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Removing the Mystery Behind Medicare's Coordination of Benefits Policies

Important illumination of the ins and outs of COB policies.

By Henry E. Schwartz

Comprehending Medicare’s Coordination of Benefits (COB) policies can be a daunting task. Nevertheless, it is important that Medicare providers have some grasp of who will pay them, and when, under COB.

In COB language, you will need to distinguish between the “primary payor,” and the “secondary payor.” As a general rule of thumb, the primary payor is the party to whom bills must be directed initially. The secondary payor comes into play only when the primary payor refuses coverage, or in some cases, does not cover the entire bill.

First, it is important to note that Medicare policies take precedence over state law or insurance plans or policies that contradict federal policy. If Medicare says that it is secondary payor, it will be secondary payor.

Generally, Medicare is the secondary payor in the following scenarios:

1. In cases of injuries sustained in car accidents, where there is automobile liability insurance, uninsured motorist insurance, or underinsured motorist insurance.
   
2. In cases of illness or injury covered by homeowners’ liability insurance, malpractice insurance, product liability insurance, and general casualty insurance.
   
3. Services to the “working aged,” that is, Medicare beneficiaries age 65 or older who have group health plan coverage through their employment or their spouse’s employment. Employer health plans fall into this category if the employer has 20 or more employees.
   
4. Services to Medicare beneficiaries under the age of 65 who have disability-generated Medicare benefits, and who are covered under a large group health plan through their current employment or through the current employment of any family member. Employer disability plans fall into this category if the employer had 100 or more employees on 50 percent or more of its business days during the prior calendar year.
   
5. Services to patients who have kidney disease-generated Medicare benefits, during the first 30 months of their Medicare eligibility.
   
6. Services covered by Workers’ Compensation benefits.
   In the above situations, Medicare is secondary payor when the other benefits have been paid, or can reasonably expect to be paid. This last part can get a little murky, as it involves some guesswork regarding insurance coverage.
   

Medicare requires providers to inquire into the patient’s status with respect to other possible coverage for the illness or injury being treated. If you don’t fill in the “other insurance” category, Medicare may suspend payment of a bill while investigating, and may send you a “First Claim Development” form to be filled out as part of that inquiry. This is most likely to occur where an accident or traumatic injury has occurred, as these are the situations most likely covered by some form of liability insurance.

There will be occasions where Medicare has paid a bill, and then become aware that there was other “primary” coverage. In those cases, the provider will be required to repay the program, while Medicare reprocesses the claim. The primary payor will need to be billed.

Additionally, providers should be aware that they may bill Medicare first, where Medicare is the secondary payor, if they know that the primary payor does not cover the particular service provided, but they believe that Medicare does.

Providers should also be aware that Medicare payment limitations do not apply to primary payor responsibility. In other words, if another insurer is primary payor, the provider is not limited to collecting the maximum amount allowable under Medicare (from the primary payor).

It should also be noted that Medicare would allow invoicing, even though it is identified as the secondary payor, if the insurer does not pay the claim within 120 days. Claims may be submitted to Medicare on a “conditional” basis, and Medicare will later collect the insurance payment, if available. This will be useful in particular, where liability is in dispute, and the insurer is not willing, at that point, to provide payment or coverage.

If the provider bills Medicare after waiting the 120-day period, the provider must then withdraw claims and/or liens against the insurer or beneficiary. If the provider decides to continue to seek payment from non-Medicare sources, it may not bill Medicare.

Knowledge and organization can help a provider to wade through the COB morass. Knowing the law is an initial step. The government advises that providers have an established format for eliciting relevant information from patients.

It is important to know what other coverage the patient may have, and whether treatment is sought for reasons relating to some form of injury or exposure that may be subject to a liability determination. A tickler system should be established for the 120-day waiting period, so that the provider does not miss out on the opportunity to submit a bill to Medicare when the rules allow it. Another item to tickle is the receipt of beneficiary co-payments and deductibles. They may vary depending upon the payor, and the provider will need to make adjustments based on the changing scenario. If a refund is required, it will be important to see that it is made.

Last, the Medicare program has provided telephone access to its COB Contractor, which will respond to specific questions, at 800-999-1118.

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Henry E. Schwartz is a partner with Blank Rome Comisky & McCauley LLP in Baltimore, Maryland. He can be reached at 410-659-3962 or schwartz@blankrome.com.