Will Medicare make a conditional payment when the primary payer is bankrupt or insolvent?

When a primary payer fails to pay primary benefits in accordance with CMS's policy because it is bankrupt or insolvent, CMS does not make a conditional primary payment and does not make a Medicare secondary payment until after the conclusion of the bankruptcy or insolvency proceedings.

After the conclusion of the bankruptcy or insolvency proceedings, providers, physicians, or other suppliers may file Medicare secondary claims. CMS determines the amount of Medicare secondary payments, if any, after the conclusion of the bankruptcy or insolvency proceedings.

Billing the Beneficiary During Liquidation Process
During the liquidation process, participating providers, physicians, and other suppliers who have accepted assignment may not collect or seek to collect from the beneficiary or the beneficiary's estate, charges for Medicare covered services. Under the terms of the Medicare provider agreement and the terms of the Medicare assignment, the providers, physicians, and other suppliers may bill the beneficiary (or the beneficiary's estate) only to establish a legal claim for future collection of charges and not for purposes of currently collecting charges from the beneficiary or the beneficiary's estate.

When to Make Secondary Payment
After the conclusion of the bankruptcy or insolvency proceedings, Medicare secondary payments may be made if the:

• Provider or physician/supplier has filed a claim with the receiver (i.e., the entity responsible for settling and/or paying the outstanding debts of the bankrupt or insolvent primary payer);

• Payment made on behalf of the bankrupt or insolvent entity responsible for paying primary benefits is less than the amount of the charge and less than the amount Medicare would have paid as the primary payer; and

• Provider, physician, or other supplier is not required to accept the payment as full discharge of the liability of the beneficiary (or estate) for the bill.
  

The receiver determines the payments that can be made on behalf of the bankrupt or insolvent entity. The providers, physicians, and other suppliers receive any available primary payment from the receiver and can then file Medicare claims to obtain any appropriate secondary payments. After the Medicare secondary claims have been processed, any remaining liability (e.g., deductibles, coinsurance, and payment for noncovered services) of the beneficiary (or of a deceased beneficiary's estate) can be pursued by the providers, physicians, and other suppliers. However, they may not pursue collection from the beneficiary if a receiver orders that the allocated fractional payment must be accepted as full discharge of the entire bill. If circumstances dictate, CMS will advise FIs and carriers that it will coordinate the pursuit of the bankruptcy court's findings and communicate the results to them.

Time Limits for Filing After Liquidation Process
If you are a participating provider or supplier, you should file claims with a receiver as soon as possible. The time limit for filing secondary claims once the liquidation process has been completed is the later of the following:

• The usual time limit specified in regulations for filing Medicare claims (i.e., on or before December 31 of the calendar year following the year in which the services were furnished if the services were furnished during the first nine months of a calendar year or on or before December 31 of the second calendar year following the year in which the services were furnished if the services were furnished during the last three months of the calendar year (see 42 CFR 424.44(a)); or

• The last day of the sixth month following the month of the written notice by the bankrupt or insolvent entity to the provider, physician, or other supplier of the amount of primary benefits payable.
  

When Palmetto GBA denies a claim for Medicare conditional primary or secondary benefits in insolvency cases because the receiver has not completed the determination of final payment, we will notify you of the possible 6-month extension on filing claims as described above.

Reference
CMS Internet-Only Manual (IOM), Publication 100-05, Chapter 5, Section 40.5.

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