Coordination of Benefits in Medical Billing: Primary vs Secondary, the Birthday Rule and MSP

Coordination of benefits (COB) is the set of rules that decides, when a patient has more than one health plan, which plan pays first, which pays next, and how the second payment is calculated from the first. The plan that pays first is the primary payer; the one after it is secondary.

Most COB problems are easy to fix, but they often go unnoticed until a denial arrives. Asking the right questions at registration prevents most of them.

Where you see it

Place	What goes there
CMS-1500 box 11d	Whether there is another health benefit plan; boxes 9, 9a and 9d carry the other insured and plan
837P loop 2320	Other subscriber information, with the payer responsibility sequence (P, S, T) and the primary’s CAS adjustments and paid amount
837P loop 2330B	The other payer’s name and ID
271 eligibility response	Other payer or MSP information returned by the payer, including Medicare’s record of a primary plan
MSP questionnaire	The model admission questions from the Medicare Secondary Payer Manual, asked at registration
Remittance advice	CARC 22 and remark codes MA04, MA92 or N4 when COB is in doubt; OA-23 on a secondary remittance for the prior payer’s impact (see the group code column on our annotated remittance)

Who pays first: commercial plans

Employer and individual plans mostly follow the NAIC model rules:

Situation	Primary
Patient is the employee on one plan and a dependent on another	The plan where the patient is the employee
Patient has active-employee coverage and retiree or COBRA coverage	The active-employee plan
Child covered by both parents	The birthday rule: the plan of the parent whose birthday comes first in the calendar year; the year is ignored. Same birthday: the plan that has covered the parent longer
Divorced or separated parents	A court decree if there is one; otherwise the custodial parent’s plan, then the custodial parent’s spouse, then the non-custodial parent
Nothing above decides it	The plan that has covered the patient longer

Who pays first: Medicare Secondary Payer

Medicare is secondary by law in a defined set of situations, which CMS calls the Medicare Secondary Payer (MSP) provisions:

Situation	Primary	Note
Working aged: 65 or older, group health plan (GHP) from own or spouse’s current employment, employer has 20 or more employees	The GHP	The 20-employee test counts full and part time staff on each working day in 20 or more weeks of the current or prior year
Disability: under 65, Medicare on the basis of disability, large group health plan from own or a family member’s current employment, employer has 100 or more employees	The LGHP	Below 100 employees, Medicare is primary
ESRD: Medicare on the basis of end-stage renal disease and a GHP of any size	The GHP, for a 30-month coordination period	The period starts when the patient is eligible for Part A; it applies to all covered services, not only dialysis, and even if the plan says it is secondary to Medicare. After 30 months Medicare is primary
Retiree coverage, or COBRA for an aged or disabled beneficiary	Medicare	COBRA is primary only during the ESRD coordination period
Workers’ compensation, no-fault, liability, Black Lung	That program, for related services only	Medicare may make a conditional payment and recover it later
TRICARE For Life, CHAMPVA, Medicaid	Medicare	These pay after Medicare, and Medicaid pays after everyone

The ESRD rule matters most to nephrology practices. A dialysis patient with employer coverage keeps that plan as primary for 30 months after Medicare eligibility, so the practice needs the Medicare eligibility date on file to know when Medicare becomes primary.

The MSP questionnaire

The Medicare Secondary Payer Manual, chapter 3, section 20.2.1, publishes the model admission questions providers use to find out who is primary. They cover Black Lung, workers’ compensation, no-fault and liability; then age and employment (the patient’s and the spouse’s) for the working aged rule; then disability and ESRD. Hospitals must ask them at each admission and, for recurring outpatient services, verify the answers at least every 90 days. Physician practices are not bound by the hospital rule; asking at each new course of treatment and whenever the card changes is the practical equivalent. Changes are reported to the Benefits Coordination and Recovery Center (1-855-798-2627), which keeps Medicare’s record of other coverage.

How the secondary claim reports the primary’s decision

The secondary payer needs to know what the primary allowed, paid and adjusted, line by line. On an 837P that information goes in the CAS segments of loop 2320 (claim level) or 2430 (line level) and the AMT*D payer paid amount: the same group codes and reason codes that appeared on the primary remittance. On paper you attach the primary’s EOB. Medicare then pays as secondary the lowest of three amounts: the Medicare allowed amount minus the primary’s payment; what Medicare would have paid as primary (allowed minus deductible and coinsurance); or the amount the provider is obligated to accept minus the primary’s payment.

A worked example

A 67-year-old patient works full time for an employer with 200 employees and has Medicare Part B. The employer plan is primary. The oncology practice bills chemotherapy administration, CPT 96413, at 480.00.

Step	Amount	Carried to Medicare as
Primary allowed	360.00
Primary contractual adjustment	120.00	CASCO45*120.00
Primary paid (80 percent)	288.00	AMTD288.00
Patient coinsurance under primary	72.00	CASPR2*72.00

Medicare’s allowed amount for 96413 is 300.00 and the deductible is met. The three candidate payments: 300.00 minus 288.00 = 12.00; 80 percent of 300.00 = 240.00; the obligated amount 360.00 minus 288.00 = 72.00. Medicare pays the lowest, 12.00. The patient owes 72.00 minus 12.00 = 60.00. All figures are illustrative. A secondary payer does not automatically cover the whole coinsurance.

What to do

• Ask the MSP questions at registration and record the answers with a date. Repeat them when the card changes, at each new course of treatment, and every 90 days for recurring hospital outpatients.
• Check eligibility before the visit. Iridium Suite’s real-time eligibility check returns the other-payer information carried in the 271 response, which is the earliest point to catch a COB change.
• Bill in order. Primary first; secondary only after the primary remittance posts, with the CAS data or EOB attached. Track the timely filing limit on the secondary.
• Recognize the codes. CARC 22 (another payer may be responsible) with MA04, MA92 or N4: verify coverage, update the BCRC or the commercial plan if the record is out of date, then resubmit. CARC 109 (not covered by this payer, send to the correct payer) is handled the same way. OA-23 on a secondary remittance is not a denial; it is the prior payer’s adjudication being accounted for. A COB denial is almost always a resubmission, not an appeal.

Related terms

• Crossover claims
• Timely filing limit
• TRICARE billing
• CHAMPVA
• PR-1, PR-2 and PR-3: deductible, coinsurance and copay
• Claim adjustment group and reason codes
• Medicare Secondary Payer and the ESRD 30-month coordination period
• When does Medicare play second fiddle to a group health plan?
• Master the trick of Medicare secondary billing
• Keep it simple: 3 ways to file secondary claims
• How to handle secondary insurance denials

Further reading: CMS Coordination of Benefits and Recovery overview; Medicare Secondary Payer Manual, chapter 1 (PDF); Medicare Secondary Payer Manual, chapter 3, model admission questions (PDF); X12 claim adjustment reason codes.