3. Conditional Payments

The Medicare program was offered as an insurance type program, after decades of failure by some to sell the nation on national health insurance. FN 1 In its lifetime, the Medicare Trust Fund has run a surplus in only two years. FN 2. One court has gone so far as to say that "the financial viability of Medicare is dependent on its being reimbursed." FN 3. Medicare is a very popular program with the public, and thus the politicians have no stomach for reducing benefits. Since the tax which funds the program is based on a flat marginal rate (in large part to maintain the pretense that the program is insurance as opposed to welfare), there is no political stomach for raising the tax/premium paid either. The most common method of dealing with the declining solvency has been cost controls, either by setting below market reimbursements or using private providers who are paid a flat rate (e.g. Medicare Advantage). Against this backdrop, the MSP provides a perfect political "solution", at least for a little while. The idea is to appear to provide the promised benefits while shifting the cost onto private insurers, providers and in some cases taxpayers. The MSP has the same economic impact as a tax, but is hidden from public view, a politician's dream.

The Center for Medicare Services [CMS] is precluded for making any payment for any item or service if it has been paid, or can reasonably be expected to be paid, by a primary plan. If this were as far as the plan went, it would be simple enough. The beneficiaries receive their promised health care and Medicare has to outlay no funds. But there is a political hitch. A number of primary plans, due to the very nature of their contractual or tort obligations, don't pay right away. Where the primary plan disputes its obligation to pay, the Medicare beneficiaries would have to wait for (or self fund) their health care while the claim is being processed or litigated, which might be viewed by some as a "cut" in the promised benefits. Hence, the no-pay rule has an exception. Medicare may make what are called conditional payments. FN 4.

The trigger for Medicare's ability to make conditional payments is a determination that the primary plan(s) "has not made or cannot reasonably be expected to make payment with respect to such item or service promptly,". FN 5. The key phrase is promptly, which is defined as " a payment by the primary plan within 120 days of receipt of the claim." FN 6. Most of the problems with the MSP arise from the mechanisms set up for CMS to get its money back, which is the heart of the savings promised by the MSP.

FN 1. See R Swedloff, Can't Settle, Can't Sue: How Congress Stole Tort Remedies from Medicare Beneficiaries, 41 Akron Law Review 557 (2009).


FN 2. Copies of the Trustee reports are available at this CMS page.


FN 3. Wall v. Leavitt, 2008 WL 4737164 at *10 (E.D. Cal. 2008).

FN 4. "The way the system is set up the beneficiary gets the health care she needs, but Medicare is entitled to reimbursement if and when the primary payer pays her." Cochran v. United States Health Care Fin. Admin., 291 F.3d 775, 777 (11th Cir. 2002).

FN 5. 42 U.S.C. § 1395y(b)(2)(B)(i); 42 C.F.R. § 411.21.

FN 6. 42 C.F.R. § 411.21.