If you have Medicare and one or more other health care coverages and have a claim, Medicare and industry wide rules determine how costs are split between them. The rules answer such questions as:

• What if one health coverage includes the subject of the claim, but the other doesn't?
• Which health insurance pays first and which pays second?

Medicare speaks of this process as Medicare and "Other Health Benefits." The private sector calls it "Coordination of Benefits." To make the discussion in this article fit with the way people speak, we will call the process "Coordination of Benefits."

Coordination of benefits are intended to assure:

• That your medical bills are paid without conflict or delay.
• That the doctor or other health care provider only receives one payment.
• That you don't make a profit by seeking medical care.

The rules to determine which plan is primary and which plan is secondary depend on the type of coverage you have in addition to Medicare. The alternatives are:

• How Coordination Of Benefits Works  
• Group Health Insurance
  • Medicare And Group Health Insurance  
  • Medicare and Group Health Insurance: People Age 65 or Over  
  • Medicare and Group Health Insurance: People Who Are Disabled (Not Due To End Stage Renal Disease or ALS) AND Under Age 65  
  • Medicare and Group Health Insurance: People Disabled With End Stage Kidney Disease (ESRD) Or With ALS   
  • Medicare and Group Health Insurance: If You Have Been Disabled And Return To Work  
  • Medicare and Group Health Insurance: Medicare and More Than One Group Policy  
• Medicare and
  • Individual Health Insurance  
  • Workers Compensation  
  • Veterans Benefits  
  • Champus  

If you have more than one health insurance coverage, and Medicare is not one of them, the rules are different. If this applies to you, click here.

NOTE: Bills to Medicare when there is more than one coverage are now sent to a national claims crossover contractor,  the Coordination of Benefits Contractor. This is instead of individual Medicare contractors.

If you still have questions after reading this article, call the Medicare number which answers coordination of benefit questions: 800.999.1118

As a practical matter:

• When a bill is submitted, the company that receives the bill checks to see if there is other health coverage. If there is, the company applies the "coordination of benefits" rules to determine whether it is the "primary" or "secondary" carrier.
• The "primary" company will then pay the full amount it would have paid if it were the only plan you have.
• Then the "primary" carrier sends you an "Explanation of Benefits" describing what it paid and why.
• If the amount the "primary" carrier paid did not include the entire bill, including co-pays and deductibles, the insured then submits the bill to the "secondary" carrier.
• The "secondary carrier" then pays the difference between the actual bill and the amount that the primary plan paid. The secondary carrier never pays pay more than it would have paid if it had been the only plan except in one instance. If the primary payer covers something that the secondary payer does not, the secondary payer will still cover part of the bill up to the maximum amount of savings realized by being the secondary payor.
• Neither plan will pay a total of more than it would have paid if it were the only plan.
• Neither plan will cover something that is not covered under either policy. For example, if neither plan covers telephone charges in the hospital, neither one will pay for such charges.
• Between the two companies you will be reimbursed 100% of your covered medical bills IF:
• The total of the payments the two plans would have paid if they had been the only payor exceeds the total of the bill and
• Everything billed was covered by at least one carrier.

For Example: Let's say you have health insurance coverage under your employer's plan and you are also covered under Medicare.

You bills for out-patient laboratory charges that totals $2,500. The bills are submitted to Medicare and the insurance company. Let's assume that Medicare is the primary carrier, and that the Medicare Allowable Amount for this service is $1,500.

Medicare pays what it would normally pay: 80% of the Medicare Allowable Amount of $1,500 = $1,200.

The Secondary Payer, your group health plan, covers 80% of the full $2,500 but it has a $500 deductible. In the absence of any other plan, your group insurance plan would have paid $1,600 ($2,500 -- 500 x 80%= $1,600). However, since there is a balance due of only $1,300 after Medicare makes its payment as primary payor, that is all that the Secondary Payer has to pay.

The benefit to you is that you don't have to pay anything. Between the two plans, the entire bill was covered.

It is becoming more and more common for people who qualify for Medicare because of their age to also have a group health insurance policy. More and more people are working past age 65 -- especially now that Social Security removed the earnings penalty from the retirement benefits for people who work after age 65.

Because of age discrimination laws, employers are prohibited from offering any unique type of insurance to employees over age 65, such as a special Medicare Supplement plan. They must offer employees over 65 the same package of benefits that they offer younger employees. So, if a Medicare beneficiary continues working, the choice is either a broad health insurance plan or to decline all coverage.

It is worthwhile for people with Original Medicare to have additional insurance to cover the gaps Medicare doesn't pay.  Health insurance through work is one of the ways to fill those gaps.

Medicare only applies Coordination of Benefits rules when the second policy is a group health policy from an employer or a union. (Medicare refers to the situation as "Medicare Secondary Payer" (MSP) Program) It does not apply Coordination of Benefits rules if you have both Medicare and an individual health insurance policy, or Medicare and a group policy other from an employer or union. In these cases, Medicare ignores the individual plans.

"Coordination of benefits" rules will be applied even if one of your group policies doesn't include a provision about the subject.

The coordination of benefit rules are different in each of the following situations:

• You are Age 65 Or Over
• You are Disabled and Under Age 65
• You are Disabled With End Stage Kidney Disease or ALS
• You Have Been Disabled and Return to Work
• You Have Medicare and More Than One Group Policy

Medicare is Primary to employer based insurance if you are over age 65 and:

• You are covered by a group health plan because of you, your spouse's or significant other's current active employment and your employer has less than 20 employees, OR
• You or your spouse or significant other are self-employed and also covered by a group health plan of an employer that has less than 20 employees.

Otherwise, Medicare is Secondary.

To determine if an employer has 20 or more employees, the Medicare regulation states that an employer does have 20 or more employees for these purposes when an employer has 20 or more full time and/or part-time employees for each working day in each of 20 or more calendar weeks in the current or preceding year. It doesn't matter if less that 20 employees participate in the health plan.

Examples:

• You are over 65 and retired, but your wife, who works for a company with 5,000 employees covers you as her spouse. Your wife's plan is Primary.  Medicare is Secondary.
• You get Medicare when you turn 65 but you continue to work and are covered under your employer's plan. Your employer is a small machine shop with 14 employees. Your group health plan is Secondary.  Medicare is Primary.
• You are over age 65, self-employed and work as an independent contractor selling cosmetics for a large cosmetic firm with hundreds of employees. The cosmetic firm permits you to be covered under their policy. The cosmetic company plan is Primary. Medicare is Secondary.
• You are a dependent under your spouse's retiree coverage so Medicare is Secondary to your retiree coverage.

If you have Medicare because you are disabled and under age 65, Medicare is Secondary if:

• You are covered under an employer's plan because of your current employment or the current employment of a family member, whether it is a spouse, parent, or significant other AND
• The employer has 100 or more employees.

Otherwise, Medicare is Primary.

Examples:

• Your health insurance is continued by your employer because you are collecting Long Term Disability benefits (not due to your current employment).  Medicare is Secondary. Your former employer's health insurance is Primary.
• You are covered as a dependent under your spouse's or significant other's policy from the employer where s/he currently works. Your spouse's employer has 500 employees. Your spouse's plan is Primary.  Medicare is Secondary.
• You are 21 and covered as a dependent under your Dad's employer plan. His employer has 55 employees. Medicare is Primary. Your Dad's coverage is secondary.

If you receive Medicare because of permanent kidney failure or ALS, your group health plan is the Primary carrier for the first thirty months of eligibility or entitlement to Medicare.

After thirty months Medicare is Primary.

In this situation it doesn't matter how many people the employer employs. It also doesn't matter whether you have the group insurance due to active employment or retiree coverage.

Examples:

• You are covered under your former employer's plan as a disabled retiree, and you have been on Medicare 27 months. Your employer's health plan is Primary. Medicare is Secondary.
• You are covered under your former employer's plan as a disabled retiree, and you have been on Medicare for 34 months. Medicare is Primary. Your employer's health plan is Secondary.
• You are covered under your spouse's plan from his or her work, and you have been on Medicare 27 months. Your spouse's health plan is Primary. Medicare is Secondary.
• You are covered under your spouse's plan from his or her work, and you have been on Medicare for 34 months. Medicare is Primary. Your spouse's health plan is Secondary.

If you return to work full-time, your Medicare will remain in force, and the Premiums paid on Part A -- Hospital, for up to 8 years and 3 months after you return to work. You would continue to pay the Part B Medical premium just as when you were disabled.

If your new employer also provides group health coverage, since you have the group coverage because of "current employment," Medicare is Secondary Payor if the employer has 100 or more employees. Medicare is the Primary Payor if your employer has less than 100 employees.

Confusion can develop if you have Medicare and two group policies because Medicare's Coordination of Benefits is not identical with the private group insurance industry's Coordination of Benefits provisions.

Generally, Medicare rules will govern, but it may take some work to get each of the three entities to agree which will be primary.

Contact Centers for Medicare and Medicaid Services (CMS) and ask for guidance: tel. 877.267.2323 or in the Baltimore Area: 410.786.3000.

For example, Phoebe:

• Is covered by Medicare.
• Is also covered by her former employer who continues her coverage while she is disabled; and
• She is also covered as a dependent under her spouse's plan.

Private industry rules say her employer's plan is primary when compared to the plan on which she is a dependent. However, under Medicare rules, her spouse's plan is primary because it is a plan obtained due to the "active, current employment" of her spouse.

In the real life situation in which this happened, both plans refused to pay first. Phoebe contacted a person in CMS's San Francisco office who contacted both insurance companies. The companies agreed to follow Medicare's rule, making her employer's plan primary.

Medicare ignores any benefits paid by an individual health insurance policy. However, that doesn't mean that both plans pay their full benefits.

Virtually all individual health insurance policies contain a provision that limits the insurance company's payments to their regular payment less any payments made by Medicare. Such a provision means that Medicare and your health insurance together will pay no more than your individual health insurance would have paid if it were the only insurance. In other words, the individual insurance company, not you or your doctor, gets the benefit of Medicare paying a portion of the bill.

Example: You have an individual health plan and Medicare. The individual health plan contains a provision that limits the insurance company's payment to their regular payment less any payments made by Medicare. The health plan would have paid $4,000 if there had been no other insurance, but Medicare pays $2,800 towards the bill. The insurance company will subtract Medicare's payment from their regular payment and pay the difference, in this case, $1,200 ($4,000 - $2,800).

Workers Compensation covers medical costs for injuries and diseases caused by your employment.

Medicare is Primary and Workers Compensation is secondary. However, Medicare does not pay for any items and services that either have been paid or can be reasonably expected to be paid by Worker's Compensation.

You are responsible for filing the Workers Compensation claim with your employer and submitting your medical bills first to the Worker's Compensation insurance company. Medicare will consider paying what Worker's Compensation does not pay. That generally isn't a lot since most state laws cover all charges if they are work related.

If the Workers Compensation claim is delayed longer than 120 days, a claim may be filed with Medicare - which may make a conditional payment that must be repaid when Worker's Compensation pays your claim.

If you have Medicare but are also eligible to receive medical care under Veterans Benefits, you may choose to get treatment under either program. However, Medicare will not pay for care provided by the Veterans Administration (VA). The VA will not pay for any care that Medicare covers.

You may, if you choose:

• Receive some of your care through the VA by utilizing their facilities and referrals and
• Use Medicare with private physicians and medical facilities.

The only time Medicare and Veterans Benefits work together is if you are authorized by the VA for hospital services that are not at a VA hospital and the VA doesn't pay for all of the services. Medicare can pay for Medicare-covered services that the VA does not pay.

NOTE: Medicare does not pay any VA co-payments for services furnished by VA hospitals or facilities except emergency inpatient or outpatient hospital services at a VA hospital.

CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) covers retired military personnel and the families of active, retired or deceased members of the military. Most CHAMPUS beneficiaries who become eligible for premium-free Medicare Part A: Hospital Benefits lose their eligibility for CHAMPUS.

Note For People With End Stage Renal Disease

People who lose CHAMPUS eligibility due to Medicare eligibility based on End Stage Renal Disease may reinstate the CHAMPUS coverage if they later lose Medicare due to an improvement in their condition. There are certain groups of people who are permitted to have both CHAMPUS and Medicare.

They are:

• People who are eligible for Medicare Part B only.
• People who must pay monthly premiums for Medicare Part A.
• People who are eligible for Medicare due to disability other than End Stage Renal Disease. (NOTE: To keep CHAMPUS, you must enroll in Part B Medicare.)
• Dependents of active duty service members.

For people who have both Medicare and CHAMPUS, Medicare is the Primary payer of medical claims unless the services are furnished by a federal provider such as a military hospital. CHAMPUS may supplement what Medicare does not pay in full such as the deductible and coinsurance, but CHAMPUS would never pay more than if CHAMPUS had been the only carrier.

NOTE: If you have Medigap insurance, the Medigap company may be required to pay for CHAMPUS services as if they were Medicare-covered services.

                                    Reviewed by Jacques M. Chambers, CLU 
                                    www.helpwithbenefits.com