Medicare-Medicaid Crossover Bad Debt Accounting Classification

InsightsClient Alert

Effective for cost reporting periods beginning on or after October 1, 2019, Medicare-Medicaid crossover claims must be charged to an expense account for uncollectible accounts to include on the cost report as a Medicare bad debt.  Accounts written off to a contractual allowance account will no longer be permitted according to MLN Connects for April 4, 2019.

Crossover balances have been considered contractual allowances because providers are contractually bound by their Medicaid provider agreements to accept amounts paid by the state plan as payment in full, even if the state plan pays nothing (42 CFR § 447.15).  Because there is no legal ability to recover contractual allowances from the state or beneficiaries, providers consider them to be worthless and claim them as bad debt pursuant to the Provider Reimbursement Manual – Part 1, Section 322.

Even though MLN Connects for April 4, 2019specifically refers to Medicare-Medicaid Crossovers, this rule could affect other categories of Medicare bad debt as well due to the reference to Medicare bad debt requirements referred to below and in Section 322.

We recommend establishing a separate Medicare bad debt expense account(s) on your general ledger to record Medicare traditional, indigent, and crossover bad debts to comply with CMS’s requirement.

We anticipate that the account(s) will still be considered a reduction from patient service revenue consistent with generally accepted accounting principles and

42 CFR § 413.89– Bad debts, charity and courtesy allowances.

For more information, please contact our Albany office at (229) 883-7878 or our Atlanta office (404) 220-8494.