It’s hard to believe that Medicare, as popular as it is now, was once bitterly opposed. The system has now proven to be one of the most well-organized methods of collecting and paying out healthcare benefits.

The Medicare, Medicaid and SCHIP Extension Act, which came into effect in January 2006, is mostly good news for physicians, hospitals and other healthcare service providers, since it averted a 10.1 percent reduction in their benefits. It also saves the government tons of money in benefits that claimants already have coverage for.

How does this Act save money? The Social Security Act authorizes the Medicare Secondary Payer (MSP) to identify situations where another insurance company pays first and Medicare is only responsible for qualified secondary payments, thereby reducing expenditure.

The Extension Act, mentioned earlier, has improved MSP reporting, making it easier to identify cases where Medicare is the secondary payer, and saving the government even more money.

The most recent Centers for Medicare and Medicaid Services (CMS) report shows total MSP savings of $6 billion for 2006, increasing from $3 billion in 2000. Most of the savings were for the working aged and the disabled, as shown in the table below:

The new Medicare policies require stricter reporting, but in the end, it makes the system more streamlined both for the payer and the beneficiaries.