15 Oct GAO Foresaw Need to Assist States in Recovering TPL Monies
In September 2006, after the Deficit Reduction Act of 2005 (DRA) was signed into law, the Government Accountability Office (GAO), which is the investigative arm of the U.S. Congress established to support Congress in improving performance and accountability of the federal government to the nation’s population, reported that 13 percent of Medicaid recipients in the years from 2002 to 2004 possessed additional health insurance coverage, known as third-party liability (TPL), which should be paying for health costs prior to payments from Medicaid. The GAO also found that states were suffering difficulties with regard to recovering TPL monies in two areas: 1) determining when Medicaid beneficiaries owned private health insurance coverage; and 2) collecting payments from these insurance companies.
After analyzing these complications, the GAO said two areas needed to be resolved by the Centers for Medicare & Medicaid Services (CMS), the agency within the U.S. Department of Health and Human Services (HHS), which oversees Medicaid, and they are 1) to set up a deadline for states to enact laws that adhere to TPL requirements established by DRA; and 2) identify the specific entities that must adhere to state laws stipulated by DRA on TPL payments. CMS concurred with these GAO recommendations and as of June 2006, informed the GAO that CMS was developing guidance to states.
Why is This a Problem?
Medicaid is outlined under Title XIX of the Social Security Act as a program jointly financed between the U.S. Federal Government and state governments. It also soaks up some of the most federal dollars. States receive federal help administering Medicaid. Medicaid is meant to be the payer of last resort, so states are required by the federal government to seek and collect reimbursement from private insurance companies for Medicaid beneficiaries who also hold private health insurance.
When states cannot receive payment which is rightly theirs, they lose money and the cost of administering Medicaid increases, a price that’s already a huge burden for both federal and state governments. In 2004, $5.5 billion was realized in TPL-related savings by states. Of this amount, over $4.9 billion involved Medicaid payments that were initially avoided and $524 million was recovered by states. Pursuing claims cost states money and often states determine that they don’t have the financial resources available to track what’s rightfully theirs through legal action, so the money is lost.
Details About Third-Party Liability
Of the 13 percent of Medicaid beneficiaries nationwide who also held private health insurance coverage, the states with the lowest rates of simultaneous coverage were California, Arizona and Alabama with nine percent. The highest rate of dual coverage was in Wyoming, where as much as 23 percent of the residents had additional private health insurance. South Dakota and Iowa was next at 22 percent.
The extra coverage of this 13 percent most often was the result of union or employee benefits, to the tune of 11 percent throughout the nation. Discrepancies ranged from seven percent in Alabama and Arizona to almost 17 percent in Wyoming, New Hampshire, Michigan and Colorado. Only two percent nationwide purchased this additional coverage independent of an employer, with the highest in Iowa at eight percent and the lowest of one percent in 11 states.
States encounter problems verifying private health insurance coverage, such as uncooperative insurance companies that refuse to share electronic files and pharmacy benefit managers who ignore requests or decline requests for verification information. The GAO discovered from a private collection firm contracted by a state that recoveries increased more than 200 percent when pharmacy benefit managers agreed to electronically share files, resulting in more than $300 million a year in recovered TPL payments.
When states can’t prove TPL coverage, they must pay and collect from the third party later. Problems states find with this strategy include filing claim time limits, undue restrictions buoyed by health care managers, erratic claim requirements, uncooperative insurance companies and inadequate state and federal laws.
Solutions to Third-Party Liability Issues Found by States
The GAO stated in their 2006 report that the then recently passed DRA addressed some of the issues states had recovering TPL payments. First, the law identified TPL entities not previously listed. Second, it required those entities to provide the state with data and accept that the state had a right to recover the money. Third, these entities must respond within three years from the date of the service. Fourth, claims can’t be denied just because of the date of the submission.
Additionally, the GAO said states needed direction on when their own laws should be implemented, since the DRA didn’t address that issue. Finally, some plan administrators and pharmacy benefit managers believe DRA doesn’t apply to them and the GAO thought that without their cooperation, states will continue to encounter Third Party Liability problems.