CMS Pub. 100-05, ch. 5, § 60.1.3.2.1

A. Cost Avoidance Savings

Cost avoided (unpaid MSP claims) savings, reported in lines 1 and 2, are those that the A/B

MAC and DME MAC has returned without payment because there is strong evidence that

another insurer is the primary payer and there is no indication that payment has been requested

from that payer. Cost avoided savings are always classified as pre-payment savings. The

information indicating MSP involvement may be contained in the A/B MACs and DME MACs

files, on the CWF Auxiliary file, or on the claim itself. In addition, any information obtained

from a non-Medicare source and used as the basis for claiming cost avoidance savings must

meet the criteria in §60.1.3.B.

Information considered adequate for claiming cost avoidance savings includes statements on the

claim noting "automobile accident," "collision," or the name of the automobile insurer. Another

example would be previous information obtained that shows that GHP coverage exits. The A/B

MAC and DME MAC does not count claims it develops as "possible" MSP situations based on

routine edits as cost avoidance savings unless there is previous information that another payer

has primary responsibility. For example, "trauma code" edits are not, by themselves, considered

strong evidence that Medicare is the secondary payer.

Line Description Instruction

Line

1

Cost Avoid (#

of claims)

The number of cost avoided claims from which savings

is recorded on the report.

Line

2

Cost Avoid ($) The dollar value of the potential Medicare payments

calculated for the claims on Line 1 that will be saved if the

primary payer makes a payment that relieves Medicare of all

payment liability.

The amount of cost avoided is what Medicare would have paid. The A/B MAC and

DME MAC must not count total charges as cost avoided savings.

For A/B MACs (Part A) the cost avoided amount is the "Medicare payment rate" or the

"current Medicare interim reimbursement amount" less any coinsurance amount

applicable. It reduces Part B services subject to coinsurance for the coinsurance amount

or uses a "coinsurance reduction factor" of 19 percent to calculate coinsurance charges

for all Part B services. It may assume that the deductible has been met.

A/B MACs (Part B) reduce the cost avoided amount based upon reasonable charge and

coinsurance calculations:

• Reasonable Charge Reductions - The reasonable charge amount may be

calculated through the actual reasonable charge methodology or through a

"reasonable charge reduction factor" which is the percentage derived from the

most current Forms CMS-1565A by dividing line 3 (Total Amount of reduction)

by Line 1 (Total Covered Charges for All Claims). (See the Medicare Financial

Management Manual, Chapter 6, §240.2.)

• Coinsurance - The A/B MACs reduce line items subject to the Part B

coinsurance by that amount or apply a "coinsurance reduction factor" of 19

percent to all charges.

B. Tracking/Adjusting Cost Avoidance Savings

Cost avoidance savings may not duplicate savings reported as full or partial recoveries

and may not be shown where Medicare ultimately makes primary payment. To prevent

duplicate counting, the A/B MACs and DME MACs suspends all claims returned unpaid.

It sets up a control on the claim when it is returned for development. It maintains this

control for 75 days, unless further information is received before that time which allows

processing the claim. If no further information on the claim is received, the claim may be

denied after 75 days. A/B MACs and DME MACs are required to continue tracking the

claim, but retain the key identifying information on the claim, as described in §60.1.3.A.

The CMS prefers cost avoidance savings only after 75 days have elapsed. However, A/B

MACs and DME MACs do have the option of counting the savings when the claim is

initially suspended or at any time during the suspension period. If the latter alternative is

selected, the A/B MACs and DME MACs adjust cost avoidance savings if the claim is

resubmitted during the suspension period with information showing it is not a legitimate

cost avoidance.

NOTE: The A/B MAC (Part B) may not return a non-assigned claim to a beneficiary, but

must control it as described above when the claim is being developed for MSP

involvement and counted as cost avoidance savings. The following situations require

special consideration if cost avoidance savings are counted before the 75 day suspense

period has ended:

• A claim returned (and counted as cost avoided) is paid in part by

another payer and the provider resubmits it for secondary payment.

• A claim returned (and counted as cost avoided) is denied by the other

payer and the provider resubmits it for primary payment.

• A claim returned (and counted as cost avoided) is paid in full by the other

payer and the provider submits a no-payment bill. The A/B MAC and DME

MAC shows "pre-payment full recovery" savings and not cost avoidance.

In these situations, the A/B MAC and DME MAC adjusts the cost avoidance savings

figures by deducting or "backing out" the applicable amounts. It makes the adjustments in

the reporting month in which a final determination is rendered. The following chart

outlines the correct reporting of savings in each situation.

ADJUSTMENTS TO REPORTED MSP COST AVOIDANCE SAVINGS

CLAIMS PROCESSING ACTIONS MSP SAVINGS REPORTED

Cost

Avoidance

Pre-payment

Partial

Recoveries

Pre-payment

Full

Recoveries

I. Pre-payment Partial Recovery Adjustment

– A/B MAC (Part A)

• MSP situation indicated. The A/B

MAC (Part A) calculated the

Medicare payment to be $1200 if

Medicare was primary payer. Claim

is returned to submitter.

$1,200

• P

rovider resubmits the claim to the A/B

MAC (Part A) showing $900 paid by the

other insurer. Medicare secondary payment

of $300 is made

$(1,200)* $900

II. Pre-payment Partial Recovery

Adjustment – A/B MAC (Part B)

• M

SP situation indicated. A/B MAC (Part B)

$50

CLAIMS PROCESSING ACTIONS MSP SAVINGS REPORTED

Cost

Avoidance

Pre-payment

Partial

Recoveries

Pre-payment

Full

Recoveries

if Medicare was primary payer. Claim is

returned to submitter.

• Claim is resubmitted to the A/B MAC

(Part B) showing $30 paid by the other

insurer. Medicare secondary payment of

$20 is made.

$(50) * $30

III. "Other Payer Denial" Adjustment –

A/B MAC (Part A)

• MSP situation indicated; Medicare

"primary" payment by the A/B MAC (Part

A) is, $2,000. Claim is returned to

providers.

$2,000

• O

ther payer denies claim. Medicare found

to be primary and Medicare payment of

$2 000 is made

$ (2,000) *

IV. "Other Payer Denial" Adjustment –

A/B MAC (Part B)

• MSP situation indicated; Medicare's

"primary" payment by the A/B MAC (Part

B) is calculated to be $75. Claim is returned

to submitter.

$75

• Other payer denies claim; Medicare

found to be primary and Medicare payment

of $75 is made.

$ (75)*

V. Full Recovery Adjustment - A/B

MAC (Part A)

• MSP situation indicated -

Medicare "primary" payment,

$900. Claim is returned to

provider

$ 900

CLAIMS PROCESSING ACTIONS MSP SAVINGS REPORTED

Cost

Avoidance

Pre-payment

Partial

Recoveries

Pre-payment

Full

Recoveries

• Provider submits a "no-payment" bill

showing full payment by the other payer.

$ (900) * $ 900

VI. Full Recovery Adjustment – A/B

MAC (Part B)

• MSP situation indicated: Medicare's

"primary" payment calculated to be

$80. Claim is returned to submitter.

$ 80

• Submitter or other source informs the

A/B MAC (Part B) that full payment was

made by the other payer.

$ (80) * $ 80

*Amounts "backed out" of cost avoidance savings figures.