HI 00620.177 Medicare as Secondary Payer for End Stage Renal Disease (ESRD) Beneficiaries and for Employed Beneficiaries Age 65 or Over (Working Aged) and the Spouses Age 65 or Over of Employed Individuals of Any Age
Medicare is secondary payer to employer group health plans (EGHPs) during a period of up to 30 months for beneficiaries entitled to Medicare solely on the basis of end stage renal disease (ESRD). Medicare is also secondary to EGHPs, for employed Medicare beneficiaries age 65 or over and for spouses age 65 or over of employed individuals of any age (the working aged provision). Where Medicare is secondary to an EGHP, the plan must pay primary benefits. If the plan does not pay in full, Medicare pays secondary benefits to supplement the EGHP payment. See HI 00801.247C.2. for additional information concerning Medicare remaining secondary payer for the full ESRD coordination period.
Individuals and organizations engaged in a trade or business, organizations exempt from income tax, such as religious, charitable, and educational institutions, and the governments of the United States, the States, Puerto Rico, Guam, the Virgin Islands, American Samoa, the Northern Mariana Islands and the District of Columbia, including their agencies, instrumentalities and political subdivisions.
For purposes of the ESRD beneficiary provision the term “employer” is defined without regard to the number of employees.
For purposes of the working aged provision, the term “employer” refers to an employer with 20 or more employees. (Note, however, that the Special Enrollment Period is available for individuals of an employer of any size. See HI A00805.265 ff.) This requirement is met if an employer has 20 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding year. Providers have been instructed to assume, in the absence of evidence to the contrary, that any health plan (including a union plan) in which a beneficiary is enrolled because of current employment meets this definition. Self-employed individuals who participate in a plan are not counted as employees for purpose of determining if the 20 or more employees requirement is met.
2. Employed Individual
The term “employed individual” as used in the working aged instructions (Subsection E.) refers not only to employees but also self-employed persons such as directors of corporations and owners of businesses. There is no requirement that an employer provide coverage to self-employed individuals. However, if a self-employed individual enrolls in an EGHP which meets the definition in subsection 3, any coverage provided to self-employed persons age 65 or older and spouses age 65 or older of self-employed persons of any age by an employer of 20 or more employees must be the same as coverage provided to younger self-employed persons; that is, coverage primary to Medicare. The employer must also provide primary coverage to older self-employed individuals even if there are no younger self-employed individuals enrolled in the plan.
The term “employed individual” also includes members of the clergy and members of religious orders who are reimbursed for their services by a church, religious order, or other employing entity. The following guidelines apply in determining whether members of the following groups are employed individuals.
Individuals age 65 and older who receive disability payments— an employee is considered employed if such payments are subject to taxes under the Federal Insurance Contributions Act (FICA). Employer disability payments are subject to FICA tax for the first 6 months of disability after the last calendar month in which the employee worked for that employer.
Insurance Agents— A self-employed insurance agent is considered employed if he actually conducts business on behalf of the company. The fact that a self-employed insurance agent is authorized to represent the company; e.g., to write policies on behalf of the company, does not itself confer the status of “employed individual.”
NOTE: An insurance company that offers EGHP coverage to any self-employed insurance agent who writes policies on behalf of the company, must offer the same coverage under the same circumstances to older and younger agents. For example, a company that provides EGHP coverage for younger insurance agents who sell at least $10,000 of insurance during a calendar year is required to furnish the same coverage under the same conditions to agents age 65 and over, including “retirees” who sell at least $l0,000 of insurance during the same time period.
Since a full-time life insurance agent is considered an employee for social security purposes, such an individual is also considered an employee for purposes of the working aged provision.
Senior Federal Judges— Senior Federal judges are retired judges of the U.S. court system and the Tax Court. They may continue to adjudicate cases, but they are entitled to full salary as a retirement benefit whether or not they perform judicial services for the Government. By law, the “remuneration” they receive as senior judges is not considered wages for social security retirement test purposes. Since they are considered retired for social security purposes, they are also considered retired for purposes of the working aged provision.
Volunteers— Volunteers are not considered employed unless they perform services or are available to perform services for an employer and receive remuneration for their services. For example, for purposes of section 1862(b) of the Act, VISTA volunteers are considered employed by the Federal Government since they receive remuneration.
Directors of Corporations— Directors of corporations, i.e., persons serving on a Board of Directors of a corporation, who are not officers of the corporation, are self-employed. (Officers of a corporation are employees.) Directors who receive no remuneration for serving on the Board (“unpaid directors”) are not considered employed.
However, remuneration may consist of “deferred compensation;” i.e., amounts earned but not payable until some future date, usually when the individual reaches age 70 and is no longer subject to the social security retirement test. A director receiving deferred compensation is an employed individual.
3. Employer Group Health Plan (EGHP) Or Employer Plan
An EGHP is defined as any health plan that is of, or contributed to by, an employer, and that provides medical care directly or through other methods such as insurance or reimbursement to current or former employees, or to current or former employees and their families. It includes the Federal Employees Health Benefits programs, but not the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Employee-pay-all plans, i.e., group health plans under the auspices of an employer which do not receive any contributions from the employer, also meet the definition of EGHP.
The term “plan” means any arrangement by an employer or by more than one employer, or by an employee organization to provide health benefits or medical care to employees. An arrangement by more than one employer is considered to be a single plan if it provides for common administration of the health benefits, for example, by the employers directly, by a benefit administrator, by a multiemployer trust or by an insuring organization under a contract or contracts which stipulate that the organizations provide all employees enrolled in the plan the same benefits or the same benefit options.
For purposes of the working aged provision, a multiemployer group health plan (including a union plan) that has at least one employer with 20 or more employees is considered an employer plan under this provision. However, if such a plan identifies members who are employees of employers with less than 20 employees, those identified individuals and their spouses are exempt from this provision. Medicare is the primary payer for them.
A plan that does not have any employees as enrollees, e.g., a plan for self-employed persons only, does not meet the definition of EGHP and Medicare is not secondary to it. Thus, if an insurance company establishes a plan solely for its self-employed insurance agents, other than full-time life insurance agents, the plan is not considered an EGHP. But if the plan includes full-time life insurance agents or other employees or former employees, it is considered an EGHP. The status of self-employed life insurance agents is explained in subsection 2.
4. Secondary (ESRD)
The term “secondary,” when used with respect to Medicare payment, means that Medicare is the residual (last) payer to all EGHPs under which the Medicare beneficiary is covered and does not pay for any expenses that are reimbursable by any such plan(s).
5. Secondary (Working Aged)
The term “secondary” means that Medicare is the residual (last) payer to all EGHPs under which the Medicare beneficiary is covered based upon current employment. Medicare does not pay for any expenses that are reimbursable by any such plan(s).
6. Spouse (Working Aged)
The term spouse means any individual who has spousal coverage under the employer plan.
C. Provisions Applicable to Both ESRD Beneficiaries and the Working Aged and Their Spouses
Medicare benefits are secondary to benefits payable under EGHPs for individuals who are entitled to benefits solely on the basis of ESRD (see HI 00801.247) during a period of up to 30 months (determined in accordance with D.) and for employed individuals age 65 or over and their spouses age 65 or over. (See E.) Medicare benefits are secondary to employer policies or plans for these individuals even though the employer policy or plan contains a provision stating that its benefits are secondary to Medicare"s or otherwise excludes or limits its payments to Medicare beneficiaries.
Claimants have the right to take legal action against and to collect double damages from an EGHP which is primary to Medicare and which fails to pay primary benefits where required to do so under Section 1862 (b) of the Act.
Where an EGHP pays benefits as a primary payer, but pays less than the amount charged, the Medicare carrier or intermediary pays secondary Medicare benefits to supplement the amount paid by the employer plan. The combined benefit paid by the employer plan and Medicare as secondary should provide for full payment of covered hospital expenses and for payment of the difference between the employer plan payment and the higher of the Medicare reasonable charge or the employer plan allowable charge for covered physician services. Amounts paid by an employer plan are applied to any applicable Medicare deductible and/or coinsurance amounts to the extent that expenses would be applied if Medicare were primary payer.
The workers" compensation exclusion (HI 00620.170) and automobile and liability insurance provisions (HI 00620.175) must also be considered in determining the extent of Medicare"s liability as a residual payer since there may be a primary insurer in addition to the EGHP.
Other primary payers customarily coordinate benefits. If a portion of the bill remains unpaid after the other insurers have paid, a secondary Medicare payment is made.
An employer plan"s decision to pay or deny a claim because it determines that the services are or are not medically necessary is not binding on the Medicare intermediary or carrier. Medicare continues to evaluate claims under its guidelines derived from the law and regulations to assure that the services are in fact covered by the program regardless of employer plan involvement.
Medicare beneficiaries who are subject to these provisions and the providers, physicians, and suppliers who furnish them with covered items and services must file claims with the employer plan first whenever there is coverage under such a plan.
Primary Medicare benefits are paid if an EGHP denies a claim for primary benefits because the services were not rendered during a coordination period (ESRD); the employer does not employ 20 or more employees (working aged); the beneficiary is not entitled to benefits under the plan; benefits under the EGHP are exhausted for the services involved; or the services are not covered by the EGHP, and the beneficiary is not appealing the EGHP denial.
A Medicare participating provider of services or any other facility that receives direct payment from the Medicare program may not charge a beneficiary or any other party other than an insurer which is primary under section 1862(b) of the Act for Medicare covered services if the provider or facility has been paid or could have been paid by an EGHP an amount which equals or exceeds any applicable deductible or coinsurance amount. This applies to situations where an insurer is made primary under section 1862(b) but offers only secondary benefits. Similarily, a physician or supplier accepting assignment may not charge a beneficiary or any other party for Medicare covered services if the physician or supplier has been paid by an EGHP an amount which equals or exceeds the Medicare reasonable charge or Medicare fee schedule amount.
Conditional primary Medicare benefits may be paid if:
the beneficiary has appealed or is protesting the EGHP denial of the claim for any reason other than that the EGHP offers only secondary coverage of services covered by Medicare, or
the EGHP denied the claim because the time limit for filing the claim with the EGHP has expired (whether appealed or not). Conditional primary Medicare benefits may not be paid where an EGHP offers only secondary coverage of services covered by Medicare.
2. Recovery Of Medicare Primary Payments
If primary Medicare payments are made for items or services that are covered by an employer plan, the Medicare intermediary or carrier attempts to recover its payments from the EGHP or instructs the provider to file a claim with the employer plan for primary benefits. If the provider does not file a claim for primary benefits with the employer plan, Medicare recovers the full amount it paid from the provider. If the reason the provider does not file a claim with the employer plan is that the beneficiary declines to sign the claim form, the intermediary or carrier attempts to recover directly from the EGHP. When Medicare pays conditional primary benefits, Medicare has the right to recover its benefits before any other entity, including Medicaid State agencies. Also, Medicare has the right to recover its benefits from any entity, including a State Medicaid agency, that has been paid by an EGHP.
D. Provisions Applicable Only To ESRD Beneficiaries
Medicare benefits are secondary to benefits payable under an EGHP for any Medicare covered items and services (including services required by kidney donors in cases of transplantation) furnished ESRD beneficiaries during a period of up to 30 months. This 30-month limitation does not apply to Medicare beneficiaries who are over age 65 or entitled to Medicare based on disability.
The twelve-month period in which Medicare is secondary payer begins with the earlier of:
The month in which the individual starts a regular course of dialysis, or
The first month in which the individual becomes entitled to Medicare, in the case of an individual who receives a kidney transplant.
Since Medicare entitlement usually begins with the third month after the month in which the individual starts a regular course of dialysis, Medicare is usually the secondary payer for the first 9 months of an individual"s entitlement. However, where the three-month waiting period is waived, i.e., for individuals who undertake a course in self-dialysis training or who receive a kidney transplant during the 3-month waiting period, or where an individual has more than one period of entitlement to Medicare based solely on ESRD, Medicare is the secondary payer for up to the first 30 months of the individual"s Medicare entitlement.
If the basis for an individual"s entitlement to Medicare changes from ESRD to age 65 or disability, the 30-month period terminates with the month before the month in which the change is effective.
If an individual has more than one period of entitlement based solely on ESRD, a 30-month period is determined for each period of entitlement.
If you receive any complaints that an employer plan differentiates between individuals having ESRD and other individuals covered under the plan, or if you receive any complaints of job discrimination by employers against employees with renal disease or with dependents who have renal disease, refer the complaints to the CMS RO, Attention Associate Regional Administrator, Program Operations. When complaints are filed, include the individual"s health insurance number, the beneficiary"s name, the employer"s name and evidence that the employer discriminates, e.g., evidence that the plan does not have the required coverage. Congress expressed concern that the increased cost of health insurance might cause employers to discriminate against individuals with ESRD.
E. Provisions Applicable Only to Working Aged Beneficiaries and Spouses
Medicare benefits are secondary to benefits payable under EGHPs for employed individuals age 65 or over and the spouses age 65 or over of employed individuals of any age. For items and services furnished from January 1, 1985 - April 30, 1986, Medicare was secondary payer for employed individuals age 65 - 69 and spouses age 65 - 69 of employed individuals of any age through 69. For items and services furnished from January 1, 1983, through December 31, 1984, Medicare was secondary payer for employed individuals and spouses age 65 - 69. Medicare is secondary to EGHP coverage only if the EGHP coverage is by reason of the employee"s current employment. Health insurance plans for retirees do not meet this condition.
NOTE: All individuals who are subject to the working aged provision, as well as certain others, are eligible for the special enrollment period and premium surcharge relief. (See HI 00805.265ff.)
Medicare beneficiaries are free to reject the employer coverage, in which case they retain Medicare as the primary coverage. When Medicare is primary payer, employers cannot offer such employees or their spouses secondary coverage of services covered by Medicare. However, an employer may offer a supplemental plan that covers items and services not covered by Medicare such as eyeglasses or routine dental care.
The Age Discrimination in Employment Act (ADEA) which is administered by the Equal Employment Opportunity Commission requires employers of 20 or more employees to offer to their age 65 or over employees and to the age 65 or over spouses of employees of any age, the same coverage, and under the same conditions, as they offer to employees and employees" spouses under age 65, i.e., coverage that is primary to Medicare. From January 1, 1985 through April 30, 1986, employers were required to furnish such coverage to their age 65 - 69 employees and to the age 65 - 69 spouses of employees of any age through age 69. From January 1, 1983 through December 31, 1984, employers were required to offer primary EGHP coverage to their employees age 65 - 69 and to their spouses age 65 - 69.
If you receive any complaints that an employer plan is not in compliance with the ADEA, i.e., that an EGHP maintains that it is secondary to Medicare, refer the complaint to the CMS RO, Attention: Associate Regional Administrator, Program Operations. When complaints are filed, include the individual"s health insurance number, the beneficiary"s name, the employer"s name and address and the name and address of the EGHP, the individual"s policy number, and evidence that the EGHP does not have the required coverage.
2. Individuals Subject To Provision
Medicare Part A and Part B benefits are secondary to benefits payable under EGHPs for an individual who:
Is age 65 or over and receives services on or after May 1, 1986; is age 65 through 69, and receives services before May 1, 1986, and
Is entitled to Part A (hospital insurance) of Medicare on the basis of the individual"s own social security or railroad retirement earnings record, or Federal quarters of coverage, or the earnings record or the Federal quarters of coverage of another person, and
Employed and covered by reason of that employment by an EGHP; or
The spouse of an employed person, covered by an EGHP by reason of that person"s employment, and the employed person is:
any age and receives services on or after May 1, 1986,
any age through 69 and receives services on or after January 1, 1985, through April 30, 1986; or
age 65 - 69 and receives services on or after January 1, 1983 through December 31, 1984.
3. Individuals Not Subject To Provision
This provision does not apply to:
Individuals who are entitled or who could upon application become entitled to Medicare under the ESRD provisions, i.e., individuals who meet the requirements for ESRD entitlement even though their current Medicare entitlement may be on the basis of attainment of age 65;
Individuals who are enrolled in Part B only;
Individuals enrolled in Part A on the basis of a monthly premium;
Anyone who is under age 65;
Anyone who is over age 69, with respect to services rendered before May 1, 1986;
Age 65 - 69 spouses of employees over age 69, with respect to services rendered before May 1, 1986;
Individuals covered by a health plan other than an EGHP as defined above, e.g., one that is purchased by the individual privately and not as a member of a group;
Members of EGHPs of employers of fewer than 20 employees;
Members of multiemployer plans whom the plan has identified as employees of employers with fewer than 20 employees; or
Retired beneficiaries (other than spouses of employed individuals) who are covered by EGHPs as a result of past employment and who do not have EGHP coverage as the result of current employment.
4. Reemployed Retirees And Annuitants
Where a retired individual or annuitant returns to work even for temporary periods, the employer is required to provide the same coverage under the same conditions that he furnishes to other employees (i.e., non-retirees). Medicare is secondary payer to the EGHP coverage that the employer provides to the reemployed retiree even if the premiums for coverage in the plan are paid from a retirement pension or fund. Medicare also pays secondary benefits for consultants who are former employees if the employer provides coverage for other such consultants.