A Medicare patient may have employer coverage, workers’ compensation, liability insurance, or another health plan. If your practice bills Medicare before identifying the correct primary payer, the claim may be delayed, denied, or later subject to recovery. This matters across a large Medicare population: CMS reports that about 69.4 million people were enrolled in Medicare Parts A and/or B in 2025.
Knowing the Medicare Secondary Payer (MSP) Rule helps providers and billing teams determine who should pay first, collect accurate insurance information, and submit Medicare claims correctly. CMS requires entities that bill Medicare to determine whether Medicare is the primary payer for the services they provide.
This guide explains the key Medicare secondary payer requirements, common coverage situations, billing steps, and errors providers should watch for. In FY 2025, Medicare Fee-for-Service had a projected 6.55 percent incorrect payment rate, totaling $28.83 billion.
What Is the Medicare Secondary Payer (MSP) Rule?
The Medicare Secondary Payer (MSP) Rule determines when Medicare should pay after another insurer or coverage has primary responsibility. For providers, the rule directly affects payer sequencing, claim submission, reimbursement, and potential Medicare recovery.
Medicare is the secondary payer when another health plan or coverage is legally responsible for paying first. Common situations include certain employer group health plans, workers’ compensation, liability insurance, no-fault insurance, and ESRD-related coverage.
The primary payer generally processes the claim first. Medicare may then consider paying any remaining qualified amounts. If Medicare pays first when another payer is responsible, CMS may take action to recoup the incorrect payment.
Why Does the MSP Rule Matter to Providers?
MSP affects the billing process before a claim reaches Medicare. Providers must collect current employment and insurance information and determine whether Medicare is primary or secondary. According to CMS, failure to maintain an identification system for other payers violates the Medicare provider agreement.
Correct MSP screening can help providers:
- Bill the appropriate primary payer first.
- Reduce incorrect Medicare billing and overpayments.
- Submit the information required for secondary claims.
- Reduce the risk of later Medicare recovery activity.
- Support accurate coordination of benefits.
MSP requirements apply to entities that bill Medicare for covered items and services. This includes hospitals, physicians, suppliers, medical practices, and other healthcare providers. CMS requires these entities to determine whether Medicare is the primary payer before submitting applicable claims.
For Part B providers, CMS recommends obtaining billing information at the time of service and submitting the appropriate MSP information with the claim. Electronic claims must contain the required fields, loops, and segments needed to process an MSP claim.
When Is Medicare the Secondary Payer?
Medicare becomes secondary when another insurer or coverage has primary payment responsibility for a beneficiary’s services. The correct payer depends on the beneficiary’s Medicare entitlement, employment, employer size, and type of other coverage.
Working-Aged Beneficiaries With Employer Group Health Plans
For beneficiaries age 65 or older, a GHP based on current employment generally pays first when the applicable employer has 20 or more employees. If the employer has fewer than 20 employees, Medicare generally pays first, and the GHP pays second. Multi-employer plan rules can affect this determination.
Disabled Beneficiaries With Large Group Health Plans
For beneficiaries who qualify for Medicare because of disability, an applicable Large Group Health Plan (LGHP) generally pays first when coverage is based on the current employment of the beneficiary or a family member and the employer meets the 100-employee requirement.
Beneficiaries With ESRD
For ESRD-based Medicare entitlement, a GHP generally pays first during the 30-month coordination period, regardless of employer size. This rule can also apply to certain COBRA and retirement coverage.
Workers’ Compensation
Workers’ compensation generally pays first for services related to a work-related injury or illness. Medicare may make a conditional payment when workers’ compensation is not expected to pay within 120 days, subject to later recovery.
Federal Black Lung Benefits
Federal Black Lung benefits are primary for covered services related to a beneficiary’s pneumoconiosis or related condition. Providers should submit applicable claims to the responsible Black Lung payer rather than treating Medicare as primary.
COBRA and Retiree Coverage
COBRA and retiree coverage require careful review. For beneficiaries age 65 or older or those entitled because of disability, Medicare generally pays first when the other coverage is COBRA or retiree coverage. ESRD is an important exception during its 30-month coordination period.
Medicare, Medicaid, Medigap, and Other Coverage
Medicaid generally pays after Medicare, while Medigap supplements Medicare rather than replacing it as the primary payer. Medicare Advantage also follows different payment arrangements than Original Medicare, so providers should confirm the patient’s specific coverage before billing.
CMS advises providers to identify all applicable coverage and determine the correct payer before submitting claims.
Medicare Secondary Payer Requirements for Providers
MSP compliance starts with accurate insurance information before the claim is submitted. Providers must identify other coverage, determine payer responsibility, and keep the patient’s MSP information current.
Ask the Right Insurance Questions
Ask whether the patient has coverage through their own or a spouse’s current employment. Also ask about workers’ compensation, liability, no-fault insurance, Federal Black Lung benefits, and other coverage that could pay before Medicare. CMS’s MSP questionnaire provides a structured set of questions for this screening process.
Verify Current Coverage
When applicable, eligibility checks can be used to back up patient statements. CMS recommends checking eligibility for other primary insurance information and, for institutional providers, incorporating MSP information from the HETS 271 response into the health record.
Identify the Primary Payer
Determine which insurance bears primary payment responsibility for the specific service. A patient may have multiple types of coverage, and CMS emphasizes that more than one insurer may occasionally be primary to Medicare for a claim.
Document MSP Information
Record relevant employment, insurance, injury, claim, and payer details in the patient’s billing or health record. For Medicare claims, providers must report applicable MSP information using the required claim fields, codes, loops, or segments.
Update Coverage When Circumstances Change
MSP information can change after retirement, a new job, an insurance change, an accident, or the end of other coverage. Providers should reassess relevant information rather than relying on an old payer record. CMS states that providers have a responsibility to collect and maintain current information about other payers.
Provider takeaway: MSP screening should be part of the normal registration, eligibility, and billing process—not a step performed only after Medicare rejects a claim.
Conclusion
Understanding the Medicare Secondary Payer (MSP) Rule helps providers determine which insurer should pay first and submit claims to the correct payer. Accurate insurance screening also helps reduce billing errors, denials, and potential Medicare recovery.
Providers should verify coverage, document MSP information, bill the primary payer when required, and update insurance details when circumstances change. These steps support accurate coordination of benefits and proper Medicare claim processing.
A consistent MSP process makes payer responsibility clearer before claims are submitted. Billing teams should review coverage carefully and follow current CMS requirements for each applicable Medicare beneficiary.
