MSP Payment Calculation Examples

Medicare secondary payments are based on the higher allowable charge between the primary insurer and Medicare unless the supplier is obligated to accept the primary insurer's allowable as payment in full. At no time will Medicare pay more secondary benefits than it would have paid as primary payer and all claims are subject to Medicare coverage criteria. The Medicare Secondary Payment (MSP) payment calculation applies to assigned and non-assigned claims.

Secondary payments are calculated as follows:

  1. The Medicare primary payment is determined in the usual manner, e.g., as if there were no other coverage.
  2. The higher of the Medicare allowable charge or the primary insurer's allowable charge is determined.
  3. The amount paid by the primary insurer is subtracted from the amount determined in Step 2 above.
  4. Medicare pays the lower of Step 1 or 3.

MSP Calculation Examples

Example 1

  • Submitted Charge = $500
  • Unmet Medicare Deductible = $0
  • Medicare Allowable = $375
  • Primary Allowable = $500
  • Primary Paid = $400

Breakdown

  • Medicare primary payment is $375 × 80% = $300
  • Primary allowed of $500 is the higher allowed amount
  • Primary allowed minus primary paid is $500 - $400 = $100
  • The lower of Step 1 or 3 is $100. (Medicare will pay $100)

Example 2

  • Submitted Charge = $300
  • Unmet Medicare Deductible = $0
  • Medicare Allowable = $250
  • Primary Allowable = $200
  • Primary Paid = $160

Breakdown

  • Medicare primary payment is $250 × 80% = $200
  • Medicare allowed of $250 is the higher allowed amount
  • Medicare allowed minus primary paid is $250 - $160 = $90
  • The lower of Step 1 or 3 is $90. (Medicare will pay $90)

MSP and Deductible

Example 1

  • Submitted Charge = $150
  • Unmet Medicare Deductible = $100
  • Medicare Allowable = $120
  • Primary Allowable = $150
  • Primary Paid = $120

Breakdown

  • Medicare primary payment is $120 - $100 (deductible) × 80% = $16
  • Primary allowed of $150 is the higher allowed amount
  • Primary allowed minus primary paid is $150 - $120 = $30
  • The lower of Step 1 or 3 is $16. (This claim will pay $16)

Example 2

  • Submitted Charge = $200
  • Unmet Medicare Deductible = $0
  • Medicare Allowable = $125
  • Primary Allowable = $150
  • Primary Paid = $0

Breakdown

  • Medicare primary payment is $120 × 80% = $96
  • Primary allowed of $150 is the higher allowed amount
  • Primary allowed minus primary paid is $150 - 0 = $150
  • The lower of Step 1 or 3 is $96. (This claim will pay $96)

If the claim is filed assigned, the patient responsibility would be the difference between the Medicare allowed and the total amount paid. The patient responsibility is $24 for this claim.

Obligated to Accept

"Obligated to Accept" is a term used when a supplier has a contractual agreement with the primary insurer to accept the primary insurer's allowed amount as payment in full. When the supplier is obligated to accept, the secondary payment is based solely on the primary insurer's allowed amount.

Example 1

  • Submitted Charge = $300
  • Unmet Medicare Deductible = $0
  • Medicare Allowable = $300
  • Primary Allowable = $250
  • Primary Paid = $200

Breakdown

Supplier is obligated to accept the primary allowed as payment in full.

  • Medicare primary payment is $300 × 80%= $240
  • Primary allowed of $250 is selected due to obligated to accept
  • Primary allowed minus primary paid is $250 - $200 = $50
  • The lower of Step 1 or 3 is $50. (This claim will pay $50)

Resource

 

Last Updated Aug 14, 2018