HI 00620.020 No Obligation to Pay for or Provide Services

Payment may not be made for items or services which neither the beneficiary nor any other person or organization has a legal obligation to pay for or provide. This exclusion applies where items and services are furnished gratuitously without regard to the individual's ability to pay, and without expectation of payment from any source such as free X-rays or immunizations provided by health organizations and the services of local ambulance corps and first aid squads which do not charge for their services. However, Medicare reimbursement is not precluded merely because a provider, physician, or supplier waives his charge in the case of a particular patient or a group or class of patients. The determinative factor in applying this exclusion is the reason the particular individual is not charged.

The following sections illustrate the applicability of this exclusion involving services other than those paid for directly or indirectly by a governmental entity. (For a discussion of services paid for by a governmental entity, see HI 00620.030).

A. Indigence

This exclusion does not apply where items and services are furnished an indigent individual without charge because of his inability to pay, if the provider, physician, or supplier bills other patients to the extent that they are able to pay.

B. Provider, physician, or supplier bills only insured patients

Some providers, physicians, and suppliers waive their charges for individuals of limited means, but they also expect to be paid if the patient has insurance which covers the items or services they furnish. In such a situation, since it is clear that a patient would be charged if insured, benefits are payable for services rendered to patients with medical insurance if the provider, physician, or supplier customarily bills all insured patients — not just Medicare patients — even though noninsured patients are not charged.

C. Medicare patient has other insurance

Except as provided in the next paragraph, payment is not precluded under Medicare even though the patient is covered by another health insurance plan or program which is obligated to provide or pay for the same services. This plan may be the type which pays money toward the cost of the services, such as a health insurance policy, or it may be the type which organizes and maintains its own facilities and professional staff. Examples of this latter type are employer and union sponsored plans which furnish services to special groups of employees or retirees or to union members, and group practice prepayment plans.

The exceptions to this rule are services covered by automobile medical or no-fault insurance (HI 00620.175); services rendered during a specified period of up to 12 months to individuals entitled solely on the basis of ESRD who are insured under an employer group health plan; services rendered employed individuals age 65 or over and the spouses age 65 or over of employed individuals of any age who are insured under an employer group health plan (HI 00620.177); and services covered by workers' compensation (HI 00620.170). In these cases, the other plan pays primary benefits and, if the other plan does not pay the entire bill, secondary Medicare benefits may be payable. Medicare is also secondary to the extent that services have been paid for by a liability insurer (HI 00620.175).

D. Items covered under a warranty

Where a defective medical device, such as a cardiac pacemaker, is replaced under a warranty, hospital or other provider services rendered by parties other than the warrantor are covered despite the warrantor's liability. However, Medicare contractors may consider recovering payment for such services under the liability insurance provisions in HI 00620.175.

With respect to payment for the device itself, under cost reimbursement the following rules apply: If the device is replaced free of charge by the warrantor, no program payment may be made, since there is no charge involved. If, however, a replacement device from another manufacturer had to be substituted because the replacement device offered under the warranty was not acceptable to the beneficiary or his physician, payment may be made for the replaced device. Also, if the warrantor supplied the replaced device, but some charge or pro-rata payment was imposed, program payment may be made for the partial payment imposed for the device furnished by the warrantor.

If a hospital could have obtained an acceptable device free of charge under a warranty but chose to purchase one instead, payment cannot be made for the purchased device. Also, if an acceptable device could have been purchased at a reduced price under a warranty but the hospital did not take advantage of the warranty (i.e., it paid the full price to the original manufacturer or purchased the replacement device from a different manufacturer), the most the hospital can receive as reimbursement for the purchased device is the amount it would have had to pay if it had pursued the warranty.

Payments to a hospital for inpatient services under the prospective payment system (PPS) are not reduced to reflect collections by the provider under warranty provisions for medical devices.

E. Members of religious orders

A legal obligation to pay exists where a religious order either pays for or furnishes services to members of the order. Although medical services furnished in such a setting would not ordinarily be expressed in terms of a legal obligation, the order has an obligation to care for its members who have rendered lifelong services, similar to that existing under an employer's prepayment plan.

F. Ambulance services

There are numerous methods of financing ambulance companies. For example, some volunteer organizations do not charge the patient or any other person but ask the recipient of services for a donation to help offset the cost of the service. Although the recipients may be under considerable moral and social pressure to donate, they are not required to do so; and there is no enforceable legal obligation on the part of the individual or anyone else to pay for the services. Thus, Medicare benefits would not be payable. However, services of volunteer ambulance corps are not categorically excluded. Many such companies regularly charge for their services and these services are covered by Medicare.

Some ambulance companies provide services without charge to residents of specific geographical areas but charge non-residents to the extent they are able to pay (e.g., through private health insurance). Under those circumstances, the free services provided the residents would be excluded from coverage, while the services furnished non-residents would be covered.

Ambulance companies which charge membership fees generally do not charge additional fees for services covered under the membership plan, although they may charge for certain other services (e.g., additional trips or mileage). Services furnished by such ambulance companies including services for which prepayment is made under the membership plan, are considered to be services for which there is a legal obligation to pay. Therefore such services are reimbursable provided the ambulance company bills all third party payors.

Membership fees and insurance premiums are not incurred expenses under Medicare.


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HI 00620.020 - No Obligation to Pay for or Provide Services - 04/03/2015
Batch run: 04/03/2015
Rev:04/03/2015