How Does Medicare Work With a Secondary Payer? 

Many seniors in the United States take advantage of Medicare benefits exclusively to help pay for healthcare needs, but others still have access to private health insurance. Whether through a previous employer, a spouse or some other source, secondary insurance in addition to Medicare benefits can be very helpful. Many seniors find that they aren’t quite sure how Medicare coverage works with secondary insurance.

How Medicare defines payers

Medicare divides payment sources into payers. Medicare insurance is one payer, and each other source is a separate payer. This means that Medicare recipients can have multiple payers on a single account. How each payer’s financial obligation is split is what’s important to understand.

When a medical expense is incurred, payment is based on which entity is considered the primary payer and which is considered the secondary payer. Medicare recipients can potentially have additional payers on an account, but in most cases, there will only be a primary and a secondary.

How does Medicare work with a secondary payer?

The primary payer always pays first, and the secondary payer pays second. Determining which entity is classified as the primary comes down to the roles each entity plays. In the vast majority of cases, private health insurance will always be the primary payer in cases where private health insurance and Medicare coverage are carried by Medicare recipients at the same time.

When a medical bill is sent to your private insurance provider, a coverage determination is made. If your debt is covered, your insurer will pay out to the maximum of your plan. If an amount is left over, this amount will be sent to Medicare for consideration. Medicare benefits then apply according to your plan. If an amount is left over after Medicare benefits apply, the remainder will either be your obligation or will be sent to a third payer if one is available.

How does Medicare work with Medicaid?

Some people qualify as dual-eligibles. These seniors qualify for both Medicare as well as Medicaid coverage. In these situations, Medicare insurance pays first as Medicaid is considered the secondary payer. Any amount that is left over after Medicare insurance makes its payment is sent to your state’s Medicaid office. Once Medicaid has made its payment, any amount left over is sent to you.

Does private insurance affect Medicare benefits?

Carrying private insurance does not affect your eligibility for Original Medicare benefits, and it also does not affect the benefits you are entitled to receive. What it can change, however, is the process of enrolling in Medicare.

Upon turning 65, you can enroll in Original Medicare coverage. Your Initial Enrollment Period encompasses the seven-month period surrounding your birthday month, meaning the three months before, the three months after and the actual month you turn 65. If you have private insurance through an employer-sponsored health insurance plan, you may choose to forgo enrollment in Part B and/or Part D. Most people get premium-free Part A due to taxes paid while working, so most people will get Part A at 65. 

If you lose employer-sponsored coverage at a later date, Medicare enrollment is available under a Special Enrollment Period. During this period, there is no penalty for late enrollment since losing your employer-sponsored coverage counts as a qualifying life event.