Collection Efforts for Dual Eligible Bad Debts

This newsletter explains WPS Medicare's position with respect to collection efforts for a bad debt owed by a patient who is eligible for both Medicare and Medicaid (dual eligible). In summary where a State is obligated either by the terms of its own Medicaid plan or State or local law to pay all or any part of a dual eligible's Medicare deductible or coinsurance amount, a provider must bill the state for this amount and obtain a denial before it can be reimbursed as a Medicare bad debt.

The Medicare program will reimburse a health care provider for deductible and coinsurance amounts the provider is unable to collect from a Medicare beneficiary. The regulation at 42 C.F.R. §413.80(e) states,

Before a bad debt may be reimbursed, it must meet the following criteria:

  1. The debt must be related to covered services and derived from deductible and coinsurance amounts.
  2. The provider must be able to establish that reasonable collection efforts were made.
  3. The debt was actually uncollectible when claimed as worthless.
  4. Sound business judgment established that there was no likelihood of recovery at any time in the future.

CMS Pub. 15-1 Section 310 provides further guidance:

To be considered a reasonable collection effort, a provider's effort to collect Medicare deductible and coinsurance amounts must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients. It must involve the issuance of a bill on or shortly after discharge or death of the beneficiary to the party responsible for the patient's personal financial obligations.

Also relevant to the dual eligible issue, CMS Pub. 15-1 Section 322 states, in part:

Where the State is obligated either by statute or under the terms of its plan to pay all, or any part of, the Medicare deductible or coinsurance amounts, those amounts are not allowable as bad debts under Medicare. Any portion of such deductible or coinsurance amounts that the State is not obligated to pay can be included as a bad debt under Medicare provided that the requirements of §312 or, if applicable, §310 are met.

Section 322 concludes by stating that:

If neither the title XIX plan nor State or local law requires the welfare agency to pay the deductible and coinsurance amounts, there is no requirement that the State be responsible for these amounts. Therefore, any such amounts are includable in allowable bad debts provided that the requirements of §312 or, if applicable, §310 are met.

On the other hand, if either the title XIX plan or State or local law requires that the welfare agency pay the deductible and coinsurance amounts, then a provider must make a reasonable collection effort by billing the agency and receiving a denial before Medicare will reimburse the bad debt.

A provider must demonstrate that a debt was uncollectible when claimed as worthless. With respect to a dual eligible, this can only be done by billing the welfare agency for each deductible or coinsurance amount and receiving a partial or total denial of the claim. The denial must be documented and made available to the auditor upon request. We cannot accept other forms of documentation such as a provider's calculations of the agency's liability for the debt or an affidavit from the provider's employee that they were instructed not to bill by the agency. Moreover, we will not accept a letter from the welfare agency informing providers it will no longer pay Medicare deductible or coinsurance amounts because of a State payment ceiling or budget shortfall.

Page Last Updated: Monday, 11-Jul-2011 15:23:11 CDT