November 29, 2006
MSP Calculations
Providers should familiarize themselves with how Medicare secondary payments are calculated. Secondary payments are calculated as follows:
- The amount Medicare would pay as primary payer is calculated in the usual way.
- Medicare's allowed amount is compared to the allowed amount of the primary insurer. The higher allowed amount is identified. (On a nonassigned claim, the primary insurer's allowed amount is reduced to the Medicare limiting charge in the computation.)
- The amount paid by the primary insurer is subtracted from the allowed amount determined in step 2.
- Medicare pays the lower of Medicare's primary payment amount (step 1) or the difference between the higher allowed amount and the primary insurer's payment amount (step 3).
The following examples show the calculation of MSP payments for both assigned and nonassigned claims.
| Example 1 Assigned |
Example 2 Assigned |
Example 3 Nonassigned |
Example 4 Nonassigned |
|
|---|---|---|---|---|
| Amount of claim | $ 2,000.00 | $ 135.00 | * $ 1,420.25 | * $ 117.99 |
| Primary insurer allowable charge | $ 1,800.00 | $ 135.00 | * $ 1,420.25 | * $ 117.99 |
| Primary insurer payment | $ 1,440.00 | $ 108.00 | $ 1,136.20 | $ 94.39 |
| Medicare allowable charge | $ 1,300.00 | $ 108.00 | $ 1,235.00 | $ 102.60 |
| Medicare deductible withheld | $ 00.00 | $ 100.00 | $ 00.00 | $ 100.00 |
| MSP payment | $ 360.00 | $ 6.40 | $ 284.05 | $ 2.08 |
* Limiting Charge
MSP Refund Calculation
- Determine amounts allowed by Medicare and the primary insurer
Medicare Allowed Amount = ______________________ Primary Ins. Allowed Amount = ______________________ - Compare the allowed amounts and use the higher allowed amount
in the MSP calculation.
Higher Allowed Amount = ______________________ - Subtract the primary insurer's payment amount from the amount
determined in Step 2.
Higher Allowed Amount ______________________ Primary Payment Amount - ______________________ Potential Secondary Payment = ______________________ - Compare the amount paid by Medicare with the amount of the potential
secondary payment
Medicare payment = ______________________ Potential secondary payment = ______________________ - If the Medicare payment is higher than the potential secondary
payment (determined in step 3), subtract the amount of the
potential secondary payment from the amount paid by Medicare.
Refund the difference to Medicare.
Medicare Payment ______________________ Potential Secondary Payment - ______________________ Amount to be refunded = ______________________ - If the Medicare payment is lower than the potential secondary payment, no refund is necessary.
- If the Medicare payment is higher than the potential secondary
payment (determined in step 3), subtract the amount of the
potential secondary payment from the amount paid by Medicare.
Refund the difference to Medicare.
