How Medicare Determining and Paying Interest

The contractor must pay interest on clean, non-PIP (FIs) claims for which it does not make payment within the payment ceiling specified in § 80.2.1.1, provided payment is due on such claim. The interest rate and formula for calculation are shown above. The interest rate is determined by the rate applicable on the carrier or FI’s payment date.

The contractor applies interest to the net payment amount after all applicable deductions are determined (e.g., deductible, copayment, and/or MSP). Interest is rounded to the nearest penny.

A. Reporting Interest Payment on Remittance Record
See 100-22 for remittance advice completion instructions

B. Payment Made to Beneficiary
If interest is paid on a claim for which payment is made directly to the beneficiary, the contractor adds the following messages on the beneficiary notice:
“Your payment includes interest since we were unable to process your claim timely.”

C. Claims Paid Upon Appeal
Interest payments are not payable on clean claims initially processed to denial and on which payment is made subsequent to the initial decision as a result of an appeal request. This applies to appeals where more than the applicable number of days elapsed before an initial denial, but the claim was later paid upon appeal. Where an appeal of a previously paid claim results in increased payment FIs follow the following section.

D. Interest on Postpayment Denials and Other Adjustments
If a paid claim is later denied in full, the carrier or FI recovers any interest paid as well as the incorrect payment. It does not pay interest on the related no payment bill. If the claim is partially denied, interest is payable on the reduced amount. The FI recalculates the interest due based upon the new reimbursement amount. It uses the rate of interest and elapsed days applicable to the original claim. This can be accomplished by applying a ratio of the new reimbursement amount (from its debit action) to the reimbursement amount on the initial claim (from its credit action). It multiplies the result by the interest amount paid on the initial claim. The result is the interest amount payable on its debit action. The following formula is used to calculate interest:

Interest = Debit action reimbursement amount
           Credit action reimbursement amount x original interest paid

Use of the formula is preferable to expanding an FI system to handle multiple scheduled payment dates and calculation procedures.