Medicaid Third Party Liability Background
Medicaid is similar to Medicare in that it is a government program that provides health care benefits to certain groups of people; however it is different in that it is a needs based program, whereas Medicare is entitlement based (generally based upon being at least 65 years of age and/or disabled). With Medicaid, individuals must qualify to receive health care benefits, typically based on where they sit with regard to the poverty level for their State. Further, unlike Medicare, States and not the Federal government are responsible for program administration of Medicaid. The Centers for Medicare & Medicaid Services (CMS) is responsible for Federal oversight as this benefit was created by Congress in 1969. Further complicating matters and causing confusion is the fact that approximately 20 percent Medicare beneficiaries are also enrolled in Medicaid programs. These dual eligible cloud most people’s understanding that Medicaid and Medicare are two separate and distinct programs.
Medicaid is a creature of Federal law as of July 1, 1969. States were required to establish their individual programs and also implement legislation and regulation. Each State controls who may participate in the program thereby creating eligibility differences across the Country in each State. Nonetheless, there are certain uniformity principles put in place by the Federal legislation that States must implement in exchange for Federal government reimbursement payments for a portion of the benefits that are paid under the Program. One of the major guiding principles is that Medicaid is the payer of last resort. In other words, States must identify other responsible parties, and after doing so, make sure they are made whole for any benefits previously paid (Recovery) and also avoid further payments until that third party is no longer responsible (Coordination).
Third Party Liability (TPL) identification is therefore an important obligation of the States under Federal law. If it is not done correctly, reimbursement payments by the Federal government include charges that should be the responsibility of a third party. If TPL identification recovery and coordination is not properly pursued by the State, it therefore increases the burden on the U.S. Budget. CMS, the Federal agency that manages reimbursement to the States, must answer to Congress on budget issues regarding funds that are appropriated for this purpose. Therefore, CMS regularly issues policy and guidance to States to improve TPL recoveries. It also recommends to Congress changes in the law to encourage States to strengthen TPL practices.
The Current State of Medicaid TPL Recovery
Medicaid Third Party Liability (TPL) developed to date is complicated and evolving. Potential third parties that may be responsible under state TPL laws include: Veterans Benefits, Group Health Plans, as well as Non-Group Health Plans. Rules in place are naturally complex to cover multiple coverage scenarios designed to improve State coordination and recovery obligations. To evaluate how States are performing, the Government Accounting Office (GAO) completed a study and published their results on January 28, 2015. This report was on the heels of a previous GAO study in 2006 that demonstrated State TPL programs were not effective. The new study put in perspective the size of the problem that with over 7.6 million Medicaid enrollees in 2012 or 13.4% of the Medicaid population having other health insurance coverage; potential recovery opportunities remain. While recoveries did improve from $3.7B in 2001 to almost $14B in 2011, the Office of Inspector General (OIG) in its recent report stated that at least another $4B annually is left on the table. Of course this assumes no growth in State Medicaid programs which translates that the potential savings are even greater.
Medicaid reimbursements to States by CMS each year stands at approximately $500M. While the recovery results identified by the GAO are encouraging, CMS has signaled that more can be done to improve on it. The Patient Accountability and Affordability Act (Obamacare) expands persons that can be covered by Medicaid programs, adding pressure to States to step up TPL efforts.
Therefore, CMS is following up with States on the implementation of the Deficit Reduction Act of 2005. This law requires States to implement registries or data exchanges between Health Insurance Plans and Medicaid. The data provides enrollment information which Medicaid attempts to match against to identify and verify TPL responsibility. For the most part this law applies to Group Health Plans, but our research indicates that a few states have liberally defined “Health Insurance” to include both GHP and NGHPs(For example, California Welfare & Institutions Code Sec. 14124.70 – 14124.94, that includes all insurance as defined by the Ins. Code Sec. 23). While enforcement has focused on traditional GHP to report enrollment data, continued pressure by CMS could trigger States to expand reporting to Non-Group Health Insurance (NGHP) like California. We see this as one way data reporting for NGHPs will likely expand and potentially parallel Section 111 Mandatory Insurer Reporting for Medicare that is done today. In view of this, it is important to monitor any State developments in this area.
Another aspect of the Deficit Reduction Act requires States to improve identification programs. Thus, states are required to build data matching processes between Medicaid databases and state databases that collect workers’ compensation and automobile accident information. In the last 18 months, we have seen increased activity by States that have perfected this matching process to submit questionnaires to NGHP seeking additional information. States such as Kentucky and Ohio for example are currently doing this at present. Others are expected, with these States perfecting the process. While there is no direct penalty for failure to respond, there are adverse consequences spelt out in implementing legislation by States such as loss of license to do business in State or being subject to a deceptive claims practices act. Most States have hired contractors, such as HMS to help them improve these data matches.
The majority of jurisdictions today rely on the Medicaid beneficiary and their attorney to notify the State of a workers’ compensation, no fault or liability claims (NGHP). These jurisdictions also require Providers to identify TPL situations when a Medicaid enrollee presents for treatment. These Providers cannot refuse treatment because of the involvement of other insurance, but are required to “bill the responsible third-party” before Medicaid. Since Medicaid is the payer of last resort, the Provider bears the administrative burden of securing the necessary information from the TPL regarding denial of benefits before billing Medicaid. Consequently, NGHPs can expect further inquiries from such providers as they process their workers’ compensation, liability and no-fault claims.
It is the continued pressure by CMS on States and because of reports like the GAO that identify room for improvement in the TPL process, that States will request data directly from NGHPs. The most famous situation today where this occurs is in Rhode Island that launched a data exchange with NGHPs about three years ago. In that State, a NGHP is required to notify Rhode Island via a database of a potential settlement that is more than $500 with a Medicaid enrollee. The NGHP must withhold distribution of settlement funds until it receives a letter from Medicaid about whether a TPL lien exists or not. If it does, the carrier must make that payment directly to Medicaid, unless the Medicaid enrollee triggers an appeal. If there is an appeal, the NGHP continues to hold the funds until a final determination is made. Complicated in practice and once data is used to identify Medicaid situation, the process reverts to a traditional letter exchange that identifies the lien amount, and process for repayment.
The National Council of Insurance Legislators have reviewed the Rhode Island reporting law and as a result created model legislation for other States to consider. An important difference between the model legislation and Rhode Island, is that it does not include workers’ compensation claims. However, that would not stop a State from enacting a law to include it if it believes this will increase TPL identification as mandated by CMS. To date, no State has looked to adopt the model act; however Colorado was close to considering it a year ago.
The Future of Medicaid TPL Recovery
Because Medicaid is managed at the state level, the notion that there will be a single system by which NGHPs may be required to notify or otherwise submit data is not realistic. Regrettably, as States look to further enhance TPL identification to improve upon coordination and recovery, we will see systems develop to fit a particular State’s characteristics. We therefore may see a combination of reporting methods that range from enhanced data matching with existing databases to required reporting of either settlement information or enrollee information.
As such, we believe Medicaid is the next Medicare that we must be prepared for and manage the compliance issues that develop. The Murray/Ryan Budget Deal of 2013 will authorize Medicaid to recover 100% of their lien as of October 1, 2017. This will remove most State’s administrative shackles that exist today, because Medicaid can only recover a percentage based on the “full value” of the claim. A difficult challenge removed that makes Medicaid just like Medicare conditional payment recoveries. CMS is interested in full recoveries as it reduces the payment burden by the U.S. Government when reimbursing States for Medicaid payments. Thus, it can be expected that CMS will issue guidance on best practices that include data exchanges to enhance the identification and recovery.
Our recommended Best Practices for Medicaid TPL Recovery at this current point in time is to be proactive and monitor developments in Medicaid laws. As such rules increase responsibilities, develop your programs to meet those obligations. Franco Signor is ready to serve you in this area. We monitor Medicaid legislation and rules and inform our clients as they occur. More importantly, we have the expertise in-house that can help identify potential Medicaid enrollees and remedy liens with minimal cost.
Chief Client Officer, Franco Signor