What is the Medicare Secondary Payer Act (MSP)?
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Have you ever heard the term MSP and wondered what it meant? MSP stands for Medicare Secondary Payer Act, which was enacted by Congress in 1980. The act prohibits Medicare from acting as the primary payer for any injury-related medical services or for prescription drugs when there's another responsible party liable for the injury.

The MSP Act requires that Medicare's interests be protected, and it prevents the primary payer from shifting the burden to Medicare in the future. The act allows Medicare to pay the bills initially, called conditional payments, which are then reimbursed to Medicare at the time of settlement.

According to the MSP statute, the following types of insurance plans are deemed primary to Medicare: Workers Compensation, No Fault Insurance, Auto Insurance, Liability Insurance and Self-insured Plans.

The statute also dictates that all parties have an obligation. If Medicare's conditional payments are not considered, the primary payer may face double the damages paid by Medicare plus the interest that Medicare incurred.

If an injured person spends settlement proceeds designated for future medical care on items other than approved medical expenses, they could also lose their future Medicare benefits.

One way to prevent this is to set up a Medicare Set-Aside account, also known as an MSA.