CMS Pub. 100-06, ch. 3, § 70.1

Section 1879 of the Social Security Act (the Act) provides financial relief to beneficiaries, providers,

practitioners, and other suppliers who acted in good faith in accepting or providing services found to be

not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the

functioning of a malformed body member, or to constitute custodial care. The provision applies to all

Part A/Part B claims decisions where claims are denied or reduced (prepay or postpay) under §1862(a)

(9) and §1879 (e) and (g) of the Act.

Contractors must make an individualized determination for each claim that is denied as not reasonable

and necessary. (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits, §14.1)

A. Limitation on Liability – Indemnification Procedures for Claims Filed under Part B

Section 1879(b) of the Act provides that, when a physician/supplier is held liable for the payment of

expenses incurred by a beneficiary for items or services determined to be excluded and such

physician/supplier requests and received payment from the beneficiary or any person(s) who assumed

financial responsibility for payment of expenses, the Medicare program will indemnify the beneficiary

or other person(s) for any payments made to the liable physician/supplier (including deductible and

coinsurance payments). Further, any such indemnification payments are considered overpayments to the

physician/supplier. (See PIM Exhibits, §14.1.)

B. Limitation on Liability Where Physician and Beneficiary Did Not Have Prior Knowledge With

Respect to Services Found To Be Not Reasonable And Necessary Services (§1879 of Act)

When both the physician and the beneficiary did not have prior knowledge with respect to services

found to be not reasonable and necessary, permit Medicare payment to be made under the limitation on

liability provision. (See Medicare Program Integrity Manual (PIM), Publication 100-08, Exhibits,

§14.1) An overpayment does not exist if a determination is made that the limitation of liability provision

applies. The claim decision must incorporate a limitation of liability determination.