What is Medicare Bad Debt?

Medicare Reimbursement Solutions

Medicare reimbursable bad debt can be a significant source of additional reimbursement for many hospitals.

Every year providers submit their Medicare bad debt listings to their assigned Medicare Administrative Contractor (MAC), along with their Medicare cost report. Providers are reimbursed a portion (currently 65%) of the total eligible amount of Medicare Bad Debt that is incurred and unpaid by Medicare beneficiaries.

Providers are only eligible to receive reimbursement if their Medicare Bad Debt account meets the specific criteria, as mentioned in CMS Provider Reimbursement Manual 42 CFR 413.89.

Criteria for Allowable Bad Debts

  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 a reasonable collection effort was 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.

Identifying and capturing 100% of allowable Medicare bad debts requires the aggregation, integration, and analysis of many data elements from various systems and sources. It is complex and requires proper understanding and knowledge of each system and process. Previously, hospitals were able to go back and claim reimbursements from prior fiscal years, but now Medicare Administrative Contractors (MACs) have placed certain restrictions regarding this practice. Therefore, it is important to get it right the first time.

What is Medicare Advantage Bad Debt?

Medicare Advantage bad debt seeks to reimburse hospitals for unpaid and uncollectable deductibles and coinsurance incurred by private Medicare Advantage Plan members enrolled with Medicare Part C carriers.

If your hospital is not requesting Medicare Advantage Bad Debt, you may be leaving reimbursement dollars on the table. While 34% of Medicare beneficiaries are enrolled in Medicare Advantage plans, the distribution of those members is not uniform across the country. Some states like Florida, Hawaii, Minnesota, Oregon, Wisconsin, Pennsylvania have very high enrollment rates of Medicare Advantage, while others like Alaska, Montana, North Dakota, Nebraska have very low enrollment rates. Due to the significant variability in Medicare Advantage enrollment rates, it is important to review contracts and policies that impact a hospital’s opportunity to collect Medicare Advantage Bad Debt reimbursement.

What is the Difference between Traditional Medicare Bad Debts and Medicare Advantage Bad Debts?

Traditional Medicare bad debts are those unpaid deductibles and coinsurance amounts that are related to Medicare Part A and Medicare Part B beneficiaries. These Part A and B bad debts are reported on the Medicare cost report each year and reimbursed as a lump sum to the hospital. Medicare Advantage bad debts similarly include those unpaid deductibles and coinsurance amounts but from Medicare Part C enrollees who have opted out of Medicare Part A and B in favor of a Medicare Advantage plan that may offer them enhanced benefits. Because the Part C carrier is receiving payment from Medicare for each enrollee, that carrier becomes responsible for bad debts if not explicitly excluded in the contract with the hospital.

How does Healthcare Reimbursement Solutions (HRS) Assist Hospitals with Medicare Bad Debt and Medicare Advantage Bad Debt?

Healthcare Reimbursement Solutions (HRS) ensures your Medicare Bad Debt listings are complete, accurate, and created according to regulations outlined by CMS. Our team has decades of experience and the tools required to help hospitals navigate the complex data aggregation, integration, and analysis associated with Medicare Bad Debt and Medicare Advantage Bad Debt.

Reach out today to learn how HRS can:

Medicare Advantage Bad Debt

  • Identify 100% of your hospitals’ potential Medicare Deductibles and Coinsurance and reconcile them back to their ultimate disposition, whether that be a properly adjudicated crossover claim, self-pay account with exhausted collection efforts, or a charity care recipient that has met all documentation requirements.
  • Crosscheck all potential bad debts against collection efforts, charity policies, and previously claimed bad debts, as is the case in a reopening, to report back to your operational health. This often-overlooked step informs your internal policies and procedures, allowing you to capture bad debt correctly at the time of cost report preparation.
  • Prepare initial or replacement Medicare bad debt listings and submit them to your Medicare Part A MAC and any relevant Medicare Part C Advantage Plans, supporting them through audit to final settlement. Our work isn’t over until you have been fully reimbursed and audited (NPR issued).