How Does Medicare Work With Other Insurance: Who Pays First?

Medicare works alongside other insurance through federal “coordination of benefits” rules that decide who pays first on each claim. The insurer that pays first is the primary payer and covers the bill up to the limits of its policy; whatever balance remains goes to the secondary payer, which applies its own rules to what’s left. Whether Medicare is primary or secondary depends on the kind of other coverage you have, whether you or a spouse are still actively working, the size of that employer, and, in injury cases, whether someone else’s insurer is legally on the hook.

Getting the order wrong is not a paperwork nuisance. It leads to denied claims, surprise bills, and in some cases permanent premium penalties you’ll pay for the rest of your life.

Who Pays First: The Basic Rule

The Medicare Secondary Payer statute requires Medicare to step back whenever another insurer has a legal obligation to pay first.¹ The primary payer covers costs up to its policy limits. The secondary payer then evaluates the leftover amount under its own rules. If you have a third source of coverage, it pays last. The system exists to keep private insurers and other responsible parties from pushing their share of the bill onto Medicare.

Your provider needs to know the correct order before billing. If they send a claim to Medicare when Medicare should be secondary, the claim gets rejected and you end up sorting it out.

If You’re Still Working at 65

When you’re 65 or older and still actively employed, the size of the employer decides the order. At companies with 20 or more employees, the group health plan pays first and Medicare pays second. At smaller employers, Medicare is primary and the group plan wraps around it.² The same rules apply if your coverage comes through your spouse’s current employer.

If you qualify for Medicare because of a disability rather than age, the threshold shifts. The employer group plan pays first only if the employer has 100 or more employees; below that, Medicare is primary.²

The word doing the heavy lifting in these rules is “current.” The coverage must attach to a job you or your spouse holds right now. Retiree plans from a former employer don’t count. Neither does COBRA. That distinction becomes expensive when it comes to Part B enrollment.

What This Means for Delaying Part B

If your employer plan legitimately pays primary because you’re actively working at a company large enough to qualify, you can delay Part B without penalty. Once that employment ends, you get an eight-month Special Enrollment Period to sign up. Miss it, and your Part B premium goes up by 10% for every full 12-month period you could have enrolled but didn’t, and the surcharge lasts for as long as you have Part B.³ On the 2026 standard premium of $202.90 per month, a two-year delay would add roughly $40.58 a month permanently.

To use the Special Enrollment Period, you’ll need proof of your prior group coverage. Your employer completes CMS Form L564 confirming the dates you were covered and the dates of employment; you submit it with your enrollment application.⁴ Get it signed while you still have a working relationship with HR.

Retiree Coverage and COBRA

Once you stop actively working, Medicare moves to primary. Retiree health coverage from a former employer pays second and fills in gaps for deductibles, coinsurance, and services Medicare doesn’t cover.⁵ Many retiree plans require enrollment in both Part A and Part B, so dropping Part B to save on premiums can void the retiree benefit entirely.

COBRA follows the same logic, with a timing wrinkle. If you already have Medicare when you elect COBRA, COBRA pays after Medicare for the rest of its term.⁶ If you elect COBRA first and later become entitled to Medicare, the plan can terminate your COBRA early.⁷ Either way, COBRA is not current employer coverage. Relying on it past your Initial Enrollment Period triggers the Part B late enrollment penalty.

If your retiree plan or COBRA includes drug coverage, watch for the annual creditable coverage notice. It tells you whether the drug benefit pays at least as much as standard Medicare Part D. Keep it. Creditable coverage protects you from the Part D late enrollment penalty; non-creditable coverage does not.⁸

Medicare and Medicaid

Medicaid is always the payer of last resort. When you qualify for both programs, Medicare pays first for anything it covers. Medicaid then picks up remaining costs within its own rules, which can include Medicare premiums, deductibles, and copayments you would otherwise owe.⁹ Medicaid also covers services Medicare doesn’t touch at all, including long-term nursing home care, personal care assistance, and home-based services.

Even without full Medicaid, you may qualify for a Medicare Savings Program that helps with premiums or cost-sharing. There are four:

Qualified Medicare Beneficiary (QMB) covers Part A and Part B premiums plus all Medicare deductibles and coinsurance; providers cannot bill you for Medicare cost-sharing. The 2026 income limit is $1,350 per month for an individual in most states.
Specified Low-Income Medicare Beneficiary (SLMB) pays your Part B premium. Income limit: $1,616 per month for an individual.
Qualifying Individual (QI) also pays your Part B premium. Income limit: $1,816 per month for an individual.
Qualified Disabled and Working Individual (QDWI) covers Part A premiums for certain disabled workers. Income limit: $5,405 per month for an individual.

These are 2026 federal baselines for most states. Alaska and Hawaii use higher thresholds, and some states set their limits above the federal floor.¹⁰ Resource limits for QMB, SLMB, and QI are $9,950 for an individual and $14,910 for a couple in 2026.

VA Benefits and TRICARE For Life

VA healthcare and Medicare do not coordinate on claims. You choose one or the other each time you seek care. If you go to a VA facility, the VA covers the cost and Medicare plays no role. If you go to a non-VA provider, Medicare covers the visit under its normal rules and the VA has no involvement.¹¹ The VA does not bill Medicare.

Even so, Part B alongside VA benefits gives you the option to see a civilian provider when wait times or facility locations get in the way. Skipping Part B because you rely on the VA and later changing your mind triggers the late enrollment penalty.

TRICARE For Life works differently. It functions as a Medicare supplement for military retirees who have both Part A and Part B. Medicare pays first, and TRICARE covers remaining coinsurance and deductibles. For services covered by both, you generally pay nothing.¹² When TRICARE covers something Medicare doesn’t, TRICARE becomes primary for that service.¹³ TRICARE pharmacy coverage is creditable under Part D rules, so you won’t face a Part D penalty for skipping a stand-alone drug plan while covered.¹⁴

End-Stage Renal Disease Coordination

People who qualify for Medicare because of end-stage renal disease face a coordination rule that catches many beneficiaries off guard. For the first 30 months of Medicare entitlement based on ESRD, any employer group health plan pays first regardless of the employer’s size. This applies even when the plan’s contract says its benefits are secondary to Medicare.¹⁵ Medicare stays secondary through those 30 months, including when the group coverage comes via COBRA or a retirement plan. After the coordination period ends, Medicare becomes primary and the group plan shifts to secondary. Confirm the switch with your plan and providers, since claims around the transition date are a common source of denials.

Injury Claims: Liability, Auto, and Workers’ Comp

If your treatment stems from an injury covered by workers’ compensation, auto liability, or another liability policy, that insurer pays before Medicare. Someone else is legally responsible, so their insurer bears the cost.¹⁶

These claims can drag on for months or years. If the responsible insurer hasn’t accepted liability, Medicare makes conditional payments so your care doesn’t stop. Those payments come with a lien. Once a settlement, judgment, or award is reached, Medicare is entitled to recover every dollar it spent on injury-related care from the proceeds.¹ You have 60 days after Medicare’s recovery demand to repay, and interest accrues from the date of the notice if you miss the window.

Workers’ compensation settlements sometimes require a Medicare Set-Aside Arrangement, a portion of the settlement carved out to cover future injury-related medical costs Medicare would otherwise pay. CMS reviews proposed set-aside amounts when the claimant is already a Medicare beneficiary and the total settlement exceeds $25,000, or when Medicare enrollment is expected within 30 months and the settlement exceeds $250,000.¹⁷ These thresholds are workload management tools, not safe harbors. You’re expected to protect Medicare’s interests in every settlement.

Marketplace Plans and HSAs

Marketplace coverage does not end automatically when Medicare starts. You have to update your Marketplace application to cancel the plan, which you can do up to three months before your Medicare start date.¹⁸

Once you’re eligible for Part A, you lose eligibility for premium tax credits on a Marketplace plan. Continue receiving them anyway and you’ll pay them all back at tax time.¹⁸ You can keep the Marketplace plan at the full unsubsidized premium, but it rarely makes financial sense alongside Medicare.

Health Savings Accounts have their own coordination trap. Starting with the first month you’re enrolled in any part of Medicare, your HSA contribution limit drops to zero. You can still spend existing HSA funds tax-free on qualified medical expenses, including Medicare premiums and out-of-pocket costs. You just can’t add new money.¹⁹

The bigger trap is retroactive enrollment. If you delay Social Security past 65 and later apply, Part A can be backdated up to six months. Any HSA contributions during that retroactive window become excess contributions subject to a 6% tax penalty each year they remain in the account.¹⁹ For 2026, HSA contribution limits are $4,400 for self-only and $8,750 for family coverage, so the exposure isn’t small.

Telling Medicare About Your Other Coverage

Medicare needs to know about your other insurance to process claims in the right order. The Benefits Coordination & Recovery Center handles reporting at 1-855-798-2627. Have your insurance company’s name and address, policy and group numbers, type of coverage, and the dates coverage started or ended.²⁰ Report changes promptly. If Medicare’s records show the wrong primary payer, your claims will bounce between insurers while your bills sit unpaid.

Providers are also required to ask about other coverage before billing Medicare, usually through a Medicare Secondary Payer questionnaire at admission or check-in. Answer accurately every visit, even at providers you’ve seen before.

If a claim is denied over a payer-order dispute, you can appeal through Medicare’s redetermination process. You have 120 days from receiving the initial determination to file a written request with the Medicare Administrative Contractor that processed the claim. Include your name, Medicare number, the services and dates in question, and an explanation of why you disagree.²¹ There’s no minimum dollar amount. Attach documentation that supports the correct order, such as employment verification or the other insurer’s policy details.

1
Office of the Law Revision Counsel. 42 USC 1395y – Exclusions From Coverage and Medicare as Secondary Payer
2
eCFR. 42 CFR Part 411 Subpart E – Limitations on Payment for Services Covered Under Group Health Plans: General Provisions
3
Medicare. Avoid Late Enrollment Penalties
4
CMS. Request for Employment Information
5
Medicare. Retiree Insurance and Medicare
6
Medicare. Working Past 65
7
CMS. COBRA Continuation Coverage
8
CMS. Model Notice Letters
9
CMS. Beneficiaries Dually Eligible for Medicare and Medicaid
10
Social Security Administration. Medicare Savings Programs Income and Resource Limits
11
Veterans Affairs. VA Health Care and Other Insurance
12
TRICARE. TRICARE For Life
13
TRICARE Newsroom. Q&A – How Does TRICARE For Life Work With Medicare
14
TRICARE Newsroom. Understanding Medicare Part D and TRICARE Pharmacy Coverage
15
CMS. End-Stage Renal Disease (ESRD)
16
CMS. Medicare Secondary Payer (MSP) Liability Insurance, No-Fault Insurance and Workers Compensation Recovery Process
17
CMS. WCMSA Reference Guide Version 3.0
18
HealthCare.gov. Changing From Marketplace to Medicare
19
Internal Revenue Service. Publication 969 – Health Savings Accounts and Other Tax-Favored Health Plans
20
Medicare. Medicare’s Coordination of Benefits – Getting Started
21
CMS. First Level of Appeal – Redetermination by a Medicare Contractor