When it comes to healthcare billing, one of the most misunderstood—but crucial—concepts is Medicare Secondary Payer (MSP). Whether you’re a Medicare beneficiary, a healthcare provider, or an employer, understanding who pays first—Medicare or another insurer—can prevent billing headaches, denied claims, and unnecessary out-of-pocket costs.
Originally designed to protect Medicare funds and shift costs to the appropriate insurers, MSP affects millions of Americans each year. In this article, we’ll explore what MSP really means, when it applies, and why it matters more than ever in 2026.
What is Medicare Secondary Payer (MSP)?
Medicare Secondary Payer, commonly known as MSP, refers to situations where Medicare is not the primary payer of a healthcare claim. Instead, another insurance plan or payer, like an employer group health plan, workers’ compensation, or liability insurance, is responsible for covering costs before Medicare steps in.
When Medicare was introduced in 1966, it served as the primary payer in nearly all situations. However, with rising healthcare costs and the increasing availability of private insurance, Congress enacted laws in 1980 to make Medicare the secondary payer in specific cases. This helps protect the Medicare Trust Funds and ensures the right party pays first.
Why Does MSP Matter?
Understanding MSP is essential for several reasons:
- Cost Savings: Ensures that Medicare only pays when truly necessary, which helps preserve public funds.
- Billing Accuracy: Prevents duplicate or incorrect payments by healthcare providers.
- Legal Compliance: Healthcare entities and employers must comply with MSP rules or face financial penalties.
- Fewer Claim Denials: Beneficiaries who know their coverage responsibilities are less likely to experience rejected claims or delays in care.
If Medicare pays a bill that should have been paid by another insurer, you could be responsible for reimbursing the overpayment—making it crucial to know when MSP applies.
Common MSP Situations and Who Pays First
Understanding who pays first depends on the individual’s age, health condition, type of coverage, and employment status. Here’s a breakdown of the most common scenarios:
Working Aged (65+) with Employer Group Health Plan (GHP)
- Small Employers (<20 employees):
Medicare pays primary, GHP pays secondary. - Large Employers (20+ employees):
GHP pays primary, Medicare pays secondary. - Self-employed with coverage through a spouse’s large employer:
GHP pays primary, Medicare pays secondary.
This means that if you’re 65 or older and still working or covered under a spouse’s large employer plan, Medicare may not be your first line of coverage.
Disability and Employer GHP
If you’re under 65 and disabled, covered under an employer group health plan with 100 or more employees:
- GHP pays primary, Medicare pays secondary.
If the employer has fewer than 100 employees:
- Medicare is typically primary.
This ensures that employers with substantial coverage contribute first, shifting the burden off Medicare.
End-Stage Renal Disease (ESRD)
During the first 30 months of Medicare eligibility:
- Group Health Plan or COBRA pays primary, Medicare pays secondary.
After the 30-month period:
- Medicare becomes primary.
This unique rule applies regardless of age and reflects the high cost and complexity of treating ESRD.
COBRA Coverage
COBRA provides temporary continuation of employer health coverage after leaving a job. Here’s how it interacts with Medicare:
- ESRD patients with COBRA:
COBRA pays primary during the first 30 months. - Individuals 65+ or disabled with COBRA and Medicare:
Medicare pays primary, COBRA pays secondary.
Failure to understand this can lead to unexpected medical bills, especially for retirees and those in between job transitions.
Retiree Health Plans
If you’re retired and have health coverage from a former employer:
- Medicare pays primary, retiree coverage pays secondary.
These plans are often misunderstood, and some retirees assume their old employer’s plan pays first, when it doesn’t.
No-Fault and Liability Insurance
When a Medicare beneficiary is injured in an automobile accident or a similar incident, no-fault insurance or liability insurance (like a homeowner’s or auto liability policy) typically pays first.
Medicare pays secondary to:
- No-fault insurance (e.g., personal injury protection).
- Liability insurance (e.g., third-party liability from a car accident or personal injury lawsuit).
If the insurer delays payment or denies a claim, Medicare may make a conditional payment, which must be repaid once a settlement or judgment is reached.
Workers’ Compensation
If you’re injured or become ill due to your job, Workers’ Compensation pays for related healthcare services first.
- Medicare does not pay for care related to a workplace injury.
- If a claim is denied or partially paid by Workers’ Compensation, Medicare may step in conditionally.
- Before settling a case, parties must consider Medicare’s interest and possibly set up a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) for future care costs.
Failing to account for Medicare in a Workers’ Comp settlement can result in legal and financial complications.
What Are Conditional Payments by Medicare?
A conditional payment is a temporary advance Medicare makes when another payer (like liability insurance or Workers’ Compensation) is expected to pay but hasn’t yet.
- Medicare ensures the beneficiary isn’t left without coverage.
- Once a settlement or judgment is issued, the conditional payment must be reimbursed to Medicare.
- These are tracked and managed by the Benefits Coordination & Recovery Center (BCRC).
Beneficiaries and attorneys must notify Medicare of such situations to avoid overpayment penalties.
Responsibilities Under MSP Rules
Responsibilities of Medicare Beneficiaries
- Report any changes in health insurance coverage or employment status.
- Inform doctors and providers of other active insurance plans.
- Respond promptly to Medicare’s MSP development letters.
Notify the BCRC if you’re:
- In a lawsuit for medical claims.
- Involved in a car accident.
- Part of a Workers’ Comp claim.
Failing to do so can result in delays or denials of claims and potential repayment obligations.
Responsibilities of Healthcare Providers
- Ask patients about other health insurance coverage before providing services.
- Use CMS-approved questionnaires to determine primary vs. secondary payer.
- Submit MSP information using the correct condition/occurrence codes.
- Attach EOBs or use proper loops/segments when submitting MSP-related claims electronically.
Correct billing protects providers from penalties and ensures timely payment.
Responsibilities of Employers
Employers must:
- Ensure their health plans comply with MSP regulations.
- Identify employees and dependents to whom MSP rules apply.
- Avoid discrimination based on age (65+), disability, or kidney failure.
- Ensure Medicare is billed only after the primary plan pays.
Compliance is not optional—violations can lead to legal consequences and financial penalties.
MSP Compliance and Federal Law
MSP laws are federal, which means they override state laws or private insurance agreements. Even if a state law or plan contract says Medicare should pay first, MSP provisions take priority.
Governed under:
42 U.S.C. 1395y(b) – Section 1862(b) of the Social Security Act
42 C.F.R. Part 411 – Federal regulations on MSP
Providers, insurers, and beneficiaries must follow these rules to avoid compliance issues and recoupments.
Helpful Resources & Training for MSP
The Centers for Medicare & Medicaid Services (CMS) offers a full MSP Training Curriculum to help providers, employers, and beneficiaries understand their responsibilities.
- Access computer-based training (CBTs) on Medicare.gov.
- Contact the Benefits Coordination & Recovery Center (BCRC) for claims coordination help.
- Visit CMS.gov for MSP manuals, forms, and documentation guides.
Conclusion
Understanding Medicare Secondary Payer (MSP) rules is more than just a billing technicality—it’s critical to avoid unexpected costs, denied claims, and legal troubles. Whether you’re a patient, a provider, or an employer, knowing who pays first can make a major difference in your healthcare experience. As the healthcare landscape evolves, staying compliant and informed about MSP is more important than ever.
Frequently Asked Questions
Q1: When is Medicare the primary payer?
Ans: Medicare is primary when you don’t have other insurance, or in specific cases like small employer plans, retiree coverage, or after the ESRD coordination period.
Q2: What happens if Medicare pays by mistake?
Ans: Medicare can demand repayment from the beneficiary, provider, or other insurer. These are known as Medicare recoveries or recoupments.
Q3: Can I have two health plans and Medicare?
Ans: Yes. This is common with employer coverage, COBRA, or retiree plans. The MSP rules determine who pays first.
Q4: How do I contact the BCRC?
Ans: Call the BCRC at 1-855-798-2627 or visit the CMS Coordination of Benefits page.
Q5: What is a Workers’ Compensation Medicare Set-Aside (WCMSA)?
Ans: A WCMSA is a financial arrangement in a Workers’ Compensation settlement that allocates money to pay for future medical services that Medicare would otherwise cover.
