Money Talks | Jan. 29, 2015

Who Pays First? – Insurance questions answered

By Melissa Myers and Michael J. Tucker, Jan. 29, 2015.

450746397Melissa Myers: Here’s an interesting tidbit about our clients who are still working after age 65.

Michael J. Tucker: I thought you were opposed to that.

Myers: Well, in addition to those who like continuing to get a paycheck, a disarming number of people actually enjoy working enough to keep doing it.

Tucker: I’ve noticed that curious phenomenon as well.

Myers: Here’s the tidbit: the government has rules for health insurance companies to determine “who pays first” for folks who have Medicare and who also have employer-provided health insurance coverage.

Tucker: And most Americans qualify for Medicare Part A at age 65, even if they don’t elect to start receiving Social Security retirement benefits until later.

Myers: If they’re still working, and if their employer provides health insurance coverage, then they’re covered by Medicare and by the employer coverage.

Tucker: I get it. The government’s rules determine which costs are paid by Medicare and which costs are paid by the employer’s insurance company.

Myers: That’s the idea. The sector of the government that handles this is called the Center for Medicare and Medicaid Services (CMS).

Tucker: I bet CMS has some lengthy rule books that are a joy to read.

Myers: I don’t know about that, but here’s a CMS rule that applies to same-sex spouses that I was surprised to learn.

Tucker: What’s that?

Myers: CMS recognizes same-sex marriages for purposes of these rules, even if the state where the couple lives doesn’t.

Tucker: Isn’t that like the rule that most of the federal government follows?

Myers: Yes, but you might expect CMS to align with the Social Security rule, which recognizes same-sex marriage only if the spouse lived in a marriage-recognition state at the time the spouse applied for Social Security benefits.

Tucker: Oh, you’re right . . .

Myers: Again, this has relevance in the “who pays first” area for Medicare secondary payer rules, which are a nightmare for consumers if it doesn’t work smoothly.

Tucker: It’s an obscure rule, but
a surprising one.

Myers: This scenario is most likely to play out in a marriage nonrecognition state.

Tucker: We can’t use Arizona in that example these days, so let’s use Texas. Or Alabama.

Myers: Say the couple has always lived in Tex-bama. One of them is still working and is over 65 and has Medicare for primary health coverage and employer-provided health insurance that she is using as secondary coverage. Medicare is going to treat this couple as married even though they live in Tex-bama.

Tucker: I can see how messy it could get if, for example, the couple was treated as married for the employer’s health insurance purposes but not for Medicare purposes. If the employee’s spouse had medical expenses, and if the employer-provided coverage was treating her as covered while Medicare wasn’t …

Myers: Yes, it is a great rule. We can only be thankful, on behalf of the community, to the folks who work inside CMS and the policymakers and national organizations that presumably worked behind the scenes to get this rule in place.

Tucker: Bureaucracy is rarely fun, but once in a while, it’s got your back.

Myers: Here and there, folks inside the beltway have done quite a bit to stretch the application of various laws to create equal treatment for same-sex marriage couples.

Tucker: Now that same-sex marriages are recognized in 37 states, we don’t have to be quite so careful about saying that out loud.


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This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation. Neither Camelback nor Commonwealth offers tax or legal advice.