Medicare Secondary Payer (MSP): Coordination of Benefits Guide

Estimated Read Time: ~7 minutes

Summary: Medicare Secondary Payer (MSP) is a federal law that determines when Medicare pays second for your healthcare costs. Understanding MSP helps you navigate coverage coordination and avoid billing surprises when you have multiple insurance plans.

You’re 65 and you’ve earned your Medicare card. But you’re still working, and your employer offers health insurance too.

So, which insurance pays first? 

It might surprise you to learn that it’s not always Medicare. This is because the Medicare Secondary Payer rules apply. These federal guidelines help protect both your wallet and Medicare’s resources from wasteful duplicate payments.

Here’s what many people may not realize: having two insurance plans may save you money. With the coordination in place, you may pay less out-of-pocket than you would with just one plan.

What is Medicare Secondary Payer (MSP)?

Medicare Secondary Payer (MSP) is a federal law determining the order in which insurance plans pay for your healthcare when you have multiple types of coverage. MSP establishes which insurance pays first and which one pays second to prevent duplicate payments and ensure proper coordination of your benefits.¹

Here’s what primary and secondary mean:

Primary insurance pays first. It handles your medical bills according to its coverage rules and benefit limits.

Secondary insurance pays second. It covers the remaining eligible costs after the primary insurance finishes paying.

When Medicare becomes secondary, your other insurance takes the primary role and pays first. Medicare then steps in to cover the remaining costs that fall under its rules.²

This coordination prevents a common problem: double payments for the same service. 

Without these rules, healthcare providers might receive more payment than the actual cost of the service. And in such cases, the government can ask for the overpayment back, creating complexity.

When does Medicare act as the secondary payer?

Several situations trigger Medicare secondary payer rules. Each one follows specific criteria² that determine the payment order.

Working individuals aged 65+ with employer group health plans

If you’re still working at age 65+ and enrolled in an employer group health plan (at a company that employs 20 or more people), your employer’s health plan typically pays first. This comes as a surprise to most new Medicare beneficiaries who assume their new Medicare card takes priority.

Workers’ compensation claims

If you’ve hurt yourself while on the job, workers’ compensation insurance jumps to the front of the line for any related medical treatment.

Auto accident or liability insurance coverage

Car accidents create a clear hierarchy: the at-fault driver’s insurance pays first. Your auto insurance may also offer coverage, depending on the state you live in and your policy details. Medicare covers what’s left after liability insurance handles its share.

Veterans benefits

Veterans Affairs (VA) pays first for service-connected conditions. Medicare becomes the backup plan for these specific health issues.³

COBRA coverage situations

The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer’s health insurance after you leave your job or experience certain qualifying events. COBRA benefits take priority over Medicare for the first 30 months. After that period ends, Medicare moves to the primary position.

Understanding these specific situations helps you know what to expect when you have multiple insurance options and ensures you provide the right information to your healthcare providers.

What is Medicare MSP coordination of benefits and how does it work?

Medicare coordination of benefits is the process that determines which insurance pays first when you have multiple health plans. It creates an organized system so your insurance plans work together.

How coordination of benefits (COB) works under MSP

Medicare coordination of benefits provides an organized system that ensures your insurance plans work together smoothly. The process follows a clear sequence:

1. Your primary insurance processes the claim first, paying according to its rules and coverage limits.
2. Information automatically transfers to Medicare. Your healthcare provider or primary insurance company sends the claim details directly to Medicare — you don’t need to take any action for this step.
3. Medicare evaluates the remaining costs and pays its share based on its own coverage guidelines.
4. You are responsible for any leftover expenses that neither insurance covers.

This system helps eliminate guesswork. Each insurance company knows exactly what the other paid, preventing overpayments and underpayments.

What are the Medicare coordination of benefits rules?

Medicare uses specific criteria to determine when it pays second:

Company size matters: When employers have 20 or more employees, their group health plan automatically becomes primary for workers 65 and older.

Coverage type creates hierarchy: Workers’ compensation and liability insurance automatically take priority over Medicare for related claims.

Insurance companies and employers must report coverage information to Medicare.⁴ It’s required by law.

MSP compliance and employer responsibilities

Employers must abide by MSP rules.⁵ The law creates specific obligations for companies that offer group health plans.

Employer group health plan rules for individuals over 65

Companies with 20 or more employees must offer identical health benefits to workers 65 and older as they provide to younger employees. They can’t force older workers to use Medicare first or offer inferior coverage based on age.

For companies with fewer than 20 employees, Medicare acts as the primary payer for workers 65 and older, with the employer’s group health plan serving as secondary coverage.

Reporting requirements⁶

The law mandates that employers and insurance companies must report specific information to Medicare:

• Group health plan coverage for Medicare beneficiaries
• Workers’ compensation settlements and ongoing payments
• Liability insurance settlements that might affect Medicare payments

Legal implications of non-compliance

Ignoring MSP rules creates serious consequences. Companies face penalties and must reimburse Medicare for payments that other insurance should have made.

How claims are paid when Medicare is secondary

Let’s walk through a real scenario that shows how MSP coordination works in practice.

You need surgery costing $2,000. Your employer insurance covers 80% after you meet your $500 deductible. Here’s how the payments flow:

You pay the $500 deductible first. Your employer insurance then pays 80% of the remaining $1,500, which equals $1,200. This leaves $300 unpaid.

Medicare evaluates the remaining $300 and applies its own coverage rules. If Medicare covers 80% of the service, it pays $240 of the remaining balance.

Your final responsibility is the $500 deductible plus the final $60 that neither insurance covered, totaling $560 instead of the full $2,000.

What to do if there’s a claims dispute:

Even with dual coverage, disputes may arise when:

Insurance companies disagree about which should pay first
• Claims are processed incorrectly or sent to the wrong insurer
• Coverage determinations differ between your plans
• Providers bill the wrong insurance company initially

If you encounter billing issues or payment disputes, contact both insurance companies to clarify the coordination process and ensure claims are processed according to MSP rules.

Medicare contractors and systems coordination

The Benefits Coordination and Recovery Center (BCRC) manages MSP information for Medicare. This specialized contractor tracks other insurance coverage, coordinates benefit payments and resolves disputes between insurance companies. If you’re experiencing claim disputes or coordination issues, the BCRC can help clarify which insurance should pay first and work with your providers to resolve billing problems.

Why understanding Medicare Secondary Payer matters for your coverage

Understanding MSP rules can help you become a more informed healthcare consumer. When you know which insurance pays first, you may be better positioned to provide accurate information to healthcare providers, potentially prevent claims processing delays and spot billing errors before they become expensive problems.

This knowledge may give you greater confidence in using your healthcare. You’ll be better prepared for what to expect from each insurance company and can identify coordination mistakes easily.

How Medicare supplement insurance works with MSP rules

Medicare supplement insurance operates independently of MSP coordination rules. These policies are designed to work with Original Medicare and pay benefits based on what Original Medicare approves and pays, regardless of whether Medicare is the primary or secondary payer.

When you have other coverage that makes Medicare secondary (such as employer group health insurance) and you also have a Medicare Supplement policy, the payment process works as follows:

• Your primary insurance (like employer coverage) pays first
• Medicare pays second as the secondary payer
• Your Medicare supplement policy pays last

Medicare supplement policies act as a supplement to Original Medicare rather than coordinating as a primary or secondary payer under MSP rules. The policy pays only after Medicare processes the claim and covers only costs that Medicare approves.

For help understanding Medicare supplement plans better, visit the Mutual of Omaha Advice Center. The Advice Center will ask you a few questions to understand your preferences and suggest which Medicare solutions best fit your needs.

FAQs related to Medicare Secondary Payer

Q1: What is Medicare Secondary Payer?

Medicare Secondary Payer (MSP) is a federal law that determines when Medicare pays second for your healthcare costs when you have multiple insurance plans. MSP establishes payment order to prevent duplicate payments and ensure proper coordination between your insurance plans.

Q2: What is Medicare Savings Program?

Medicare Savings Program (MSP) is a program that helps people with limited income and resources pay for Medicare costs such as premiums, deductibles and coinsurance. Despite sharing the same acronym, Medicare Savings Program and Medicare Secondary Payer are completely separate programs with different purposes.

Q3: How do I know if Medicare is my primary or secondary insurance?

Medicare offers a Secondary Payer questionnaire on Medicare.gov to help determine your coverage order.⁷ If you’re working and have employer insurance through a company with 20 or more employees, your employer plan typically pays first.

Q4: Do I need to inform Medicare about my employer insurance?

Yes, you must report other insurance coverage to Medicare. This information ensures proper benefit coordination and prevents billing delays. Update your coverage information by calling Medicare directly or through your online Medicare account.

Q5: Can Medicare refuse to pay if it’s supposed to be secondary?

Medicare pays its appropriate share after your primary insurance processes the claim first. However, incorrect information about your other coverage or failure to follow proper procedures can delay or complicate payments.

Q6: What is the BCRC and how does it help with Medicare Secondary Payer issues?

The Benefits Coordination and Recovery Center (BCRC) serves as Medicare’s specialized contractor for MSP management. They track other insurance coverage, coordinate benefit payments and resolve disputes between Medicare and other insurance companies.

Q7: Does MSP apply to Medicare Advantage plans too?

Yes, MSP rules apply to Medicare Advantage plans exactly like Original Medicare. If you have other insurance that should pay first, your Medicare Advantage plan becomes the secondary payer and follows identical coordination rules.

Sources

¹ Centers for Medicare and Medicaid Services. Web page: Medicare Secondary Payer Overview. Retrieved July 27, 2025, from www.cms.gov/medicare/coordination-benefits-recovery/overview/secondary-payer

² Centers for Medicare and Medicaid Services. Web page: Medicare Secondary Payer Fact Sheet. Retrieved July 27, 2025, from www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/msp_fact_sheet.pdf

³ U.S. Department of Veterans Affairs. Web page: VA health care and other insurance. Retrieved July 27, 2025, from www.va.gov/resources/va-health-care-and-other-insurance

⁴ Centers for Medicare and Medicaid Services. Web page: Mandatory Insurer Reporting. Retrieved July 27, 2025, from www.cms.gov/medicare/coordination-benefits-recovery/mandatory-insurer-reporting

⁵ Medicare.gov. Web page: Coordination of benefits & other insurance. Retrieved July 27, 2025, from www.medicare.gov/health-drug-plans/coordination

⁶ CMS.gov. Web page: Mandatory Insurer reporting for Non-Group Health plans. Retrieved July 27, 2025, from www.cms.gov/medicare/coordination-benefits-recovery/mandatory-insurer-reporting

⁷ Medicare.gov. Web page: Who Pays First? Retrieved July 27, 2025, from www.medicare.gov/health-drug-plans/coordination/who-pays-first

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