Medicare as Secondary Payer (MSP) – Simple Explanation
1. Medicare Never Uses the Primary’s Allowable
Medicare ignores whatever the primary insurance “allows.”
They only use Medicare’s own allowable for the HCPCS + rental month.
2. Medicare Pays Up to Their Normal Benefit
Medicare calculates what they would have paid if they were primary:
Medicare Benefit = 80% of Medicare allowable (after deductible, if any)
3. Then They Subtract What the Primary Actually Paid
Not the primary allowable.
Not the primary discount.
Only the actual dollar amount the primary paid.
Medicare Secondary Payment = Medicare Benefit – Primary Payment
If the answer is negative → Medicare pays $0.
4. Primary Patient Responsibility Counts Toward Medicare Coinsurance
If the primary already left patient responsibility (deductible/coinsurance):
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Medicare does not add more patient coinsurance on top of it.
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The patient never pays more than the larger of the two (Medicare coinsurance vs. primary liability).
5. Medicare Still Applies All DME Rental Rules
Being secondary does not change rental math:
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KH = Month 1
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KI = Months 2–3
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KJ = Months 4–13
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95% month-3 reduction still applies
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75% months 4–13 still applies
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Coinsurance still 20% of Medicare’s month-specific allowable
6. If Primary Paid $0
Medicare pays as if they were primary (their 80% rate).
7. If Primary Paid More Than Medicare’s 80%
Medicare pays nothing.
Quick Example
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Medicare allowable (month-specific): $374.77
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Primary payment: $0
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Medicare benefit:
374.77 × 0.8 = 299.82
Medicare pays: $299.82
Super-Simple Summary
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Medicare uses their own allowable
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Figures out their 80% share
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Subtracts what the primary actually paid
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Applies normal rental rules
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Never uses the primary allowable
MSP Rule: When Primary Covers Medicare’s 80%
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If the primary insurance pays an amount that meets or exceeds Medicare’s 80% of the Medicare allowable, then Medicare pays 0.
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Any patient responsibility assigned by the primary (deductible, copay, coinsurance) must be written off — you cannot bill or collect it.