Medicare for disabled and kidney-failure beneficiaries, working-aged employees, and Medicare secondary payer rules

Medicare is not only for people 65 and older

Most people qualify for Medicare at 65, but federal law opens it earlier to two groups: people with a long-term disability and people with end-stage renal disease (ESRD). The same law also decides who pays first when a Medicare beneficiary has other coverage. These Medicare secondary payer (MSP) rules are heavily tested because they decide whether a client needs Medicare to work as primary coverage, or whether an employer plan still carries the load.

Medicare for disabled beneficiaries

A person under 65 who receives Social Security disability benefits (or a Railroad Retirement disability annuity) becomes entitled to Medicare Part A after 24 months of disability benefit entitlement, so coverage starts in the 25th month. 42 U.S.C. § 426(b) sets this rule. Disability benefits themselves follow a 5-month waiting period, so Medicare usually arrives about two and a half years after the disability begins.

ALS is an exception to the wait. Under § 426(h), a person with amyotrophic lateral sclerosis is entitled to Medicare beginning with the first month of disability benefit entitlement, not the 25th.

Medicare for kidney failure (ESRD)

Under 42 U.S.C. § 426-1, a person of any age qualifies on the basis of ESRD if three things are true:

1. They are fully or currently insured under Social Security or Railroad Retirement, receive those benefits, or are the spouse or dependent child of someone who does.
2. They are medically determined to have end-stage renal disease, meaning kidney failure that needs regular dialysis or a transplant.
3. They file an application.

Entitlement normally begins with the third month after the month a regular course of dialysis starts. It can start earlier, as early as the first month of dialysis, for a patient who enters a home-dialysis training program, or with the month of hospitalisation for a kidney transplant.

Who pays first: the Medicare secondary payer rules

When a beneficiary also has a group health plan (GHP), the federal rules turn on why the person has Medicare and how big the employer is. The key phrase is current employment status: the person (or their spouse) is actively working, is the employer, or is associated with the employer in a business relationship. Retiree coverage is not current employment, so a retiree plan pays after Medicare, except during the ESRD coordination period described below, which applies to group plan coverage whether or not it comes from current employment.

• Working aged (65 and older). If the employer has 20 or more employees, the group plan pays first and Medicare second. The plan must give a worker or spouse aged 65 or older the same benefits, on the same conditions, as younger employees. With fewer than 20 employees, Medicare pays first.
• Disabled (under 65). If the coverage comes from current employment with a large group health plan, meaning an employer of 100 or more employees, the plan pays first. With a smaller employer, Medicare pays first.
• ESRD. For a 30-month coordination period, the group plan pays first regardless of employer size, and it may not treat ESRD patients differently from anyone else. After the 30 months, Medicare becomes primary and the plan may pay secondary.

Other primary payers

Medicare also pays second to workers' compensation, automobile and liability insurance (including self-insurance), and no-fault insurance. If one of those payers will not pay promptly, Medicare may make a conditional payment. That payment must be reimbursed to the Medicare trust fund once the primary payer settles. Insurers and plan administrators must report covered people to Medicare, and failing to do so carries civil money penalties.

Exam tip: count the employees and identify the reason for Medicare. 20 decides working-aged cases, 100 decides disability cases, and ESRD ignores size and uses a 30-month clock.

Why it matters to a producer

A client who is still working at 65 for a large employer may reasonably delay Part B and skip a Medicare supplement while the group plan stays primary. A client on a small employer's plan, or on retiree coverage, generally has Medicare as primary (outside an ESRD coordination period) and needs to enroll on time to avoid gaps. Getting the order of payment wrong can leave the client with unpaid claims.