Notification Requirements for Noncovered Charges

Payment Liability Conditions of Billing

Before delivering any service, providers must decide which one of the following three conditions apply in order to properly inform Medicare beneficiaries as to their potential liability for payment according to notice requirements explained below:

Condition 1 Condition 2 Condition 3
Services are statutory exclusions (ex. not defined as part of a specific Medicare benefit) and billed as noncovered, or billed as noncovered for another specific reason not related to section 1862(a)(1) and section 1879 of the Act (see below) A reduction or termination in previously covered care, or a determination of coverage related to section 1862(a)(1), section 1862(1)(9), section 1879(g)(1) or section 1879(g)(2) will require a liability notice (i.e., ABN) OR a beneficiary requests a Medicare determination be given for a service that MAY be noncovered; billing of services varies Services billed as covered are neither statutorily excluded nor require a liability notice be given
Potential liability: Beneficiary, as services are always submitted as noncovered and therefore always denied by Medicare Potential liability: Beneficiary, subject to Medicare determination, on claim: If a service is found to be covered, the Medicare program pays Potential liability: Medicare, unless service is denied as part of determination on claim, in which case liability may rest with the beneficiary or provider

Note: Only one of these conditions can apply to a given service.

Billing follows the determination of the liability condition and notification of the beneficiary (if applicable based on the condition). To the extent possible in billing, providers should split claims so that one of these three conditions holds true for all services billed on a claim, and therefore no more than one type of beneficiary notice on liability applies to a single claim. This approach should improve understanding of potential liability for all parties and speed processing of the majority of claims.

EXCEPTION: Cases may occur where multiple conditions may apply and multiple notices could be necessary. These are most likely to occur with claims paid under the outpatient prospective payment system (OPPS, Internet Only Manual (IOM) Publication 100-04, chapter 4, section 170). The OPPS requires all services provided on the same day to be billed on the same claim, with few exceptions as already given in OPPS instructions (i.e.; claims using condition codes 21, 20, discussed below or G0) (remember the G0 condition code is only allowed on OPPS claims). Modifiers used to differentiate line items on single claims when multiple conditions or notice apply are discussed below.

Liability is determined between providers and beneficiaries when Medicare makes a payment determination by denying a service. Determinations must always be made on items submitted as noncovered (i.e., properly submitted noncovered charges are denied). These denials have appeal rights, such as any other denials. However, appeal rights in these cases are not expected to be used frequently since submitting services as noncovered should indicate agreement of the beneficiary and provider that there is no expected Medicare payment and therefore no amount in dispute.

A rejection or "return to provider" (RTP) does not represent a payment determination. However, beneficiaries cannot be held liable for services that are never properly billed to Medicare, such that a payment determination cannot be made (i.e., a payment or a denial of payment). Rejected or RTP'd claims can be corrected and re-submitted, permitting a determination to be made after resubmission, In some cases, beneficiaries may appeal rejections, but NEVER RTP'd claims. After the claim has processed all the way through Fiscal Intermediary Shared System (FISS) for Payment/Rejection/Denial providers are able to see the line level rejection/denial code by going into Direct Data Entry (DDE) and choosing 01 for Inquires, 12 for Claims Inquiries, go to page 2 of the claim and press F11 twice to view the line level reason code. Providers may press F1 and key in the reason code to see if there is appeal rights or if the provider may submit an adjusted claim if modifiers are needed, reduction in units are needed etc.

The FI/AB MAC, RHHIs should not advise providers to independently cancel or adjust denied claims, such as when a line submitted as noncovered is denied, especially when a medical review determination or payment group or level would be altered. Other than exceptions noted in section 130, "Adjustments" in IOM Publication 100-04, Chapter 1, denied claims cannot be adjusted or resubmitted, since a payment determination cannot be altered other than by reconsideration or appeal, though providers may contact their FI/AB MAC, RHHI in cases of billing errors (i.e., a date typing error detected after finalization). In such cases, the FI/AB MAC, RHHI can consult with the provider and cancel the claim in its entirety, so that the provider can then replace the cancelled claim with a new and correct original claim. As a reminder timely filing rules would still apply for any adjustment/cancel claims along with the 120-day requirement to request an appeal.

Payment Liability Conditions

Payment Liability Condition 1

There is no required notice if beneficiaries elect to receive services that are excluded from Medicare by statue, which is understood as not being part of a Medicare benefit, or not covered for another reason that a provider can define, but that would not relate to potential denials under section 1879 & 1862 (a) (1) of the Act. However, applicable Conditions of Participation (COP) MAY require a provider to inform a beneficiary of payment liability BEFORE delivering services not covered by Medicare, IF the provider intends to charge the beneficiary for such services. Some examples of Medicare statutory exclusions include hearing aides, most dental services, and most prescription drugs for beneficiaries with fee-for-service Medicare prior to enactment and effectiveness of a drug benefit in 2006 under the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

In addition to what may be required by the COPs, providers are advised to respect Medicare beneficiaries' right to information as described in "Medicare and You" handbook on the website, by alerting them to potential payment liability. If written notification of potential liability for statutory exclusions is either required or desired, an explanation and sample voluntary notice suggested for this purpose can be found at the Centers for Medicare and Medicaid Services (CMS) Web site (see Notices of Exclusions from Medicare Benefits, NEMB):

When such a notice is given, patient records should be documented. If existing, any other situations in which a patient is informed a service is not covered, should also be documented, making clear the specific reason the beneficiary was told a service would be billed as noncovered.

Payment Liability Condition 2

Providers must supply a liability notice if services delivered to a Medicare beneficiary are to be reduced or terminated following delivery of covered care, or thought not to be covered under section 1862 (a) (1) of the Act, in order to shift liability under section 1970. Providers must give these notices before services are delivered for which the beneficiary may be liable. Failure to provide such notices when required means the provider will not be able to shift liability to the beneficiary.

Over time, there have been two different types of such notices, given in different settings for specific types of care:

Payment Liability Condition 3

This condition is the case in which providers are billing for what they believe to be covered services as covered services. There are no notice requirements just for this condition, and noncovered charges are not involved. However, as mentioned before, there are cases in which covered and noncovered charges are submitted on the same claim.

Condition Notice Type of Provider
Payment Liability Condition 1 No notice required - unless COPs require - not covered for reasons other than statute, section 1862(a)(1) & 1879 of the Act do not apply - documenting records recommended All Providers
Payment Liability Condition 1 Optional notice of services excluded by statute (ex. Not part of a recognized Medicare benefit, may use NEMB, Form CMS-20007) All providers when service known not to be covered by law by the Medicare fee-for-service program
Payment Liability Condition 2 Notice of Non-Coverage or comparable form (i.e., CMS Form 10055 for SNF ABN Inpatient only (TOBs: 11x, 18x, 21x, 41`x)
Payment Liability Condition 2 HHABNs (Form CMS-R-296) Home Health (HH) services under a HH plan of care and paid through the HH prospective payment system (PPS only (TOBs 32x and 33x)
Payment Liability Condition 2 ABNs (Form CMSR131L)* Laboratories or providers billing lab tests only (revenue codes 030x, 031x, and 092x)
Payment Liability Condition 2 ABN (Form CMSR131G), CMS Form 10055 for SNF Part B services ONLY All other providers and services outpatient and inpatient Part B, not previously listed in this cart for Condition 2, that bill FI/AB MAC or RHHIs, including HH services not under a plan of care, and hospice services paid under part A
Payment Liability Condition 3 No notice requirement All Providers

*Use of this version of the form is optional. Providers delivering same-day lab and non-lab services related to an ABN may use CMSR131G Form for both.

Last Updated Apr 23 , 2024