Limitation on Who Provider Can Bill

When Medicare was first enacted, the program was set up to pay the provider's reasonable cost, or basically the same that everyone paid. Prior to the 1980 amendments, and until 1988, CMS provided that a providor could bill a liability insurer if it chose to, and if the liability insurer did not pay the entire amount the balance could be billed to Medicare. FN 1. In 1983, Medicare changed its payment system such that the rates had nothing to do with actual costs. FN 2. Under these circumstances, a providor clearly has an incentive to seek payment from a source other than Medicare if possible. In 1988, gave notice of a change to its manual, by which a providor was required to bill Medicare even if a liability insurer might be responsible and prohibited from filing a lien against any liability claim. FN 3.

In Oregon Ass'n of Hospitals v. Bowen FN 4., the Plaintiff hospital association argued that the proposed manual changes exceeded the goverment's authority. The government sought to justify the change on the statutory prohibition against charging a Medicare patient more than the rate paid by Medicare. FN 5. The Court conlcuded that the goverment had exceeded its authority. The point of the MSP was to make a liability insurer the primary payer, and the rule changes were actually contrary to that point.

The current rule is set out in Chapter 2 of the MSP Manual. First, the rule justifies the differing treatment of liability insurance, noting that liability insurance lacks a contractual obligation to pay medical expenses. FN 6. The current rule is a little different from that considered by the Bowen court, and in perintnet part reads as follows:

Following expiration of the promptly period (120 days), or if demonstrated (e.g., a bill/claim that had been submitted but not paid) that liability insurance will not pay during the promptly period, a provider, physician, or other supplier may either:

  • bill Medicare for payment and withdraw all claims/liens against the liability insurance/beneficiary’s liability insurance settlement (liens may be maintained for services not covered by Medicare and for Medicare deductibles and coinsurance); or
  • maintain all claims/liens against the liability insurance/beneficiary’s liability insurance settlement. FN 7.

Interestingly, a special rule exists for providors in Oregon relating to the Bowen case. FN 8.

FN 1. Oregon Ass'n of Hospitals v. Bowen, 708 F.Supp. 1135, 1140 (D. Or. 1989).

FN 2. Pub. L. 98-21, 97 Stat. 65 § 601(1983).

FN 3. The language of the manual change at that time can be found at 708 F.Supp. at 1137-38.

FN 4. 708 F.Supp. 1135 (D. Or. 1989).

FN 5. Id. at 1140-41.

FN 6. The Manual states:

Liability insurance differs from the other insurance policies or plans that, under § 1862(b) of the Act, are primary to Medicare. In the case of other types of insurance that are primary to Medicare, i.e., no-fault insurance, group health plans, and workers' compensation, the insurance has a contractual obligation to pay for medical services provided to the covered/injured person. Liability insurance, however, has a contractual obligation to compensate the alleged tortfeasor for any damages the alleged tortfeasor must pay to an injured party.

MSP Manual, Chapter Two, § 40.2(A).

FN 7. MSP Manual, Chapter Two, § 40.2(B).

FN 8. MSP Manual, Chapter Two, § 40.2(C).