Medicare-Medicaid Crossover Bad Debts

September 2019 | Article

By Jason Adams

The Centers for Medicare & Medicaid Services (CMS) recently issued guidance on accounting for unpaid deductible and coinsurance amounts on dual eligible crossover claims. Dual eligible crossover claims are those with Medicare primary and Medicaid secondary insurance. CMS guidance states that the crossover claims should be charged to an expense account for bad debts. This requirement is effective for cost reporting periods beginning on or after October 1, 2019.

CMS provides the following criteria for allowable bad debts:

  1. The debt must be related to covered services and derived from deductible and coinsurance amounts (unless certain exceptions are met).
  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. There must be sound business judgment that there was no likelihood of recovery at any time in the future.

It has been common practice for some providers to charge crossover claims to contractual allowance accounts, such as Medicaid contractual adjustments. Contractual allowance accounts often infer that the adjustment is a result of contractual terms with a payor versus non-payment after all reasonable collection efforts have taken place. In the past, Medicare Administrative Contractors (MACs) have allowed crossover bad debt claims regardless of accounting treatment as long as there was adequate support that the criteria above were met. However, the recent CMS announcement states specifically, “Do not write off to a contractual allowance account.

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CMS states that this is not a new requirement, but a clarification of “longstanding” regulations outlined in Chapter 3 of the Provider Reimbursement Manual (PRM). Section 320.1 of the PRM, which relates to the direct charge-off method, states that “… amounts deemed to be uncollectible are charged to an expense account for uncollectible accounts. The amounts charged to the expense account for bad debts should be adequately identified as to those which represent deductible and coinsurance amounts applicable to beneficiaries and those which are applicable to other than beneficiaries or which are for other than covered services. … ”

Additionally, Section 320.2 of the PRM, which relates to the reserve method, states, “Bad debt expenses computed by use of the reserve method are not allowable bad debts under the program. However, the specific uncollectible deductibles and coinsurance amounts applicable to beneficiaries and charged against the reserve are includable in the calculation of reimbursable bad debts.”

Currently, this interpretation applies only to Medicare-Medicaid crossover bad debt claims. However, CMS could have the same interpretation with regular Medicare bad debt claims in the future.

If you have any questions or would like more information, please contact an Eide Bailly reimbursement advisor.

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