Medicare Bad Debt Reporting for Hospitals FAQ

With thinning margins and decreasing government reimbursement rates, an area of opportunity to uncover additional reimbursement lies in a provider’s Medicare bad debts.

While this area is a great option to benefit from reimbursement dollars related to Medicare patients, thorough reporting is time consuming and continues to pose significant challenges for providers due to comprehensive regulations and recently introduced Transmittal 18 instructions and templates.

The following are topics that surfaced during the Medicare Bad Debt: Reporting and Identifying Reimbursement webcast and answers to related questions to help hospitals navigate reporting.

General Questions on Medicare Bad Debt

The webcast started by answering the following questions.

What is Medicare bad debt?

Medicare bad debt is the patient responsibility related to Medicare primary accounts that have been deemed uncollectible. This includes coinsurance and deductible.

What are the categories of Medicare bad debts?

There are three categories of Medicare bad debts:

  • Indigent dual eligible,​ often referred to as crossovers
  • Indigent non-dual eligible, ​often referred to as charity
  • Non-indigent, often referred to as traditional or self-pay

How much Medicare bad debt reimbursement do providers receive?

Providers receive 65% reimbursement of the amount reported on their Medicare cost report from the Medicare program.

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What can’t be included in Medicare bad debt?

Amounts related to the following can’t be included:

  • Medicare Advantage plans ​
  • Non-Medicare recipients​
  • Coinsurance and deductible amounts related to non-covered services​
  • Physician and professional fees​
  • Presumptive charity ​
  • Share of cost or spend down amounts

If a bad debt amount was first erroneously written off to a contractual adjustment code, but then corrected and written off to a bad debt adjustment code, can it still be included?

Yes, in most cases, those should be allowable. Hospitals need to ensure any amounts being reported for Medicare bad debt have been written off to an expense account and not a contractual allowance.

Regarding the Medicare remittance date, when there are multiple dates due to takebacks and repays, which date should be populated as the Medicare remittance date for the report?

The rule of thumb should always be to use the most recent Medicare remittance date. For example, if there was a payment, takeback, then repayment, the date of the repayment should be the correct remittance date.

Should Medicare bad debts be recorded separately in the electronic medical record (EMR) system?

Every facility has its own processes and ways to track Medicare bad debts, so it really comes down to what works best for the facility. We recommend hospitals use a specific transaction code for these Medicare bad debt write-off amounts so it would be easier to track the amounts written off as well as ensuring those transaction codes are mapped to a bad debt expense account. It’s not a requirement, but can make it easier for providers to track for reporting requirements.

If the patient fails to pay the share of cost (SOC), the provider can claim the SOC related deductible and coinsurance. Does it become a traditional bad debt after going through a reasonable collection effort?

Medicare won’t reimburse amounts related to SOC for Medicaid. If the patient is responsible for SOC, then the patient responsibility amount is sent to collections and deemed uncollectible. You’re still allowed to report the Medicare coinsurance or deductible amounts on the report, but it must not include the SOC amount as a traditional bad debt.

In the case that the patient was eligible for Medicaid and paid the SOC portion, the remaining amount related to the Medicare coinsurance or deductible would then be billed to Medicaid, denied, and then you could capture them as a crossover.

Should crossover write-offs map to an expense account?

Yes, all amounts reported as Medicare bad debt should also be mapped to an expense account. Most providers set up separate transaction codes for these write-offs and when doing so, they ensure those transaction codes are also mapped to an expense account.

Can a provider do a reclass from contractual to bad debt expense for the dual eligible bad debts to be claimed if it can't remap the write-offs?

Yes, absolutely. Once the reclass occurs, the date it’s written off to the expense account would be the date it’s eligible to be included on the Medicare bad debt report. Check with your Medicare Administrative Contractor (MAC) to see if claims need to be individually corrected or if they’ll accept a journal entry change to these accounts, as different MACs approach this issue differently.

Indigent Dual Eligible

Explore questions related to indigent dual eligible bad debt.

If a patient has Medicaid, but the provider can’t obtain the denial Remittance Advice (RA) from Medicaid, can the provider still write it off as Medicare bad debt?

The Medicare bad debt requirements state you must bill Medicaid. You should receive a remit showing the denial or sometimes, Medicaid provides a notice for the account. It’s recommended you research why you can’t obtain the RA from Medicaid or find proof to show Medicaid was billed.

For audit purposes, if you’re classifying the account as a Medicare-Medicaid crossover claim, the auditor will expect a Medicaid remit since you must bill Medicaid.

Should all QMB patients be billed to Medicaid to determine if they’re eligible to be logged as a Medicare bad debt crossover claim?

QMB is a part of the Medicare program. If a patient is eligible for the QMB program, they have no legal obligation to pay for the coinsurance and deductible. To be claimed as Medicare bad debt, these patients could fall into the crossover category.

If patients are crossovers, you must bill Medicaid and then receive the Medicaid remit that shows the denial.

Should providers map to the charity general ledger (GL) account if there’s a specific patient accounting transaction code just for dual eligible write-offs? Or should the bad debt be written off to the GL account?

These transaction codes should be mapped to a bad debt expense account. Any write-off amount to be reported on the Medicare bad debt reports should be mapped to an expense account. If your current dual eligible codes are mapped to a charity allowance account, they’ll need to be reclassed so they get mapped to an expense account.

Indigent Non-Dual Eligible

Explore questions related to indigent non-dual eligible bad debt.

Should a financial assistance policy be reviewed for Medicare debt compliance?

Your policy should be reviewed to ensure it includes provisions that would satisfy the Medicare guidelines for indigency determinations. Primarily, providers should ensure there is income and asset verification of liquid assets in their processes and written policy if they intend to report claims on the Medicare bad debt report.

Has an auditor denied a provider's indigent bad debt because the claim will be disallowed as the write-off is to charity care and not an allowable Medicare bad debt?

The transaction code used would be specific to the financial assistance policy and classified as charity. We’ve seen cases where some auditors want the transaction codes to say Medicare indigent instead of something that could relate to a financial assistance policy.

We recommend a review of the policy and the type of charity the patient received. The rationale doesn’t necessarily mean the account is non-allowable for Medicare bad debt if your review says otherwise. A conversation with the auditor can help with understanding.

What if a state has a law against looking at assets to determine if a patient is indigent?

From our understanding and based on the rules and regulations for Medicare bad debt, the non-dual indigent patient should have some sort of asset and income testing.

If a Medicare or coinsurance amount meets presumptive charity criteria, does the write-off have to post to a bad debt expense account and not a charity account?

For a facility to include presumptive charity, there must be income and asset testing. If your facility is using a third-party vendor to determine eligibility, most of the time they are only pulling credit scores and there’s no asset testing. However, if your presumptive eligible tool or process includes asset testing, those claims then become allowable for the Medicare bad debt report.

All Medicare bad debt amounts being reported regardless of category should be mapped to a bad debt expense account, not a charity allowance account. If they’re currently being mapped to an allowance account, you can reclass those by using a different transaction code to ensure that code is then mapped to the expense account.

When is presumptive eligibility allowable?

Presumptive eligibility would only be allowed if the process includes income and asset testing. Most providers use third party vendors who solely use credit scores. If your facility has this practice, without asset or income testing, presumptive eligibility wouldn’t be allowable for Medicare bad debt purposes.


Explore questions related to non-indigent bad debt.

Do providers have to send three or five letters for self-pay accounts?

The minimum requirement to establish a reasonable collection effort is a combination of eight collection efforts that should include five letters or statements and three calls. It can also be determined by what the hospital’s written credit and collections policy states.

For self-pay Medicare bad debt, do providers bill the patient 90 or 120 days from the Medicare RA date?

For cost reports starting on or after October 1, 2020, the provider has 120 days. Prior to that date, it was 90 days.

When did the 120-day billing rule start versus the historical 90-day timeline for untimely billing? Is it for any open cost report?

As of October 1, 2020, cost reports and forward, 120-day rule applies to billing and collections.

Does this rule reset after a patient payment like the Medicare bad debt 120-day collection rule?

Yes. If the patient makes any payment, the clock resets to 120 days from the payment date.

Do statements count toward the five letters required for reasonable collection efforts?

Yes, reasonable collection efforts at minimum should have five patient statements or letters and three documented phone calls or what the hospital’s written credit and collections policy states.

If you have already written the claim off and there’s a takeback and repayment, the process restarts. Reverse the write-off and rebill. If this was for a Medicare-Medicaid crossover, rebill Medicaid also. The Medicaid Remit date must be after the Medicare Remit date.

Bad Debt Reporting Requirements

Explore questions related to the reporting requirements for bad debt.

What’s the difference between columns 12 and 22 in the reporting template in Transmittal 18?

The instructions for column 12 say to enter the amount of coinsurance and deductible for which the Medicare beneficiary is responsible. If the beneficiary is a QMB, enter that. For a Medicare beneficiary dually eligible for Medicaid—not a QMB—enter the amount the beneficiary is required to pay under the state cost sharing agreement. For a Medicare beneficiary deemed indigent by the provider, enter zero.

Column 12 should essentially be coinsurance or deductible for Medicare, and they aren’t a QMB patient.

The instructions for column 22 say to enter the amount of any payments received from the Medicare beneficiary, their estate, third party insurance, etc., before the account was written off, for any amounts reported in column 20 or 21.

Column 22 should pertain to payments applied to the account before the account was written off. This amount would get netted when preparing the total amount in column 23.

Column 23 is the allowable Medicare bad debt amount. This amount must be less than or equal to the sum of the amounts in columns 20 and 21, less any payments in columns 18 and 22.

Do all the new Transmittal 18 reporting requirements apply to skilled nursing facility reporting?

Yes. All rules and regulations regarding Medicare bad debts apply to all providers.

What are the differences between columns 14–17 when it comes to write-off dates?

  • Column 14: Accounts Receivables Write-Off Date. The date when the facility transferred the account balance from the accounts receivable to the bad debt expense account.
  • Column 15: Return from Collection Agency Date. The date when the hospital received the account from the collection agency. Specific for non-indigent claim, could be applied to non-dual indigent, but doesn’t apply to dual indigent.
  • Column 16: Collection Efforts Ceased. The date in which the facility stopped pursuing collections. If your facilities process is to pursue any additional internal collections after returned from an outside collection agency, then that date should be used. Otherwise, this date will be the same as the return from collection agency date.
  • Column 17: Medicare Write-Off Date. The date of write-off as it’s allowable for the Medicare bad debt report. For dual indigent claims, it would be the same date as the accounts receivable write-off date. For non-indigent claims, it should be the date returned from the collection agency or the collection efforts ceased, whichever date is most recent.

The new Exhibit 2A for the Medicare Bad Debt template related to Transmittal 18 now includes columns specific to recoveries. How should those fields be populated?

Recoveries should be reported on accounts that were previously reported as a Medicare bad debt on a prior report, but where a payment could have been received during the cost report fiscal year being prepared.

Column 18 is the amount of that payment received as it only pertains to the recovery only. Column 19—Recoveries Only Mcr FYE Date—should relate to the cost reports fiscal year end in which the bad debt was claimed.

Where can you find Centers for Medicare & Medicaid Services (CMS) Transmittal 18 including the new templates?

The transmittal and new exhibit templates can be found on the CMS website. There are also downloadable Moss Adams templates.

For more information related to Transmittal 18 and bad debt reporting requirements, you can view these resources:

We’re Here to Help

Navigating reporting can be daunting, but it can be an opportunity to uncover additional reimbursement.

If you have further questions that weren’t included above, contact your Moss Adams professional or send us your question using the “ask a question” button below. You can find additional resources on the Provider Reimbursement service page including a webcast detailing Medicare bed debt reporting.

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