordination of Benefits

VA Facility
If an eligible veteran receives care at a VA medical facility and the service is covered by VA,
Medicare cannot be billed.54 Under current law, some veterans are required to pay co-payments
for medical services55 and outpatient medications56 related to the treatment of a nonservice-
connected condition.57
Any health service or medication provided in connection to the treatment
of a service-connected condition58 or disability is provided at no cost to the veteran. Additionally,
VA does not charge co-payments for preventive screenings such as for infectious diseases;
cancers; heart and vascular diseases; mental health conditions and substance abuse; metabolic,
obstetric, and gynecological conditions; and vision disorders, as well as regular recommended
immunizations.59
The VA may collect appropriate Medicare cost sharing and deductible amounts from Medicare
supplement insurance (Medigap) held by a VA beneficiary for health care services ordinarily
covered by Medicare, if such care is (1) furnished at VA facilities and (2) provided to veterans
covered by both VA and Medicare who also have supplemental coverage. CMS and the VA have
an interagency data sharing agreement to expedite such claims. Under the agreement, CMS
provides the VA with information about how much Medicare would have paid if it had covered a
particular service (including deductibles and coinsurance). The VA then sends the CMS Medicare
information to the Medicare supplemental insurer so the insurer can determine the amounts, if
any, owed to the VA.60
Non-VA Facility
The VA has authority under its Veterans Community Care Program (VCCP) and other statutory
authorities to pay for medical services for eligible veterans, for care provided in a non-VA facility
or a VA-contracted facility. 61 In such cases, the VA pays for the entire episode of authorized care
and Medicare may be billed for Medicare-covered services that were not authorized by the VA.62

54 38 U.S.C. §1729(i)(1)(B)(i).
55 38 U.S.C. §1710(f) and 38 C.F.R. §17.108.
56 38 U.S.C. §1722A and 38 C.F.R. §17.110.
57 “The term ‘‘non-service-connected’’ means, with respect to disability or death, that such disability was not incurred
or aggravated, or that the death did not result from a disability incurred or aggravated, in line of duty in the active
military, naval, air or space service.” (38 U.S.C. §101(17)).
58 “The term ‘‘service-connected’’ means, with respect to disability or death, that such disability was incurred or
aggravated, or that the death resulted from a disability incurred or aggravated, in line of duty in the active military,
naval, air or space service.” (38 U.S.C. §101(16)).
59 38 C.F.R. Parts 17.108 and 17.110.
60 CMS, Medicare Claims Processing Manual, Chapter 37: Department of Veterans Affairs (VA) Claims Adjudication
Services Project, Rev. April 20, 2022, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/
clm104c37.pdf. Section 1.3 “While the VA is entitled by law to collect the coinsurance and deductible amounts that
would have been payable had the claim been a true Medicare claim, it is generally permitted to do so only to the extent
that there are no true Medicare claims for coinsurance and deductible submitted to the insurer for the same beneficiary
for the same year.”
61 VA, “Community Care,” https://www.va.gov/COMMUNITYCARE/programs/veterans/General_Care.asp.
62 CMS, “Centers for Medicare & Medicaid Services, “Medicare and Other Health Benefits: Your Guide to Who Pays
First,” September 2021, p. 26, https://www.medicare.gov/sites/default/files/2021-10/02179-Medicare-and-other-health-
benefits-your-guide-to-who-pays-first.pdf.
Congressional Research Service

14

Medicare Secondary Payer: Coordination of Benefits

For Medicare to be billed for such care, the services must be provided in a Medicare-certified
facility.63
If the VA authorizes care from a physician outside a VA facility, the physician must accept the VA
reimbursement as payment in full and cannot bill Medicare.64
TRICARE
The Department of Defense (DOD) administers statutory health entitlements and benefits to
active-duty military, National Guard and reserve members, retirees and their families, survivors,
and certain former spouses through the TRICARE program.65 The rules for primary and
secondary coverage of TRICARE beneficiaries are not included in the Medicare statutes, but
rather are included under 10 U.S.C. §1095. In general, Medicare pays for Medicare services and
TRICARE pays for services from a military hospital or clinic, or civilian health care providers
participating in the TRICARE program.
TRICARE for Life (TFL) is a form of supplemental insurance under which TRICARE offers
secondary coverage to beneficiaries age 65 and older enrolled in both Medicare Parts A and B.66
For TFL beneficiaries, Medicare is the primary payer for services covered by both programs and
TRICARE is secondary. For services covered under Medicare but not by TRICARE, TFL
beneficiaries must pay Medicare cost-sharing amounts and the deductible. For health care
services covered under TRICARE, but not by Medicare, beneficiaries must pay the TRICARE
cost-sharing amounts or deductibles. For TFL beneficiaries residing overseas, TRICARE is
primary and they must pay TRICARE’s annual deductible and cost sharing.67
A TRICARE beneficiary entitled to Medicare on the basis of age, disability, or ESRD must enroll
and pay the monthly Medicare Part B premium to remain TFL-eligible. However, TRICARE does
not require a premium to participate in TFL.
MSP and Medicare Advantage (Part C)/Part D Plans
A growing share of Medicare enrollees obtain Medicare medical and prescription drug benefits by
purchasing MA and/or Part D plans from commercial insurers. (See textbox on Medicare MA and
Part D Bidding and Medicare Payment.) Although MA and Part D plans provide Medicare benefit
coverage, for MSP purposes they are considered to be commercial insurance products; albeit
products subject to specific MSP coordination, reporting, and payment requirements that do not
apply to other commercial insurance products.68

63 CMS, Medicare Claims Processing Manual, Chapter 3: Inpatient Hospital Billing, Section 100.9, Rev. February 2,
2023, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/clm104c03.pdf.
64 CMS, Medicare Secondary Payer (MSP) Manual, Chapter 5: Contractor MSP Claims Prepayment Processing
Requirements, (Rev. 11550), Section 20.3, Rev. January 19, 2023, https://www.cms.gov/regulations-and-guidance/
guidance/manuals/downloads/msp105c05.pdf.
65 For more on TRICARE, see CRS Report R45399, Military Medical Care: Frequently Asked Questions.
66 Individuals may also be enrolled in TRICARE and Medicare on the basis of ESRD or disability. CMS, “Medicare
and Other Health Benefits: Your Guide to Who Pays First,” September 2021, https://www.medicare.gov/sites/default/
files/2021-10/02179-Medicare-and-other-health-benefits-your-guide-to-who-pays-first.pdf.
67 U.S. Department of Defense, “TRICARE for Life,” https://www.tricare.mil/Plans/HealthPlans/TFL. Medicare
benefits are not available to individuals overseas.
68 Most MA and Part D plans are sold to individuals. However, private employers that offer retiree health benefits to
their former employers may do so by offering special group MA and Part D plans that are known as Employer Group
(continued...)
Congressional Research Service

15

link to page 8 Medicare Secondary Payer: Coordination of Benefits

MA (Part C) and Part D Bidding and Medicare Payment
Medicare Advantage (MA) is an alternative way for beneficiaries to receive Medicare-covered benefits. In general,
private insurers contract with Medicare on an annual basis to offer MA plans in areas of their choosing, generally
consisting of counties or groups of counties or, in the case of MA regional preferred provider organization (PPO)
plans, states or groups of states, as defined by the Secretary. All items and services covered under original
Medicare Parts A and B are covered by MA plans (except hospice care which is covered by original Medicare).
Medicare Part D plans provide coverage for retail prescription drugs. Private insurers contract with CMS on an
annual basis for the right to offer Part D plans in one or all of 34 specified regions of the country. Part D can be
offered as a standalone plan (PDP) or as part of an MA plan (MA-PD).
Medicare payments to MA and Part D plans are based on annual contract bids that plan sponsors (insurers) submit
to CMS. The bids outline the insurer’s projected annual cost for providing Medicare benefits that meet at least
minimum standards specified in law. Unlike original or fee-for-service Medicare, in which CMS pays medical
providers and facilities for each covered item, procedure, episode, or spell of il ness, CMS pays MA and Part D
plans a risk-adjusted, per-capita monthly amount to provide required benefits, regardless of the number of
services an enrol ee uses. The capitated payments are based on statutory formulas.
CMS requires MA and Part D insurers to adjust their annual contract bids to account for enrol ees who have
other, primary insurance and/or Medicare as a secondary payer, such as aged/disabled workers or ESRD enrol ees.
Medicare payments to MA and Part D plans are reduced in cases where enrol ees have other primary coverage
because the plans’ costs are lower.
See CMS, “Instructions for Completing the Medicare Advantage Bid Pricing Tools for Contract Year 2023,” and
CMS, “Instructions for Completing the Prescription Drug Plan Bid Pricing Tool for Contract Year 2023.”
MA and Part D plans are secondary payers in cases where an enrollee has other commercial GHP
or NGHP coverage that meets the MSP statutory requirements to be a primary payer to Medicare.
One example would be an MA enrollee who is a current worker with coverage under an employer
GHP of 20 or more employees. (See “MSP and Employer Group Health Plans”).
Medicare Advantage MSP Requirements
Federal regulations69 require that MA plan sponsors identify payers, including GHPs and NGHPs,
that are primary to Medicare for specific plan enrollees, and coordinate MA plan benefits for such
enrollees with the benefits offered by the primary payers. As part of this process, MA plans must
report any amounts payable by other insurers to CMS on an ongoing basis. MA organizations
must account for the MSP payment responsibilities of other primary GHPs and NGHPs in one of
three ways.
MA organizations must
• Recover from liable third parties;
• Avoid Medicare costs by directing medical providers to bill liable third parties
directly; or
• Account for Medicare costs that could have been recovered or avoided, but that
were actually not recovered or avoided, by subtracting them from allowable costs
when submitting annual contract bids to CMS.70

Waiver Plans (EGWPs). For more information see the EGWP section in CRS Report R40611, Medicare Part D
Prescription Drug Benefit
.
69 42 C.F.R. §422.108; https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-422/subpart-C/section-
422.108.
70 CMS, “Medicare Program; Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription
Drug Benefit Programs, Final rule,” 75 Federal Register, Vol 72, April 15, 2010, p. 19770.
Congressional Research Service

16

link to page 24 Medicare Secondary Payer: Coordination of Benefits

Part D Medicare Secondary Payer Requirements
Medicare Part D and MA-PD plans are subject to the same MSP regulations as MA plans.71 In
addition, Part D plan sponsors must coordinate payment and coverage with certain state programs
that provide prescription drug assistance; other prescription drug plans, including Medicaid,
GHPs, Federal Employee Health Benefits (FEHB), military coverage; and other plans or
programs providing prescription drug coverage. To support the required benefit coordination, Part
D sponsors may request information on third-party insurance from beneficiaries.
Recent court cases have established that MSP statutes give MA plan sponsors, as private entities,
the right to sue other GHPs or NGHPs for double damages in cases where those GHPs and
NGHPs were primary payers to the MA plans, but did not make required payments or appropriate
reimbursements for Medicare-covered services. (See “Private Right of Action”).
Determining MSP Reimbursement for Claims
When Medicare is the secondary payer, a health care provider must first submit a claim to a
beneficiary’s primary payer, which processes the claim according to terms of the coverage
contract. If the primary payer does not pay the full charges for the service, Medicare may be
billed as secondary, and Medicare may make payments if the service is covered by Medicare. In
no case can the actual amount paid by Medicare exceed the amount it would pay as primary
payer. Any primary payments from a third-party payer for Medicare-covered services are credited
toward the beneficiary’s Medicare Part A and Part B deductibles and, if applicable, coinsurance
amounts. However, if the primary payment is less than the deductibles/coinsurance, the
beneficiary may be responsible for paying his/her unmet Medicare deductibles and coinsurance
amounts.
The Medicare secondary payment amount is subject to certain limits.72 For services, such as
inpatient hospital care or outpatient dialysis, the combined payment by the primary payer and
Medicare cannot exceed Medicare’s recognized payment amount (without regard to beneficiary
cost-sharing charges).

71 42 C.F.R. §423.462. The provisions of 42 C.F.R. §422.108 apply to Part D sponsors and Part D plans (with respect to
the offering of qualified prescription drug coverage) in the same way as they apply to MA organizations and MA plans.
A Part D sponsor must report credible new or changed primary payer information to the CMS Coordination of Benefits
Contractor in accordance with processes and timeframes specified by CMS.
72 MSP payment formulas are at 42 C.F.R. §411.33. In general, for medical services paid on a basis other than fee
schedule, reasonable charge, or monthly capitation rate (such as hospital or dialysis services), Medicare will not pay
more than the Medicare-allowable amount for a service – based on the primary insurer’s payment plus the Medicare
payment. MSP only comes into effect if a primary payer has paid less than the allowable Medicare amount. However, if
a provider has agreed to accept reimbursement that is below the full Medicare-allowed amount, Medicare does not have
to pay up to the full Medicare-allowed amount, under §411.33(e). According to 54 Federal Register, October 11, 1989,
p. 41729, https://www.federalregister.gov/citation/54-FR-41734: “As was pointed out in the Notice of Proposed
Rulemaking published on June 15,1988 (53 FR 22340), §1862(b)(3)(B) of the Act permits Medicare secondary
payments only if the employer GHP pays less than the charges. We therefore feel that the intent of the law is for
Medicare to supplement the amount paid by a primary payer up to the provider’s charges… For instance, if a provider
charged $10,000 for services for which the Medicare PPS rate is $18,000, and the primary payer paid $10,000,
Medicare would make no payment, since the statute does not permit Medicare secondary payments where a third-party
payer pays the charges in full. Yet, if the third-party payer paid one dollar less than the charges ($9,999), Medicare
would have to pay $8,001 (the difference between the $18,000 PPS amount and the $9,999 paid by the third-party
payer). We have chosen a policy that does not lead to this anomalous result.”
Congressional Research Service

17

Medicare Secondary Payer: Coordination of Benefits

As one example73 of how Medicare would decide its secondary payment amount for inpatient
hospital services: Assume that an individual received inpatient hospital services costing $6,800.
The primary payer paid $4,360 for the Medicare-covered services. No part of the Medicare Part A
inpatient hospital deductible ($1,600 for 2023) had previously been met. Medicare’s gross
payment amount, without regard to the deductible, is $4,700. As the secondary payer and per the
formula in regulation, Medicare would pay the lowest of:
• Medicare’s gross payment amount, without regard to deductible, minus the
primary payer’s payment—$4,700-$4,360 = $340;
• Medicare’s gross payment amount minus the Medicare inpatient deductible—
$4,700-$1,600 = $3,100;
• the hospital charge minus the primary payer’s payment—$6,800-$4,360 =
$2,440; or
• the hospital charge minus the Medicare inpatient deductible—$6,800-$1,600 =
$5,200.
In this case, Medicare would pay $340. The combined payment made by the primary payer and
Medicare is $4,700, the Medicare-recognized payment amount. The beneficiary has no liability
for Medicare-covered services, since the primary payer’s payment satisfied the $1,600 inpatient
deductible and, in this example, there is no applicable coinsurance for this service. If Medicare’s
payment amount had been lower than the primary payer’s amount, it would not have made a
secondary payment.74
In other cases, for services for which CMS pays on a Medicare fee schedule or reasonable charge
basis, such as physicians’ services, the Medicare secondary-payment amount cannot exceed the
lowest of the calculation of the three options described in the following example.
Assume that a physician charges a beneficiary $175 for a service. The primary payer’s allowable
charge is $150, of which it pays 80%, or $120 (the remaining 20% would be beneficiary
coinsurance). Medicare’s Part B-recognized payment amount for the service is $125, of which it
pays 80%, or $100. The beneficiary’s Part B deductible had been met. The three options75 for
determining payment are described below:
• excess of the actual provider charge minus the primary payer’s payment: $175-
$120 = $55;
• Medicare’s payment amount if the services were not covered by a primary payer:
.80 x $125 = $100;
• the higher of the primary payer’s allowable charge ($150) or the Medicare-
recognized payment amount ($125), minus the primary payer’s ($120) payment:
$150-$120 = $30.76

73 Examples are based on examples in regulations at 42 C.F.R. §411.33.
74 If the beneficiary had primary insurance that also had a deductible, the example would only apply if the beneficiary
had already met the deductible of the primary coverage.
75 42 C.F.R. §411.33.
76 42 C.F.R. §411.33(a)(3) The higher of the Medicare fee schedule, Medicare reasonable charge, or other amount
which would be payable under Medicare (without regard to any applicable Medicare deductible or coinsurance
amounts) or the primary payer’s allowable charge (without regard to any deductible or coinsurance imposed by the
policy or plan) minus the amount actually paid by the primary payer.
Congressional Research Service

18

Medicare Secondary Payer: Coordination of Benefits

Because Medicare’s secondary payment is based on the lowest of these three options, Medicare
would pay $30.
MSP Conditional Payments
In some cases, Medicare will make conditional payments for medical treatment even when it is
the recognized secondary payer. Examples include cases when (1) Medicare could reasonably
expect payment to be made under a workers’ compensation or no-fault insurance claim, but
Medicare determines the payment will not be paid or will not be made promptly (within 120
days); and (2) a beneficiary’s GHP denies a properly filed claim, in some cases, or a properly
filed claim is not made due to physical or mental incapacity of the beneficiary.77 Medicare can
also make payments in cases where Medicare benefits have been claimed for an injury that
allegedly was caused by another person.
Medicare will not make conditional payments under the following conditions: (1) it is alleged that
a GHP is secondary to Medicare; (2) a GHP limits payment when the individual is entitled to
Medicare; (3) a GHP provides covered services for younger employees and spouses, but not for
employees and spouses who are 65 and older; (4) a proper claim is not filed, or is not filed in a
timely manner, for any reason other than the physical or mental incapacity of the beneficiary; or
(5) a GHP asserts it is secondary to the liability, no-fault, or workers’ compensation insurer.78
Medicare must be repaid for conditional payments by the primary payer or anyone who has
received the primary payment, if it is demonstrated that another payer, such as a liability insurer,
had a responsibility to make a payment. Repayment is expected when a beneficiary receives a
settlement or other payment. In general, NGHP coverage is usually limited to care related to the
underlying illness or injury at question.
Subrogation
In addition to statutory authority to collect reimbursement for conditional payments, CMS has the
right of subrogation in liability or other cases that involve Medicare beneficiaries. Typically,
subrogation occurs when an insurance company that pays its insured client for injuries, losses, or
medical expenses, seeks to recover its payment. The insurer, in this case Medicare, may reserve
the “right of subrogation” in the event of a loss. This means that the insurer may choose to take
action to recover the amount of a claim paid for services provided to a beneficiary if the loss was
caused by a third party. For example, if a beneficiary is injured in a car accident, Medicare may
seek to recover its payment from any money collected by the beneficiary, or it may sue on behalf
of the beneficiary to recover its payment, from automobile liability insurance, uninsured motorist
insurance, or under-insured motorist insurance.
CMS is subrogated to any individual, provider, supplier, physician, private insurer, state agency,
attorney, or any other entity entitled to payment by a primary payer. Medicare will reduce its
recovery to take account of the beneficiary’s cost of procuring a judgment or settlement. If the
Medicare payment is less than the judgment or settlement amount, Medicare will prorate the
procurement costs. If the payment equals the judgment or settlement, it may recover the total
amount minus total procurement costs.

77 42 C.F.R. §411.52 and CMS, Medicare Secondary Payer (MSP) Manual, Chapter 1: General MSP Overview, Rev.
December 21, 2022, Sections 20.7 through 20.7.2, https://www.cms.gov/regulations-and-guidance/guidance/manuals/
downloads/msp105c01.pdf.
78 Ibid.
Congressional Research Service

19

link to page 19 link to page 19 link to page 30 Medicare Secondary Payer: Coordination of Benefits

Private Right of Action
Medicare secondary payer law79 provides a private cause of action under which insurers or other
responsible parties may sue for double damages in cases where a primary plan fails to provide for
primary payment (or appropriate reimbursement) in accordance with MSP requirements. The law
also allows the United States80 to collect up to double damages against any such entities, as well
as from any entity that has received payment from a primary plan or from the proceeds of a
primary plan’s payment to any entity.
In recent years, courts have held in lawsuits brought by MA plans that the plans have the right to
sue for double damages under the private right of action.81 (See “MSP and Medicare Advantage
(Part C)/Part D Plans” a
nd “Section 111 and MA and Part D plans”).
Federal MSP Oversight and Administration
CMS works through outside contractors to coordinate payment of Medicare benefits with other
types of health coverage. The process is designed to identify insurers and other entities that are
primary to Medicare; to collect necessary information to prevent mistaken or unnecessary
payment of Medicare benefits; and to recoup Medicare payments, including conditional
payments, in cases where other insurance is found to be primary.
Benefits Coordination and Recovery Center
The Benefits Coordination & Recovery Center (BCRC) oversees collection, management, and
reporting of information regarding coverage of Medicare beneficiaries by GHPs and NGHPs
including workers’ compensation programs, in order to recover mistaken Medicare payments
through post-payment review.82 (See “MSP Data Reporting Sources.”)
The BCRC updates the Medicare systems and databases used in the claims payment and recovery
processes including information on Medicare claims from beneficiaries, providers, employers,
insurers, workers’ compensation plans, and attorneys.83
In cases where a Medicare beneficiary has other coverage, the BCRC initiates an investigation to
determine whether Medicare or the other insurer has primary responsibility for payment. The
BCRC is responsible for recovering payments in NGHP cases where a beneficiary must
reimburse Medicare for mistaken liability, no-fault, and workers’ compensation claims. (See
“NGHP Conditional Payment Recovery from Beneficiaries.”)

79 SSA §1862(b)(3)(A) (42 U.S.C. 1395y(b)(3)(A).
80 SSA §1862(b)(2)(B)(iii).
81 See Aetna Life Ins. Co. v. Big Y Foods, 52 F. 4th 66 (2nd Cir. 2022).
82 CMS, “Coordination of Benefits & Recovery Overview,” https://www.cms.gov/Medicare/Coordination-of-Benefits-
and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Overview.
83 CMS, “MMSEA Section 111 MSP Mandatory Reporting GHP User Guide,” Version 6.7, Section 50.4 January 2023.
Available at https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-
group-health-plans/ghp-user-guide/ghp-user-guide.
Congressional Research Service

20

link to page 31 link to page 36 Medicare Secondary Payer: Coordination of Benefits

Commercial Repayment Center
The Commercial Repayment Center (CRC)84 initiates recovery in mistaken payment cases where
Medicare has paid first, but a GHP is determined to be the primary payer rather than Medicare.
Since FY2016, the CRC also has been responsible for the recovery of conditional payments
where a liability insurer (including a self-insured entity), no-fault insurer or workers’
compensation entity has assumed responsibility for ongoing medical payments and is the
identified debtor.85
For GHPs, the CRC recovers mistaken primary payments from the entity with main payment
responsibility, such as the employer or other plan sponsor, insurer, or claims-processing third-
party administrator (TPA). These entities do not have formal rights to appeal the CRC actions, but
may challenge the debt repayment through a set process.86
For NGHPs, the CRC initiates recovery of Medicare conditional payments that an applicable plan
should have paid. CMS granted NGHP applicable plans formal administrative appeal rights for
debts established on or after April 28, 2015. (See “NGHP Conditional Recovery from Payers.”)
During FY2021, the CRC identified $500 million in mistaken and conditional payments for both
GHPs and NGHPs. The CRC processed collections of $327.93 million, refunded excess
collections of $41.10 million, and posted $286.83 million in net collections.87 (See Table 4.)
Medicare MACs
Medicare Administrative Contractors (MACs) are private health care insurers in set geographic
areas of the country that process Medicare Fee-For-Service (FFS) claims (Part A and Part B (A/B)
medical claims and Durable Medical Equipment (DME) claims) for Medicare FFS
beneficiaries.88 MACs handle claims submitted for primary or secondary payment.
Medicare MACs forward relevant MSP information obtained from insurers, providers, and
suppliers to the BCRC. The MACs generate much of the correspondence/inquiries related to
NGHP, and workers’ compensation MSP cases, although the MACs do not resolve MSP
outstanding cases.89
Workers’ Compensation Review Contractor
The Workers’ Compensation Review Contractor (WCRC) oversees creation and execution of
Workers’ Compensation Medicare Set-Aside Arrangements (WCMSA). The set-aside accounts
are designed to cover future medical expenses relating to workers’ compensation cases, thereby

84 As is the case with other Medicare integrity auditors, under SSA §1893(h), the CRC is paid on a contingency-fee
basis. The amount of the contingency fee is a percentage of the mistaken payment that the identified debtor has
returned to the Medicare program.
85 CMS, “The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2021,” October 2022, p. 3,
https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/coordination-of-benefits-and-recovery-
overview/reports/reports-page.
86 Ibid.
87 Ibid, p. 7.
88 CMS, “What’s a MAC?,” https://www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-
Contractors/What-is-a-MAC.
89 CMS, Medicare Secondary Payer (MSP) Manual, Chapter 5: Contractor MSP Claims Prepayment Processing
Requirements, Rev. August 12, 2022, https://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/
msp105c05.pdf.
Congressional Research Service

21

Medicare Secondary Payer: Coordination of Benefits

ensuring that medical services to treat the underlying disability or illness are not billed to
Medicare. Proposed set-aside accounts are reviewed by CMS before final approval, if they meet
certain guidelines.90
Workers’ compensation is a primary payer for Medicare beneficiaries’ work-related illnesses or
injuries. Medicare beneficiaries are required to apply for all applicable workers’ compensation
benefits in cases of employment-related injuries and illnesses. If a Medicare beneficiary has a
condition that is approved for coverage through workers’ compensation, providers, physicians,
and other suppliers must bill workers’ compensation before billing Medicare.91 Workers’
compensation pays all medical costs associated with covered conditions without any co-
payments, coinsurance, or other cost sharing by the worker. In addition, workers’ compensation
frequently provides coverage for certain additional expenses related to an injury such as
transportation to medical appointments.
MSP Data Reporting Sources
The BCRC, CRC, and related review entities obtain information from a variety of sources,
including the following:92
Voluntary Data Sharing Agreement (VDSA): These agreements between
payers and CMS allow for the exchange of information regarding GHP eligibility
and Medicare, including prescription drug coverage in commercial plans and
Medicare Part D.93
Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(MMSEA): Section 111 imposes mandatory MSP data sharing requirements for
GHP and NGHPs. (See “Section 111 Mandatory Reporting” below.)
MSP Claims Investigation: Investigations conducted by the BCRC involve
collecting other health insurance or coverage information that may be primary to
Medicare based on information submitted on a medical claim or other sources
like correspondence, accident and injury cases, or phone calls.94

90 CMS, “Workers’ Compensation Medicare Set Aside Arrangements,” https://www.cms.gov/Medicare/Coordination-
of-Benefits-and-Recovery/Workers-Compensation-Medicare-Set-Aside-Arrangements/WCMSA-Overview. See link to
WCMSA Reference Guide Version 3.8 (PDF).
91 CMS, “Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide,” Version 3.5
January 10, 2022.
92 Medicare Learning Network, “Medicare Secondary Payer,” Rev. July 2022, p. 13, https://www.cms.gov/outreach-
and-education/medicare-learning-network-mln/mlnproducts/downloads/msp_fact_sheet.pdf.
93 CMS, “Voluntary Data Sharing Agreement,” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-
Recovery/EmployerServices/Voluntary-Data-Sharing-Agreement. “A VDSA authorizes CMS and an employer, or
agent on behalf of an employer, to electronically exchange health insurance benefit entitlement information. On a
quarterly basis, a VDSA partner agrees to submit GHP entitlement information about employees and dependents to
CMS’s Benefits Coordination & Recovery Center (BCRC). In exchange, CMS agrees to provide the VDSA partner
with Medicare entitlement information for those individuals in a GHP that can be identified as Medicare beneficiaries.
This mutual data exchange helps to assure that claims will be paid by the appropriate organization at first billing.”
94 Providers are required to ask Medicare patients for information on other potential GHP, NGHP, or government
health coverage. The model questionnaire for inpatient and outpatient admissions can be found at Medicare Secondary
Payer (MSP) Manual
, Chapter 3: MSP Provider, Physician, and Other Supplier Billing Requirements, Section 20.2.1,
Rev. September 15, 2020, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/
msp105c03.pdf.
Congressional Research Service

22

Medicare Secondary Payer: Coordination of Benefits

Questionnaires: Three months before prospective enrollees are first entitled to
Medicare, they fill out an initial enrollment questionnaire asking for information
about other existing medical coverage.
Section 111 Mandatory Reporting
Section 111 of the MMSEA requires Responsible Reporting Entities (RRE), which include GHPs
and NGHPs, to provide information regarding the health insurance status of their enrollees or any
judgments, payments, or settlements involving Medicare beneficiaries.95 The information is used
prospectively to determine whether Medicare is a primary or a secondary payer and
retrospectively to collect reimbursement in the case of erroneous payments or conditional
payments.96 Section 111 reporting requirements are the primary source of MSP information
reported to CMS.
Group Health Plan Section 111 Reporting
MMSEA Section 111 provisions require GHPs to report plan information to the BCRC each
calendar quarter regarding medical and drug coverage for workers who may be Medicare-eligible.
Reporting may be carried out by the insurers, third-party administrators, and in the case of self-
insured and self-administered plans, an administrator or fiduciary. Insurance plans also may use
third parties such as data firms to submit their information.
Each quarter, GHPs electronically submit information about active, covered individuals, defined
generally as people who may be Medicare-eligible and are currently employed, or who are the
spouses or dependents of workers covered by a GHP who may be Medicare-eligible.97
The BCRC processes the Section 111 data, then adds the information to the Medicare Common
Working File (CWF) and the Medicare Beneficiary Database (MBD), for use by other Medicare
contractors in claims processing and payment recovery. When the BCRC has finished processing,
or the allotted time for a response (45 days) ends, the BCRC transmits a response file to the GHP
RRE. The response file includes information about any errors in the original data and information
about primary or secondary coverage for individuals the BCRC identifies as Medicare
beneficiaries. Section 111 allows CMS to share information with reporting GHPs regarding a
beneficiary’s Medicare Part A, Part B, Part C, and Part D coverage. The HHS Secretary may
share this enrollment information with other government entities in order to coordinate benefits.98

95 CMS.gov, “Mandatory Insurer Reporting (NGHP),” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-
Recovery/Mandatory-Insurer-Reporting-For-Non-Group-Health-Plans/Overview; and CMS.gov, “Mandatory Insurer
Reporting for Group Health Plans (GHP),” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/
Mandatory-Insurer-Reporting-For-Group-Health-Plans/Overview. CMS, MMSEA Section 111 MSP Mandatory
Reporting GHP User Guide,” Version 6.7, January 2023, available at https://www.cms.gov/medicare/coordination-of-
benefits-and-recovery/mandatory-insurer-reporting-for-group-health-plans/ghp-user-guide/ghp-user-guide.
96 While the MMSEA instituted mandatory reporting, insurers already had an obligation to pay Medicare in cases
where their policies were deemed primary.
97 42 U.S.C. §1395y(b)(7). For a fuller description, see CMS, “MMSEA Section 111 MSP Mandatory Reporting GHP
User Guide,” Version 6.7, Section 7.3.1, January 2023. Available at https://www.cms.gov/medicare/coordination-of-
benefits-and-recovery/mandatory-insurer-reporting-for-group-health-plans/ghp-user-guide/ghp-user-guide. Plans are
required to report if they meet the specifications to be subject to MSP for plan payments.
98 The 2018 SUPPORT Act provided for exchanging GHP prescription drug coverage information to coordinate
coverage with Medicare Part D. As required by the SUPPORT Act, GHPs must submit primary prescription drug
coverage information using the Section 111 process.
Congressional Research Service

23

Medicare Secondary Payer: Coordination of Benefits

Non-Group Health Plan Section 111 Reporting
Section 111 quarterly reporting requirements also apply to NGHP applicable plans such as auto,
homeowners, no-fault insurance, and workers’ compensation plans.99 NGHP RREs must supply
information to the BCRC regarding Medicare beneficiaries or dependent spouses of Medicare-
eligible beneficiaries for whom they have assumed responsibility for ongoing medical payments
(known as ongoing responsibility for medicals or ORM), or who receive a settlement, judgment,
or award from liability insurance, no-fault insurance, or a workers’ compensation plan.100
The NGHPs report the names of all Medicare beneficiaries whose illness, injury, incident, or
accident is at issue in a claim, as well as any other information required by the HHS Secretary.101
(NGHP RREs may contract with outside entities to act as their agents for Section 111 reporting,
such as data service or consulting companies.)
NGHPs must report information to the BCRC in cases where they have assumed ORM.
According to CMS, ORM means the NGHP has continuing responsibility to pay for a Medicare
beneficiary’s medical costs associated with a claim.
The trigger for reporting ORM is the assumption of ORM by the RRE—when the RRE has
made a determination to assume responsibility for ORM, or is otherwise required to assume
ORM—not when (or after) the first payment for medicals under ORM has actually been
made. Medical payments do not actually have to be paid for ORM reporting to be
required.102
When a NGHP’s responsibility for payments ends, it reports an ORM termination date.103 When
there is a NGHP settlement, judgment, award or other payment in an outstanding case, the NGHP
must report a Total Payment Obligation to Claimant (TPOC) to the BCRC.104

99 CMS, “MMSEA Section 111 MSP Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault
Insurance, and Workers’ Compensation User Guide Chapter III Policy Guidance,” Chapter 1, Version 7, January 2023,
https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-non-group-
health-plans/nghp-user-guide/nghp-user-guide . The requirement also applies to self-insured plans. According to CMS,
the Section 111 requirements do not eliminate existing processes, including CMS’s process for self-identifying pending
liability insurance, no-fault insurance, or workers’ compensation claims to the BCRC.
100 CMS, “MMSEA Section 111 MSP Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault
Insurance, and Workers’ Compensation User Guide Chapter III Policy Guidance,” Chapter 3, Version 7, Section 6.3,
January 2023, https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-
non-group-health-plans/nghp-user-guide/nghp-user-guide.
101 CMS, “MMSEA Section 111 MSP Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault
Insurance, and Workers’ Compensation User Guide Chapter III Policy Guidance,” Chapter 1, Version 7, January 2023,
https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-non-group-
health-plans/nghp-user-guide/nghp-user-guide.
102 CMS, “MMSEA Section 111 MSP Mandatory Reporting Liability Insurance (Including Self-Insurance), No-Fault
Insurance, and Workers’ Compensation User Guide Chapter III Policy Guidance,” Chapter 3, Version 7, Section 6.3,
January 2023, https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/mandatory-insurer-reporting-for-
non-group-health-plans/nghp-user-guide/nghp-user-guide.
103 Ibid. The reference to “ongoing” is not related to “ongoing reporting” or repeated reporting of claims under Section
111, but rather to the RRE’s responsibility to pay, on an ongoing basis, for the injured party’s (Medicare beneficiary’s)
medicals associated with the claim.
104 Ibid. The TPOC amount refers to the dollar amount of a settlement, judgment, award, or other payment in addition
to or apart from ORM. The computation of the TPOC amount includes, but is not limited to, all Medicare covered and
non-covered medical expenses related to the claim(s), indemnity (lost wages, property damages, etc.), attorney fees,
set-aside amount (if applicable), payout totals for all annuities rather than cost or present values, settlement advances,
lien payments (including repayment of Medicare conditional payments), and amounts forgiven by the carrier/insurer.
Congressional Research Service

24

Medicare Secondary Payer: Coordination of Benefits

Section 111 and MA and Part D plans
Under the PAID Act, effective in December 2021, the BCRC provides requesting NGHPs with
plan enrollment information for Medicare beneficiaries, as part of any Section 111 query response
file. The information includes MA and Part D plan contract names, plan numbers, and entitlement
dates for the prior three years (up to 12 instances) of coverage, as well as the most recent Part A
and Part B entitlement dates.105 According to industry groups that lobbied for the PAID Act, the
law was a response to lawsuits filed by MA and Part D plans under Medicare’s private right of
action seeking to recover MSP payments, including double damages. The additional Section 111
Medicare enrollment information is designed to help NGHPs make more accurate payments to
the appropriate parties and forestall such lawsuits.106
Resolving MSP Mistaken/Conditional Payments
Resolving Mistaken GHP Payments
The CRC resolves MSP GHP cases where Medicare mistakenly paid in the primary, rather than
the secondary position.
If the CRC identifies an erroneous claim, it sends a payment notice to the GHP insurer/payer for
the mistaken amount. After receiving the notice, the payer has 45 days to respond. If payment is
submitted, the case is closed.
If a payer makes no response or valid defense to a CRC finding after 45 days, the CRC issues a
demand letter to the employer/plan sponsor and the insurer:
• If the employer pays the outstanding amount in the demand letter, the case is
resolved.
• If a payer challenges the demand letter, the case is considered through a review
process that is not a formal Medicare appeals process.107 (GHPs do not have the
same appeal rights as providers or beneficiaries, but may challenge a demand
letter.) If a challenge is successful, the debt is adjusted accordingly. If the
challenge is not successful, the CRC sends a notice to that effect, and the case
continues.
If a payer does not respond or has an invalid defense:
• Interest on the outstanding payment begins accruing from the date the CRC
demand letter was issued, but is not assessed unless a debt is not paid in 60 days.
• If a case is not resolved 120 days after receipt of a demand letter, the CRC
provides notification that it intends to refer the case to the Treasury Department.

105 CMS, “Paid Act Webinar,” June 23, 2021, https://www.cms.gov/files/document/june-23-2021-provide-accurate-
information-directly-paid-act-webinar-presentation.pdf.
106 The Omnibus Budget Reconciliation Act of 1986 (OBRA 86), Section 9319, added a private cause of action to MSP
allowing for double damages in cases in which a primary plan fails to pay. Verisk, “The PAID Act is now live – 5
things you need to know (and how we can help!),” December 31, 2021, https://www.verisk.com/insurance/visualize/
the-paid-act-is-now-live—5-things-you-need-to-know-and-how-we-can-help/.
107 CMS, “The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2021,” October 2022, p. 5,
https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/coordination-of-benefits-and-recovery-
overview/reports/reports-page.
Congressional Research Service

25

Medicare Secondary Payer: Coordination of Benefits

• If the case is not resolved within 60 days of an intent to refer notice (180 days after
receipt of the original demand letter), the outstanding debt is referred to Treasury.108
Resolving MSP Conditional Payments
CMS operates a two-part system to process and resolve NGHP conditional payment claims.
NGHP Conditional Payment Recovery from Beneficiaries
The BCRC is responsible for recovering conditional payments in cases where there is a
settlement, judgment, award, or other payment to a Medicare beneficiary and the beneficiary has
an obligation to repay the Medicare program. All pending liability, no-fault, or workers’
compensation cases must be reported to the BCRC, including by beneficiaries.109 In general, the
BCRC Medicare recovery period runs from the date of an incident subject to NGHP coverage,
through the date of any settlement/judgment/award.110
If the BCRC finds evidence (from its data sources) that a NGHP is primary to Medicare in a
reported case, it creates an MSP “occurrence” which is posted in Medicare records and used to
begin the recovery process. If the MSP occurrence involves a NGHP, the BCRC creates a Rights
and Responsibilities (RAR) letter that spells out information needed from the beneficiary/insurer
to resolve the issue, and explains the process for Medicare recovery.111 The letter may be sent to a
beneficiary or, if the BCRC is pursuing recovery directly from an insurer/workers’ compensation
entity, the correspondence is sent directly to that entity.
Within 65 days of an RAR letter, the BCRC sends a conditional payment letter (CPL) providing
an accounting of items or services covered by Medicare on a conditional basis, including an
interim total conditional payment amount. The CPL also provides instructions for disputing
claims. (The payment amount is considered interim because Medicare might have to keep
covering expenses while a beneficiary’s claim from a proper primary payer is pending.)
If a settlement, judgment, award, or other payment had already occurred before a beneficiary first
reported a case, and the beneficiary must repay Medicare, the BCRC sends the beneficiary a
conditional payment notice (CPN) spelling out the required payment amount.112 The BCRC also
sends a CPN when a NGHP notifies it of a settlement of judgment. After receiving the CPN:

108 CMS, “Overview of the Group Health Plan (GHP) Recovery Process,” https://www.cms.gov/medicare/coordination-
of-benefits-and-recovery/coordination-of-benefits-and-recovery-overview/downloads/ghp-recovery-process-
flowchart.pdf.
109 CMS, “Liability, No-Fault and Workers’ Compensation Reporting,” https://www.cms.gov/Medicare/Coordination-
of-Benefits-and-Recovery/Beneficiary-Services/Liability-No-Fault-and-Workers-Compensation-Reporting/Liability-
No-Fault-and-Workers-Compensation-Reporting. Also, see CMS. “Medicare’s Recovery Process,”
https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Beneficiary-Services/Medicares-Recovery-
Process/Medicares-Recovery-Process.
110 Ibid. If an “incident” involves exposure to or ingestion of a substance over time, the date of incident is the date of
first exposure/ingestion.
111 If Medicare is pursuing recovery directly from the insurer/workers’ compensation entity, a beneficiary and his/her
attorney or other representative will receive correspondence sent to the insurer/workers’ compensation entity.
112 Parties to a conditional payment case can use the Medicare Secondary Payer Recovery Portal to report a case and
manage cases reported to the BCRC. The Portal lets users obtain updated conditional payment amounts, request a copy
of a current conditional payment letter, or make an electronic payment. If the BCRC has already sent a CPL prior to a
settlement, the BCRC will identify any new, related claims that have been paid since the last time the CPL was issued
up to and including the settlement/judgment/award date. Once the process is complete, the BCRC will issue a formal
recovery demand letter advising of the amount owed to the Medicare program. The amount of money owed is called
the demand amount.
Congressional Research Service

26

link to page 33 Medicare Secondary Payer: Coordination of Benefits

• A beneficiary has 30 days to respond to a CPN/CPL and may file a dispute, with
documentation, challenging the payment amounts. The BCRC must respond to
the dispute filing within 45 calendar days and may recalculate the conditional
payment amount if warranted. If the BCRC finds that the dispute documentation
is not sufficient, the dispute is denied.
• If a response to the CPN is not received in 30 calendar days, a demand letter is
issued requesting repayment of all conditional payments, without any reduction
for fees or costs.113 Interest on the amount due accrues from the date of the
demand letter. If the debt is not repaid or otherwise resolved within the time
period specified in the recovery demand letter, interest is assessed for each 30-
day period the debt remains outstanding.
If there is no response within the specified time frame, the BCRC may refer the debt to the
Department of Justice for legal action and/or the Department of the Treasury for collection:
• If the debt is referred to Treasury, the beneficiary will be notified through an
Intent to Refer letter, which is sent 90 days after the original demand letter.
• If full payment or valid documented defense is not provided within 60 days of the
Intent to Refer Letter (150 days after the demand letter), the debt is referred to
Treasury once any outstanding correspondence is worked out by the BCRC.
• The BCRC may also refer debts to the Department of Justice for legal action. The
federal government is authorized to collect double damages from any party that is
responsible for resolving the matter but which fails to do so.
If a beneficiary is settling a liability case, he or she may be eligible to obtain Medicare’s demand
amount prior to settlement, or to pay Medicare a flat percentage of the total settlement. (See
“Expedited Repayment Options.”)
NGHP Conditional Recovery from Payers
The CRC is responsible for recovering conditional payments from NGHPs that have or had
Ongoing Responsibility for Medicals (ORM). In such cases, the BCRC first collects data related
to a Medicare beneficiary’s coverage under liability insurance, no-fault insurance, or workers’
compensation plans (known as an occurrence).
In the case of an accident or illness involving a NGHP where the BCRC has been notified and
Medicare has stepped in to make conditional payments, the BCRC follows up with a letter to the
affected parties laying out their rights and responsibilities. The CRC then reviews cases where
NGHPs have primary responsibility for ORM.114

113 If the beneficiary or his/her attorney or other representative believes any claims included on a CPL or CPN should
be removed from Medicare’s conditional payment amount, they must provide the BCRC with documents supporting
their position. The BCRC has 45 days for review, and may adjust the conditional payment amount depending on the
review. In cases where the BCRC has been notified of a settlement, judgment, or award after issuing its initial CPL, it
will apply a termination date (generally the date of settlement) to the case. The BCRC will identify any relevant claims
Medicare has paid since the last CPL was issued up to and including the settlement/judgment/award date, and will then
then issue a formal recovery demand letter specifying the amount owed to the Medicare program, called the demand
amount.
114 CMS, “Insurer NGHP Recovery,” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/
InsurerServices/Insurer-NGHP-Recovery.
Congressional Research Service

27

Medicare Secondary Payer: Coordination of Benefits

In such cases,
• If a payer owes an outstanding amount to Medicare, the CRC issues a conditional
payment notice (CPN) summarizing the Medicare payments that have been
made.115 The CPN lists conditional payments identified by the CRC, and provides
30 days to dispute responsibility for repayment before the recovery case proceeds
to the demand stage.
• The CRC next issues a demand letter, which is a formal notification of the debt,
including claim-specific information. The demand letter provides instructions on
how to repay or appeal the debt, and the penalties for failure to resolve the debt
by the set deadline.
• In response to the demand letter, debtors may pay the CRC. If payment is not
made within 60 days from the date of the demand letter, interest is assessed.
Interest accrues from the date of the demand letter, but is assessed only if there is
an outstanding balance after 60 days. Interest is assessed for each 30-day period
the debt is unresolved.
• If any part of the debt remains unresolved after 60 days, the CRC will provide a
referral notice to notify the debtor that the case will be referred to Treasury for
collection. Unless an appeal is filed, failure to resolve the debt after the referral
notice will result in referral of the debt to Treasury.
A NGHP debtor has 120 days from the time a demand letter is received to file an appeal. NGHP
entities have formal administrative appeal rights specified in statute:116
• The CRC processes the first-level appeal, called a request for redetermination.
Documentation is required for an appeal. If an appeal is successful, the debt is
adjusted.
• If an appeal is not successful, a debtor may seek additional appeals. Higher-level
appeals are: reconsideration by the CMS Qualified Independent Contractor, a
hearing by an Administrative Law Judge within the Office of Medicare Hearings
and Appeals, and a review by the Departmental Appeals Board’s Medicare
Appeals Council.
• Outstanding debt will not be referred to Treasury for collection while an appeal is
under consideration, but interest will continue to accrue.117

115 CMS, “The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2021,” October 2022, p. 6,
https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/coordination-of-benefits-and-recovery-
overview/reports/reports-page.
116 SSA §1862(b)(2)(B)(viii).
117 CMS, “Insurer NGHP Recovery,” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/
InsurerServices/Insurer-NGHP-Recovery. Interest on the debt accrues from date of the demand letter and, if the debt is
not resolved within 60 days, is assessed for each 30-day period the debt remains unresolved. Payment is applied to
interest first and principal second. Interest continues to accrue on the outstanding principal portion of the debt. If an
applicable plan requests an appeal, the debt will not be referred to the Department of Treasury while the appeal is being
processed, but interest will continue to accrue. The applicable plan may choose to pay the demand amount while
appealing the overpayment in order to avoid the accrual and assessment of interest. (An appropriate refund is made if
the appeal is favorable to the applicable plan.)
Congressional Research Service

28

Medicare Secondary Payer: Coordination of Benefits

Expedited Repayment Options for Conditional Claims
CMS has created options for speeding conditional payment claims118 in certain cases—both for
past medical bills and for some cases that involve future medical payments. Examples of cases
where expedited options are in place include the following:
• $750 Threshold—If a beneficiary has suffered a physical trauma-type injury,
obtains a liability settlement of $750 or less, and does not receive or expect to
receive additional settlements related to the incident, Medicare will not pursue
recovery.119 CMS maintains a single threshold for liability and no-fault insurance
plans and workers’ compensation. In such cases, settlements of $750 or less do
not need to be reported and Medicare’s conditional payment amounts related to
these cases does not need to be repaid.
• Fixed Payment Option—If a beneficiary suffers a physical trauma-based injury,
obtains a liability settlement of $5,000 or less, and does not receive or expect to
receive additional settlements related to the incident, the beneficiary may resolve
Medicare’s recovery claim by paying 25% of the gross settlement.120
• Self-Calculated Conditional Payment Option—If a beneficiary suffers a physical
trauma-based injury at least six months prior to selecting this option, anticipates a
settlement of $25,000 or less, proves that medical care was completed at least 90
days prior to submitting for the payment option, and has neither received nor
expects to receive additional settlements related to the incident, the beneficiary
may self-calculate Medicare’s recovery claim. Medicare then reviews the
beneficiary’s calculations and provides Medicare’s final, conditional payment
amount.121
Workers’ Compensation Medicare Set-Aside
Accounts (WCMSAs)
In addition to reimbursing CMS for past conditional payments, individuals must protect
Medicare’s interest with respect to future medical bills if they have received, reasonably
anticipate receiving, or should have reasonably anticipated receiving, Medicare-covered items
and services for a medical condition after the date of a settlement or payment based on that
condition.
In the case of a workers’ compensation settlement in which a portion of settlement is designed to
pay for future medical costs, it can be difficult to ensure Medicare does not end up paying for
medical costs related to the work injury that should have been covered by the settlement. CMS

118 CMS, “Medicare Program: Medicare Secondary Payer and Future Medicals,” 42 C.F.R. Parts 405 and 411, 77
Federal Register, June 15, 2012, p. 35917, https://www.federalregister.gov/articles/2012/06/15/2012-14678/medicare-
program-medicare-secondary-payer-and-future-medicals.
119 Threshold is the amount for 2023. See CMS, “Computation of Annual Recovery Thresholds for Certain Liability
Insurance, No-Fault Insurance, and Workers’ Compensation Settlements, Judgments, Awards, or Other Payments for
2023,” December 13, 2022, https://www.cms.gov/files/document/computation-annual-recovery-thresholds-nghp-
2023.pdf. As part of the calculation, CMS determined that the cost of collection in such cases would be approximately
$306.
120 CMS, “Demand Calculation Options,” https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/
Beneficiary-Services/Demand-Calculation-Options/Demand-Calculation-Options-page.
121 Ibid.
Congressional Research Service

29

Medicare Secondary Payer: Coordination of Benefits

suggests that individuals who receive workers’ compensation settlements that include payments
for future medical expenses create workers’ compensation set-aside accounts (WCMSAs) to
protect Medicare from paying for medical expenses covered by the settlement. Federal law does
not require the establishment of a WCMSA when there is a workers’ compensation settlement.
A WCMSA is a voluntary financial agreement in which a portion of the amount of the workers’
compensation settlement is dedicated to the payment of future medical expenses covered by
workers’ compensation. The amount of the settlement that should be placed in the WCMSA is the
estimated amount of future medical expenses that would otherwise be paid by Medicare, but that
should be covered by workers’ compensation, for the life of the person. The amount in the
WCMSA must be exhausted before Medicare will pay any medical expenses related to a workers’
compensation claim, thus ensuring that Medicare does not pay medical expenses that should be
paid by workers’ compensation and ensuring that Medicare’s remains a secondary payer in
workers’ compensation cases.
CMS recommends, but does not require, that WCMSAs are submitted to CMS for review to
ensure adequate amounts are set aside to protect Medicare’s status as a secondary payer to
worker’s compensation. In reviewing the adequacy of set-aside accounts for CMS, the Workers’
Compensation Review Contractor (WCRC) considers a number of factors including the severity
of the underlying illness, age, and the cost of expected medical procedures.
CMS will only review WCMSAs that meet one of the following conditions:
• The claimant is a Medicare beneficiary and the total amount of the settlement is
greater than $25,000; or
• The claimant has a reasonable expectation of Medicare enrollment within 30
months of the settlement date and the anticipated settlement amount is greater
than $250,000.122
CMS cautions that even if a workers’ compensation settlement does not meet these conditions, or
a WCMSA is not submitted for review, an individual is still required to protect Medicare’s
interests and ensure Medicare remains a secondary payer for expenses covered by workers’
compensation.123
Rulemaking on Expedited Set-Aside Accounts
In 2012, CMS issued an advance notice of proposed rulemaking124 that spelled out options for
creating a standardized system for Medicare set-aside accounts in cases involving automobile and
liability insurance (including self-insurance) and no-fault insurance cases, in addition to workers’
compensation set-asides.

122 CMS, Workers’ Compensation Medicare Set-Aside Agreement (WCMSA) Reference Guide, Version 3.5, November
14, 2022, p. 9, https://www.cms.gov/files/document/wcmsa-reference-guide-version-38.pdf.
123 Ibid., p. 10.
124 CMS, “Medicare Program: Medicare Secondary Payer and Future Medicals,” 42 C.F.R. Parts 405 and 411, 77
Federal Register, June 15, 2012, p. 35917, https://www.federalregister.gov/articles/2012/06/15/2012-14678/medicare-
program-medicare-secondary-payer-and-future-medicals. Some of the proposals would apply to current Medicare
beneficiaries and some for those expected to soon become eligible for Medicare.
Congressional Research Service

30

link to page 36 Medicare Secondary Payer: Coordination of Benefits

CMS proposed a series of options to streamline the process for set-aside accounts, including
• Setting out specific conditions under which Medicare would not pursue future
medical claims.
• Satisfying future claims by providing documentation that a course of care has
been completed and reimbursing Medicare for any conditional payments.
• Expanding the current workers’ compensation set-aside review system.
• Expanding or amending Medicare’s existing three expedited payment options.
• Allowing for some type of up-front payment to satisfy MSP requirements.
• Waiving some payments if a beneficiary has a compromise settlement or a waiver
or recovery.
• Having a beneficiary administer his or her own settlement account until it is
exhausted.
In 2014, this notice of proposed rulemaking was withdrawn by CMS.125
CMS published its intent to begin new rulemaking to provide guidance for set-aside accounts in
the Fall 2018 Unified Regulatory Agenda.126 A formal notice of proposed rulemaking was never
published. In March 2022, CMS held a meeting with the Medicare Advocacy Recovery Coalition
and other stakeholders pursuant to the requirements of Executive Order 12866.127 In October
2022, CMS withdrew its latest attempt at providing guidance for set-aside accounts through
rulemaking.128
WCMSA Legislation
In the 117th Congress, legislation introduced as the Coordination of Medicare Payments and
Worker’s Compensation Act (COMP Act; H.R. 3124 and S. 653) would have formalized the
WCMSA process.129 Under this legislation, a WCMSA that met certain requirements would have
been deemed to have satisfied the claimant’s responsibilities to protect Medicare’s status as a
secondary payer to workers’ compensation. Any party to a workers’ compensation settlement
would have the option of submitting a WCMSA to CMS for formal approval, with a right to
appeal a denial of approval.
MSP Savings
According to CMS, MSP laws and regulations reduced Medicare spending by about $63 billion
from FY2015 through FY2021. (See Table 4.)

125 CMS, Medicare Secondary Payer and “Future Medicals”, RIN 0938-AR43, October 8, 2014,
https://www.regulations.gov/docket/CMS-2012-0073/unified-agenda.
126 Office of Management and Budget, Office of Information and Regulatory Affairs, Unified Agenda of Federal
Regulatory and Deregulatory Actions
, Fall 2018, 2018, https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=
201810&RIN=0938-AT85.
127 For additional information on the federal agency rulemaking process and Executive Order 12866, see CRS Report
RL32240, The Federal Rulemaking Process: An Overview.
128 Office of Management and Budget, Office of Information and Regulatory Affairs, OIRA Conclusion of EO 12866
Regulatory Review
, October 13, 2022, https://www.reginfo.gov/public/do/eoDetails?rrid=229561.
129 Similar legislation was introduced in previous Congresses.
Congressional Research Service

31

Medicare Secondary Payer: Coordination of Benefits

Table 4. MSP Savings for FY2015-FY2021
(dollars in millions)
MSP Savings
2015
2016
2017
2018
2019
2020
2021
Pre-payment
$7,317
$7,354
$7,372
$7,667
$6,398
$6,035

Review
Post-Payment
$1,174
$1,307
$1,145
$1,182
$3,087
$2,896

Recovery
TOTAL
$8,491
$8,661
$8,517
$8,848
$9,476
$8,931
$9,700
Source: CMS, “Medicare and Medicaid Integrity Program Report to Congress.” Annual reports dating back to
2015 can be found at https://www.cms.gov/about-cms/components/cpi/cpireportsguidance.
Note: Totals may not add due to rounding. Figure for 2021 is from CMS, “Medicare Secondary Payer,” Medicare
Learning Network Booklet, July 2022, p. 4, National program savings: MSP provisions saved the Medicare
Program about $9.7 bil ion in fiscal year (FY) 2021.The booklet does not provide a breakdown of the savings,
https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/
msp_fact_sheet.pdf.
Congressional Research Service

32

Medicare Secondary Payer: Coordination of Benefits

Appendix. Selected MSP Legislation
Table A-1. Medicare Secondary Payer (MSP) Legislation
(federal laws that have shaped the Medicare Secondary Payer program)
Legislation
Implication
Omnibus Budget Reconciliation Act of 1980 (P.L. 96-
Set MSP rules for non-group health plans.
499)
Omnibus Budget Reconciliation Act of 1981 (P.L. 97-
Set MSP rules for group health plans covering
35)
individuals with End Stage Renal Disease (ESRD).
Tax Equity and Fiscal Responsibility Act of 1982 (P.L.
Set coverage of working aged.
97-248)
Deficit Reduction Act of 1984 (P.L. 98-369)
Expanded definition of working spouse.
Consolidated Omnibus Budget Reconciliation Act of
Eliminated upper age limit of 69 for the working aged.
1985 (P.L. 99-272)
Omnibus Budget Reconciliation Act of 1986 (P.L. 99-
Made changes in disabled workers provisions. Created
509)
a private right of action allowing for double damages
where a primary plan fails to pay in accordance with
MSP requirements.
Omnibus Budget Reconciliation Act of 1987 (P.L. 100-
Clarified provisions relating to disabled workers, as
203)
well as some COBRA provisions.
Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
Modified MSP provisions for beneficiaries with ESRD.
508)
Omnibus Budget Reconciliation Act of 1993 (P.L. 103-
Modified MSP provisions for ESRD and disabled
66)
beneficiaries.
Balanced Budget Act of 1997 (P.L. 105-33)
Extended time for Medicare to recoup conditional
payments, further clarified ESRD provisions.
Medicare Prescription Drug, Improvement, and
Expanded government’s ability to col ect repayment of
Modernization Act of 2003 (P.L. 108-173)
conditional payments, applied MSP to Medicare Part D.
Medicare, Medicaid & SCHIP Extension Act of 2007
Created Section 111 reporting requirements.
(P.L. 110-173)
Medicare IVIG Access Act, Title II (The SMART Act)
Instituted new requirements and timelines for resolving
(P.L. 112-242)
conditional payment claims.
Substance Use-Disorder Prevention that Promotes
Required all group health plans that offer primary
Opioid Recovery and Treatment (SUPPORT) for
prescription drug coverage to report this coverage
Patients and Communities Act (P.L. 115-271)
each calendar quarter as part of the Section 111
reporting process.
PAID Act/Further Continuing Resolution for FY2021
Required CMS to provide requesting NGHPs with
(P.L. 116-215 )
information on specific plan enrol ment for Medicare
beneficiaries as part of the Section 111 reporting
process.
Source: The Complete Guide to Medicare Secondary Payer Compliance, Lexis-Nexis, and HHS and CRS legislative
searches.



Congressional Research Service

33

Medicare Secondary Payer: Coordination of Benefits



Author Information

Suzanne M. Kirchhoff
Scott D. Szymendera
Analyst in Health Care Financing
Analyst in Disability Policy




Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
RL33587 · VERSION 17 · UPDATED
34