oversight

Medicaid Payment: CMS Has Not Overseen States' Implementation of Changes to Third-Party Liability

Published by the Government Accountability Office on 2019-08-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

              United States Government Accountability Office
              Report to Congressional Committees




              MEDICAID PAYMENT
August 2019




              CMS Has Not
              Overseen States’
              Implementation of
              Changes to Third-
              Party Liability




GAO-19-601
                                                August 2019

                                                MEDICAID PAYMENT
                                                CMS Has Not Overseen States’ Implementation of
                                                Changes to Third-Party Liability
Highlights of GAO-19-601, a report to
congressional committees




Why GAO Did This Study                          What GAO Found
The Medicaid program is typically the           Medicaid officials in the nine selected states GAO reviewed described being in
payer of last resort. The Bipartisan            various stages of implementing third-party liability changes as required by law.
Budget Act of 2018 changed the                  These changes affect whether health care providers must seek payment from a
Medicaid third-party liability payment          liable third party, such as private insurance, before the state Medicaid agency
requirements for prenatal care services,        pays for services. The changes apply to prenatal care services, pediatric
pediatric preventive services, and              preventive services, and services for children subject to child support
services provided to CSE beneficiaries.         enforcement (CSE beneficiaries). At the time of GAO’s review,
Before the act, in the case of these
three services, states were generally           •   Officials from four of the nine selected states reported having fully
required to pay providers for services              implemented the changes for prenatal care services, which were required to
delivered to Medicaid beneficiaries and             be implemented starting in February 2018. Officials from the remaining five
then obtain any payments from liable                states were discussing the changes internally, researching how to implement
third parties.                                      the changes in their Medicaid payment systems, or waiting for additional
The Bipartisan Budget Act of 2018 also              guidance from the Centers for Medicare & Medicaid Services (CMS), the
included a provision for GAO to study               federal agency responsible for overseeing states’ Medicaid programs.
the potential effects of these changes. In
this report, GAO (1) describes the status       •   None of the nine states had implemented the changes to pediatric preventive
of selected states’ implementation of               services and services for CSE beneficiaries, which must be implemented
Medicaid third-party liability changes; (2)         starting in October 2019. Officials from six states told GAO that they were in
evaluates CMS’s implementation and                  the early stages of exploring how they would make the changes, while the
oversight of the Medicaid third-party               remaining three states had not developed such plans.
liability changes; and (3) describes
stakeholders’ views of the possible             GAO found that guidance issued by CMS in June 2018 to assist states in
effects of these changes on providers           implementing the third-party liability changes contains information inconsistent
and beneficiaries. GAO conducted                with the law. For example, CMS’s guidance incorrectly informs states that
interviews with state Medicaid agencies         providers do not need to seek third-party payments before the state pays for
and provider associations in nine               some prenatal services. In addition, CMS has not determined the extent to which
selected states, which were selected by         states are meeting third-party liability requirements. CMS officials stated that they
taking into consideration Medicaid              expect states to comply with current law for Medicaid third-party liability and that
spending and stakeholder                        they do not verify whether states have implemented the required third-party
recommendations, among other factors.           liability changes unless the agency is made aware of non-compliance. However,
GAO also conducted interviews with              this approach is inconsistent with CMS’s Medicaid oversight responsibilities,
national experts in Medicaid, national          including its responsibility to ensure federal funds are appropriately spent.
organizations representing beneficiaries
and providers, and officials from CMS.          Medicaid experts and other stakeholders told GAO that the third-party liability
                                                changes could affect some health care providers in ways that could result in
What GAO Recommends                             decreased beneficiary access to care, because some providers might be less
GAO is recommending that CMS (1)                willing to see Medicaid patients. According to stakeholders, this could occur for
ensure that its guidance to states on           two primary reasons.
third-party liability requirements reflects     1. The changes may increase administrative requirements for providers by
current law, and (2) determine the                 requiring them to identify sources of coverage, obtain insurance information,
extent to which state Medicaid programs            and submit claims to third-party insurers before submitting them to Medicaid.
are meeting federal third-party liability
requirements. The Department of Health
                                                2. The changes may result in providers waiting longer to receive Medicaid
and Human Services concurred with
                                                   payment for certain services to the extent that states require providers to
these recommendations.
                                                   seek third-party payments before paying the providers’ claims.

View GAO-19-601. For more information,
contact Carolyn L. Yocom at (202) 512-7114 or
yocomc@gao.gov.
                                                ______________________________________ United States Government Accountability Office
Contents


Letter                                                                                      1
              Background                                                                    4
              Some Selected States Have Implemented Third-Party Liability
                Changes for Prenatal Care Services; Most of the States Were
                in the Early Stages of Planning for Other Changes                          12
              CMS Has Issued Implementing Guidance with Information
                Inconsistent with Federal Law and Has Not Overseen States’
                Implementation of Third-Party Liability Changes                            17
              Stakeholders Anticipate Third-Party Liability Changes Could Affect
                Beneficiary Access to Care; Selected States Discussed Using
                Existing Methods to Assess Effects of Changes                              22
              Conclusions                                                                  26
              Recommendations                                                              26
              Agency Comments                                                              26

Appendix I    Comments from the Department of Health and Human Services                    28



Appendix II   GAO Contacts and Staff Acknowledgments                                       31


Tables
              Table 1: Pre- and Post- Bipartisan Budget Act of 2018
                      Requirements for State Medicaid Payment of Certain
                      Claims with Probable Third-Party Liability                           10
              Table 2: Status of Selected States’ Implementation of Bipartisan
                      Budget Act of 2018 Medicaid Third-Party Liability
                      Changes                                                              15

Figure
              Figure 1: Third-Party Liability Payment Processes for Medicaid
                       Claims with Probable Private Insurer Liability                       8




              Page i                                  GAO-19-601 Medicaid Third-Party Liability
Abbreviations
CHIP                       Children’s Health Insurance Program
CMS                        Centers for Medicare & Medicaid Services
CSE                        child support enforcement
HHS                        Department of Health and Human Services
MCO                        managed care organization
MMIS                       Medicaid Management Information System



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Page ii                                           GAO-19-601 Medicaid Third-Party Liability
                       Letter




441 G St. N.W.
Washington, DC 20548




                       August 9, 2019

                       The Honorable Chuck Grassley
                       Chairman
                       The Honorable Ron Wyden
                       Ranking Member
                       Committee on Finance
                       United States Senate

                       The Honorable Frank Pallone
                       Chairman
                       The Honorable Greg Walden
                       Ranking Member
                       Committee on Energy and Commerce
                       House of Representatives

                       With few exceptions, Medicaid is considered the payer of last resort,
                       meaning that when beneficiaries have another source of health care
                       coverage—such as private health insurance provided through an
                       employer—that source, to the extent of its liability, should generally pay
                       for services before Medicaid does. This concept is referred to as “third-
                       party liability.” When a third party pays for its share of an individual’s
                       Medicaid costs, savings can accrue to the federal government and the
                       states.

                       The Bipartisan Budget Act of 2018 made changes to the procedures state
                       Medicaid agencies must follow when they receive certain claims for which
                       a third party might be liable, among other things. 1 Specifically, the act
                       changed states’ responsibilities for processing claims for three types of
                       services: prenatal care services, pediatric preventive services, and
                       services for children for whom child support enforcement (CSE) is being




                       1
                        See Pub. L. No. 115-123, § 53102, 132 Stat. 64 (codified as amended at 42 U.S.C. §
                       1396a(a)(25)).




                       Page 1                                          GAO-19-601 Medicaid Third-Party Liability
carried out by the state (also known as CSE beneficiaries). 2 The changes
pertaining to prenatal care services went into effect in February 2018; the
changes related to pediatric services and services for CSE beneficiaries
go into effect in October 2019. Before the act, in the case of these three
services, states were generally required to pay providers for services
delivered to Medicaid beneficiaries and then obtain any payments from
liable third parties—a process known as “pay and chase.” The
Congressional Budget Office estimated that the Bipartisan Budget Act of
2018 third-party liability changes would result in approximately $4 billion
in federal savings from 2018 through 2027.

The Bipartisan Budget Act of 2018 includes a provision for GAO to study
the impact or potential future impact of these third-party liability changes
on both Medicaid beneficiaries and providers. In this report we

1. describe the status of selected states’ implementation of third-party
   liability changes for state Medicaid programs;
2. evaluate CMS’s implementation and oversight of third-party liability
   changes for state Medicaid programs; and
3. describe stakeholders’ views on the possible effects of third-party
   liability changes and the methods state Medicaid program officials
   could use to monitor these changes.
To describe the status of states’ implementation of third-party liability
changes, we judgmentally selected nine states: Connecticut, Florida,
Illinois, Kentucky, Nevada, New Jersey, Tennessee, Texas, and Utah. We
selected these states to include a range of characteristics such as the
delivery systems of their Medicaid programs (e.g., fee-for-service verses
managed care), Medicaid spending, percentage of births financed by
Medicaid, and third-party liability collections, and while also taking into
consideration recommendations from background experts and national

2
 In this report, we refer to these statutory changes as the “third-party liability changes,”
although the Bipartisan Budget Act of 2018 made other changes to the Medicaid third-
party liability statute that are not the focus of this report. CMS defines “pediatric preventive
services” to include all services covered under the Medicaid early and periodic screening,
diagnosis and treatment benefit. 42 C.F.R § 433.139(b)(3)(i) (2018). CMS provides
definitions of prenatal care services, which it defines to include, at state option,
pregnancy-related services (i.e., labor, delivery, and postpartum care services) in section
3904.4 of the State Medicaid Manual, but indicates that states have the option to define
these terms more broadly, such as to include preexisting conditions that are likely to affect
the pregnancy. In this report, we use the term “CSE beneficiary” to refer to a Medicaid
beneficiary on whose behalf child support enforcement is being carried out by the state.




Page 2                                               GAO-19-601 Medicaid Third-Party Liability
provider associations. 3 We conducted semi-structured interviews with
relevant officials from each state’s Medicaid agency between November
2018 and March 2019. We also conducted interviews with stakeholders
from state chapters of the American Academy of Pediatrics and the
American College of Obstetricians and Gynecologists, with two providers,
with Medicaid managed care organizations (MCO) in three of our selected
states, and with three groups advocating for the needs of Medicaid
beneficiaries. 4 Throughout this report, we use the term “stakeholders” to
refer collectively to officials from state Medicaid agencies and Medicaid
MCOs, background experts, beneficiary advocates, provider associations,
and providers.

To evaluate CMS’s implementation and oversight of third-party liability
changes for state Medicaid programs, we reviewed relevant laws and
available guidance, including relevant regulations, CMS’s Coordination of
Benefits and Third-Party Liability (COB/TPL) in Medicaid handbook, and
an informational bulletin released on June 1, 2018, concerning CMS’s
implementation of federal third-party liability requirements and agency
oversight responsibilities regarding Medicaid state plans and state plan
amendments. We also conducted interviews with officials from CMS and
obtained written responses from CMS officials.

To describe stakeholders’ views on the possible effects of the third-party
liability changes and the methods state Medicaid officials could use to
monitor the potential effects on providers and beneficiaries, we conducted
interviews with state Medicaid agency officials in the nine selected states.
During these interviews, we asked officials about what potential effects
they anticipated these changes having on beneficiaries and providers and

3
 During the course of interviews with background experts and national provider
associations, we asked which states they recommended we review regarding this topic.
Background experts we interviewed included two individuals with experience in Medicaid
policy, as well as officials from the National Health Law Program, the Medicaid and CHIP
Payment and Access Commission, the Center on Budget and Policy Priorities, the
National Association of Medicaid Directors, and Medicaid Health Plans of America. The
national provider associations we interviewed included the American Academy of
Pediatrics and the American College of Obstetricians and Gynecologists.

Some of these stakeholders suggested states based on factors such as the number of
children and women served by a state’s Medicaid program and the perceived
effectiveness of the Medicaid agency within a state, among other things.
4
 Medicaid managed care organizations (MCO) are organizations with which states may
contract to provide a specific set of Medicaid-covered services to beneficiaries. States pay
MCOs a set amount per beneficiary to provide these services, typically per month.




Page 3                                            GAO-19-601 Medicaid Third-Party Liability
                       how states could monitor the effects of the third-party liability changes.
                       We also conducted interviews with other relevant stakeholders—including
                       individuals and organizations with expertise in Medicaid (identified
                       through interviews), national provider associations (e.g., the American
                       Academy of Pediatrics and the American College of Obstetricians and
                       Gynecologists), state chapters for provider associations, and
                       organizations representing beneficiaries—during which we asked about
                       the potential effects the third-party liability changes would have on
                       affected beneficiaries and providers. 5

                       We conducted this performance audit from April 2018 to August 2019 in
                       accordance with generally accepted government auditing standards.
                       Those standards require that we plan and perform the audit to obtain
                       sufficient, appropriate evidence to provide a reasonable basis for our
                       findings and conclusions based on our audit objectives. We believe that
                       the evidence obtained provides a reasonable basis for our findings and
                       conclusions based on our audit objectives.



Background
Overview of Medicaid   Medicaid expenditures are financed jointly by the federal government and
Expenditures and       the states. In order to receive federal matching funds for Medicaid
                       expenditures, states must adhere to a broad set of federal requirements
Oversight
                       and administer their programs consistent with individual state plans
                       approved by CMS. These plans are agreements between a state and the
                       federal government that describe how states will administer their
                       Medicaid programs, including how the state will administer Medicaid third-
                       party liability procedures. When states make changes to their Medicaid
                       programs or policies, including when necessary to comply with a change
                       in federal law, they must submit a state plan amendment to CMS. CMS
                       reviews and approves state Medicaid plans and state plan amendments.

                       The federal government matches each state’s Medicaid expenditures for
                       services according to a statutory formula called the Federal Medical
                       Assistance Percentage. This formula provides for a match that is no lower

                       5
                        We interviewed officials from organizations that have expertise in Medicaid, including the
                       National Association of Medicaid Directors, the Center on Budget and Policy Priorities, the
                       Medicaid and CHIP Payment and Access Commission, and the National Health Law
                       Program.




                       Page 4                                            GAO-19-601 Medicaid Third-Party Liability
                         than 50 percent of a state’s Medicaid expenditures and no higher than 83
                         percent. 6 States can receive a 90 percent federal match for the costs
                         associated with the development of each state’s Medicaid Management
                         Information System (MMIS), a claims processing and retrieval system
                         supporting the administration of the state’s Medicaid program. 7 States
                         also receive a 75 percent match for the costs associated with ongoing
                         MMIS maintenance and operations. 8 States use their MMIS systems to
                         process provider claims, including claims for prenatal care services,
                         pediatric preventive services, and services provided to CSE beneficiaries.

                         The Medicaid program is administered at the state level and overseen at
                         the federal level by CMS, which, among other things, ensures that funds
                         are used appropriately and beneficiaries have access to covered
                         services. Medicaid allows significant flexibility for states to design and
                         implement their programs. Within broad federal parameters, states have
                         discretion in, among other things, setting Medicaid eligibility standards
                         and provider payment rates; determining the amount, scope, and duration
                         of covered benefits; and developing their own administrative structures.

                         States may also decide how Medicaid-covered services provided to
                         beneficiaries will be delivered. For example, states may pay health care
                         providers for each service they provide—fee-for-service—or contract with
                         MCOs to provide a specific set of Medicaid-covered services to
                         beneficiaries and pay them a set amount per beneficiary, typically per
                         month. While most states use both delivery systems, the percentage of
                         beneficiaries served through MCOs has grown in recent years, and
                         represented nearly 70 percent of all Medicaid beneficiaries in 2016. 9


Federal Third-Party      Medicaid beneficiaries across various eligibility categories may have
Liability Requirements   access to private health insurance or other sources of third-party

                         6
                          Adjustments may apply to certain populations or services, however. For example, for
                         certain Medicaid enrollees, states receive a higher federal match based on whether the
                         state expanded Medicaid, as provided for under the Patient Protection and Affordable
                         Care Act. See Pub. L. No. 111-148, § 2001(a)(3), 124 Stat. 119, 272 (2010) (codified as
                         amended at 42 U.S.C. § 1396d(y)).
                         7
                         See 42 C.F.R. § 433.111(b) (2018).
                         8
                         See 42 U.S.C. §§ 1396b(a)(3)(A)(i), (B).
                         9
                          See Centers for Medicare & Medicaid Services, Medicaid Managed Care Enrollment and
                         Program Characteristics, 2016 (Spring 2018).




                         Page 5                                           GAO-19-601 Medicaid Third-Party Liability
coverage. For example, some adult beneficiaries may be covered by
employer-sponsored private health insurance even though they also
qualify for Medicaid. Children, similarly, may be eligible for Medicaid,
while also being covered as a dependent on a parent’s private health
plan. 10 As such, federal law requires states to perform various activities to
ensure that Medicaid is the payer of last resort, including taking all
reasonable measures to identify Medicaid beneficiaries’ other potential
sources of health coverage and their legal liability. 11 Specifically, states
must ensure that the following steps, among others, are taken.

1. Coverage identification. To identify beneficiaries with third-party
   health coverage, states are required to request coverage information
   from potential Medicaid beneficiaries at the time the agency makes
   any determination or redetermination of eligibility. States are also
   required to obtain and use information pertaining to third-party liability,
   for example, by conducting data matches with state wage information
   agencies, Social Security Administration wage and earning files, state
   motor vehicle accident report files, or state workers’ compensation
   files.
2. Coverage verification. When other health coverage is identified,
   states often verify the information, including the services covered
   through the other insurance and the dates of eligibility.
3. Cost avoidance payment procedures. As a general rule, federal law
   requires states to apply cost avoidance payment procedures to claims
   for most Medicaid items and services. Under cost avoidance

10
  Third parties are not limited to health insurers. Rather, they include any individual,
program, or entity legally responsible—liable—for payment for all or part of a claim for a
health care item or service. Such third parties may include private health insurance,
medical support from non-custodial parents, automobile insurance, workers’
compensation, probate-estate recoveries, and public programs, among others—unless
excluded by federal statute. See 42 U.S.C. § 1396a(a)(25)(A); 42 C.F.R. § 433.136 (2018)
(definition of a third party); CMS, State Medicaid Director Letter #06-026 (Dec. 15, 2006).

Because children are generally not permitted to enroll in a State Children’s Health
Insurance Program (CHIP) if they have another source of health care coverage, the
existence of third-party liability in CHIP is rare. However, if a child enrolled in CHIP were
to obtain private health insurance or another source of coverage (such as court-ordered
medical support from a non-custodial parent) during the course of an eligibility period,
third-party liability requirements would apply.
11
  See 42 U.S.C. § 1396a(a)(25)(A). CMS requires such activities to include the measures
specified in sections (b) through (k) of 42 C.F.R. § 433.138 unless waived. See 42 C.F.R.
§ 433.138(a) (2018). States may delegate these responsibilities to entities such as a
contractor or managed care organization.




Page 6                                              GAO-19-601 Medicaid Third-Party Liability
     procedures, the state must reject claims for which a third party is or is
     probably liable, and the agency instructs the provider to collect from
     the third party. 12 Once the provider determines the amount of the third
     party’s liability, the provider submits a claim to the state Medicaid
     agency for any remaining balance, up to the maximum amount
     allowed under the state’s payment schedule. 13 States are then
     required to make timely payment to the provider, generally within 30
     days from the date the claim for the balance is filed. 14
4. Pay-and-chase payment procedures. The Consolidated Omnibus
   Budget Reconciliation Act of 1985 made an exception to cost
   avoidance procedures for three types of services: prenatal care
   services, pediatric preventive services, and services provided to CSE
   beneficiaries. 15 It required states to pay such claims without regard to
   the liability of the third party, a procedure CMS calls “pay and chase.”
   Under the pay-and-chase payment procedure, the state Medicaid
   agency is generally required to make a timely payment to the provider
   within 30 days, and then the state, instead of the provider, will seek to
   recover payment from any potentially liable third parties within 60
   days. 16 According to CMS, cost avoidance does not apply to these
   claims because there is a risk some providers might not participate in

12
  See 42 C.F.R. § 433.139(b)(1) (2018) (requiring states to reject, but not deny, such
claims under cost avoidance procedures). See also, CMS, State Medicaid Manual, §
3904.1.
13
  Once the amount for which a third party is liable is known, the state Medicaid agency
must then pay the claim to the extent, and in the amount, that Medicaid payment for the
particular claim exceeds the amount of the third party’s payment. See 42 C.F.R §
433.139(b)(1) (2018).
14
  Specifically, states are required to make timely payments within 30 days for 90 percent
of clean claims—those for which no additional information from the provider or a third
party is necessary to process the claim. See 42 C.F.R. §§ 447.45(b), (d) (2018).
15
  See Pub. L. No. 99-272, § 9503, 100 Stat. 82, 205 (1986). The conference report
accompanying the act notes that prenatal care and preventive pediatric services were
excepted from the application of cost avoidance procedures so that third-party collections
would be pursued by the state, not by the provider. The conferees expressed a concern
that the administrative burdens associated with third-party collection efforts should not
discourage provider participation in Medicaid. The conference report also notes that the
intent of the conferees in excepting services provided to CSE beneficiaries was to protect
the custodial parent from pursuing collections from the non-custodial parent’s employer,
insurer, or other funding sources. See H.R. Rep. No. 99-453, at 544 (1985) (Conf. Rep.).
16
  States may request initial and continuing waiver of the requirement to recover payments,
and may suspend or terminate such recovery efforts, if the state determines it would not
be cost-effective to pursue recovery. See 42 C.F.R. §§ 433.139(e), (f) (2018).




Page 7                                            GAO-19-601 Medicaid Third-Party Liability
                                               Medicaid to avoid dealing with the administrative burden of cost
                                               avoidance. 17 (See fig. 1.)

Figure 1: Third-Party Liability Payment Processes for Medicaid Claims with Probable Private Insurer Liability




                                          17
                                            Center for Medicaid and CHIP Services Informational Bulletin (June 1, 2018), p. 1.




                                          Page 8                                           GAO-19-601 Medicaid Third-Party Liability
Note: With few exceptions, Medicaid is considered the payer of last resort, meaning that when
beneficiaries have another source of health care coverage—such as private health insurance
provided through an employer—that source, to the extent of its liability, should pay for services before
Medicaid does. This concept is referred to as “third-party liability.”
The Bipartisan Budget Act of 2018 amended various sections of the
Medicaid third-party liability statute, including the required processes
states must follow when paying claims with probable third-party liability for
the following three types of services:

•     Prenatal care services. The Bipartisan Budget Act of 2018
      eliminated, effective February 2018, the statutory exception for
      prenatal care services that had required states to apply pay-and-
      chase procedures to such claims. 18 Thus, under the amended statute,
      states must apply cost avoidance procedures to claims for prenatal
      care services when it is apparent that a third party is or may be liable
      at the time the claim is filed. 19 Additionally, to the extent states had
      opted under CMS regulations to apply pay-and-chase procedures to
      claims for labor, delivery, or postpartum care services—which CMS
      calls “pregnancy-related services”—states must now apply cost
      avoidance procedures to those as well. 20
•     Pediatric preventive services. Beginning in October 2019, under
      federal law as amended by the Bipartisan Budget Act of 2018, states
      are no longer required to pay claims for pediatric preventive services
      immediately. 21 While states will still have the option to apply pay-and-
      chase procedures to these claims, a state may instead choose—if it
      determines doing so is cost-effective and will not adversely affect
      access to care—to require the provider to first submit the claim to the
      third party and wait 90 days for payment by the third party before

18
    See Pub. L. No. 115-123, § 53102(a)(1) (codified at 42 U.S.C. § 1396a(a)(25)(E)).
19
    See 42 U.S.C. § 1396a(a)(25)(A).
20
  CMS regulations issued in 1985 permitted states to apply either cost avoidance or pay-
and-chase procedures to claims for labor, delivery, and postpartum care services,
excluding any costs associated with an inpatient hospital stay. See 42 C.F.R. §
433.139(b)(2) (2018). In section 3904.4 of the State Medicaid Manual, CMS explained its
view that the statutory prenatal care services exception permitted states to apply pay-and-
chase procedures broadly to “pregnancy-related services,” reasoning that obstetricians
frequently bundled these claims with prenatal care services.
21
  These statutory requirements initially appeared in the Bipartisan Budget Act of 2013, but
the effective date was delayed by subsequent legislation, most recently by the Bipartisan
Budget Act of 2018. See Pub. L. No. 113-67, § 202, 127 Stat. 1165, 1177 (2013) and Pub.
L. No. 115-123, § 53102(b)(2), 132 Stat. 64, 298 (2018), codified as amended at 42
U.S.C. § 1396a note.




Page 9                                                   GAO-19-601 Medicaid Third-Party Liability
                                                                         seeking Medicaid payment. For purposes of this report, we refer to
                                                                         such a 90-day period as a “wait-and-see period.”
                                                                  •      Services provided to CSE beneficiaries. Beginning in October
                                                                         2019, states must make payment for a CSE beneficiary’s claim if the
                                                                         third party has not paid the provider’s claim within a 100-day wait-and-
                                                                         see period. 22 However, the state may instead choose—if the state
                                                                         determines doing so is cost-effective and necessary to ensure access
                                                                         to care—to make payment within 30 days. 23 (See table 1.)

Table 1: Pre- and Post-Bipartisan Budget Act of 2018 Requirements for State Medicaid Payment of Certain Claims with
Probable Third-Party Liability

Type of claim                   Pre-Bipartisan Budget Act of 2018                                 Post-Bipartisan Budget Act of 2018                    Effective date
Prenatal care                   Pay-and-chase. State must make timely                             Cost-avoidance. State must reject claim until the Feb. 2018
services (including             payment to provider and then seek                                 provider bills the third party. If balance remains
                                                          b
pregnancy-related               payment from third party.                                         after provider bills third party or if third party denies
         a
services)                                                                                         claim, provider can submit claim to state for
                                                                                                  balance.
Pediatric preventive Pay-and-chase. State must make timely                                        State option. State must pay-and-chase or, upon       Oct. 2019
services             payment to provider and then seek                                            determination of cost-effectiveness and access,
                     payment from third party.                                                    reject claim for up to 90 days before making timely
                                                                                                  payment.
Services for                    State option. State must pay-and-chase                            State option. State must reject claim for up to 100 Oct. 2019
children subject to             or reject a claim for up to 30 days before                        days or, upon determination of cost-effectiveness
child support                   making timely payment.                                            and access, make payment within 30 days.
enforcement
Source: GAO analysis of the Bipartisan Budget Act of 2018 and related legislation. | GAO-19-601

                                                                  Note: See Pub. L. No. 115-123, § 53102, 132 Stat. 64, 298 (codified as amended by the Medicaid
                                                                  Services Investment and Accountability Act of 2019, Pub. L. No. 116-16, § 7, 133 Stat. 852, at 42
                                                                  U.S.C. §§ 1396a(a)(25), note).



                                                                  22
                                                                    The Bipartisan Budget Act of 2018 provided for a 90-day wait-and-see period for claims
                                                                  for CSE beneficiaries with probable third-party liability; however, subsequently enacted
                                                                  legislation extended it to 100 days. See Medicaid Services Investment and Accountability
                                                                  Act of 2019, Pub. L. No. 116-16, § 7, 133 Stat. 852. The Congressional Budget Office
                                                                  estimates that the additional 10 days of the wait-and-see period, which is optional for
                                                                  states, would save $60 million over 10 years. See Congressional Budget Office, Cost
                                                                  Estimate: H.R. 1839, Medicaid Services Investment and Accountability Act of 2019,
                                                                  (Washington, D.C.: Mar. 22, 2019), accessed July 3, 2019,
                                                                  https://www.cbo.gov/system/files/2019-03/hr1839_0.pdf.)
                                                                  23
                                                                    CMS has not announced whether a state that chooses to make payment within 30 days
                                                                  will continue to have the option of requiring providers to certify that they have waited 30
                                                                  days for third-party payment before filing the claim with the state or whether the state will
                                                                  be required to pay right away under pay-and-chase procedures. Under current
                                                                  regulations, states have both options and must specify the state’s procedures in their state
                                                                  Medicaid plans. See 42 C.F.R. § 433.139(b)(3)(ii) (2018).




                                                                  Page 10                                                      GAO-19-601 Medicaid Third-Party Liability
a
 We use the term “pregnancy-related services” to refer to labor, delivery, and postpartum care
services, excluding any costs associated with an inpatient hospital stay. Under Centers for Medicare
& Medicaid Services (CMS) regulations, states had the option to treat these services the same as
prenatal care services. See 42 C.F.R. § 433.139(b)(2) (2018). Under current law as amended by the
Bipartisan Budget Act of 2018, states must apply cost avoidance to all prenatal care and pregnancy-
related services. See 42 U.S.C. § 1396a(a)(25)(A).
b
 We use the term “timely payment” to refer to a payment made within the timeframe required by CMS
under its prompt payment regulation, 42 C.F.R. § 447.45(d) (2018), which requires states to pay 90
percent of clean claims—those for which no additional third party information is necessary—within 30
days of the date such claims are filed with the state agency and to pay 99 percent of clean claims
within 90 days of that date. See 42 C.F.R. § 447.45(b) (2018) (definition of a clean claim).


Once the third-party liability changes in the Bipartisan Budget Act of 2018
are fully implemented, states will have authority to require providers to
wait longer to receive Medicaid payments in certain circumstances. 24 For
example,

•    Prenatal care services claims, which were previously paid within 30
     days under pay-and-chase procedures, are now subject to cost
     avoidance. This could potentially result in providers waiting indefinitely
     to receive payment, depending on whether the provider is able to
     resolve the third-party liability (i.e., submit a claim for payment to the
     third party and determine the amount of the third-party liability), which
     must occur before the state may make payment under cost
     avoidance.
•    Pediatric preventive services claims, which are generally paid
     within 30 days under pay-and-chase procedures, could be subject to a
     90-day wait-and-see period beginning in October 2019 if a state
     decides to implement one. This could result in providers waiting 120
     days to receive payment (90 days to wait and see if the liable third
     party pays, and then another 30 days for the state to make timely
     payment on any remaining balance).
•    Claims for services for CSE beneficiaries, which are currently
     subject to pay-and-chase procedures or a 30-day wait-and-see period
     at state option, may be subject to either a 30-day or 100-day wait-and-
     see period beginning in October 2019, depending on which option the
     state chooses. This could result in providers waiting 130 days to
     receive payment (up to 100 days to wait and see if the liable third
     party pays, and then another 30 days for the state to make timely
     payment on any remaining balance).

24
  Although states are required to implement some of the third-party liability changes, such
as the requirement to apply cost-avoidance procedures to prenatal care services, the
changes applicable to pediatric preventive services claims and claims for services for CSE
beneficiaries provide the state with options.




Page 11                                                GAO-19-601 Medicaid Third-Party Liability
                          Officials from four of the nine selected states we reviewed reported
Some Selected             having implemented the required third-party liability changes for prenatal
States Have               care services. The changes were required to be implemented in February
                          2018. For the third-party liability changes affecting pediatric preventive
Implemented Third-        services and services provided to CSE beneficiaries, which are due to
Party Liability           take effect October 2019, Medicaid officials from six of the nine selected
                          states noted that they were in the very early stages of planning how they
Changes for Prenatal      might implement the changes.
Care Services; Most
of the States Were in
the Early Stages of
Planning for Other
Changes
Four of Nine Selected     Officials from four of the nine selected states we reviewed stated that
States Have Implemented   their state Medicaid agency had implemented the mandated third-party
                          liability changes for prenatal care services, which required states to
Required Third-Party
                          implement cost avoidance payment procedures for claims for these
Liability Changes for     services beginning in February 2018. 25 Officials from three of the four
Prenatal Care Services    states that have implemented the third-party liability changes for prenatal
                          care services told us that changing from pay-and-chase to cost avoidance
                          procedures involved identifying all the applicable service codes for
                          prenatal care and making the necessary changes in their systems to
                          ensure that any new claims were subject to cost avoidance procedures.
                          They said it also involved communicating the need for such changes to
                          the MCOs in their state. 26

                          State Medicaid officials from the remaining five states generally noted that
                          they were discussing the changes internally, researching how to
                          implement the changes in their MMIS, assessing the likely impact of

                          25
                            Under the new law, the state must reject any provider’s claim for prenatal care services
                          when it is apparent that a third party may be liable for those services. Once the provider
                          determines the amount of the third party’s liability, the state Medicaid agency may pay any
                          remaining balance up to the maximum allowed under the state’s payment schedule.
                          26
                            Officials from two states said that they had already been applying cost avoidance
                          procedures to claims for prenatal care services, even though the law in effect prior to the
                          Bipartisan Budget Act of 2018 required states to apply pay-and-chase payment
                          procedures to these claims.




                          Page 12                                            GAO-19-601 Medicaid Third-Party Liability
these changes on MMIS, or waiting for additional guidance from CMS. 27
For example:

•    Officials from several states noted that they were undertaking
     activities, such as identifying the prenatal care codes in their data
     systems that would need to be switched to cost avoidance payment
     procedures, or researching the best way to implement these changes.
•    Officials from one state said they were in the process of assessing
     what the likely impact of these changes on beneficiaries and providers
     would be, and would only subject claims for prenatal care services to
     cost avoidance if they determined that doing so was the best course
     of action. 28
•    Officials from one state indicated that they were waiting to determine
     whether it was more cost effective to implement these changes in
     their legacy MMIS, or wait and implement the changes in the new
     MMIS they are planning to roll out in the future.
State Medicaid officials also described other efforts that they would need
to undertake as they implemented these changes to third-party liability.
These included staff retraining and communicating the changes to
providers in their states.

Beyond state Medicaid programs, officials from the five Medicaid MCOs
we interviewed all stated that their organizations had not yet implemented
the prenatal care third-party liability changes. The MCO officials stated
that they were waiting for additional instructions on how to implement the
third-party liability changes or for revised contract language from their
state Medicaid agencies. Officials from one of the MCOs noted they were
not aware of the third-party liability changes until we reached out to them
for an interview. Officials from two MCOs we interviewed generally
agreed that the third-party liability changes for prenatal care services
would require changes to claims processing systems and internal
processes, but would not be significant. Several MCO officials noted that


27
  Although CMS issued initial guidance to states regarding the third-party liability changes
on June 1, 2018, the statutory requirement applicable to prenatal care services went into
effect in February 2018. See Center for Medicaid and CHIP Services, Informational
Bulletin (June 1, 2018).
28
  While federal law allows states certain options in processing claims for pediatric
preventive services and services provided to CSE beneficiaries, it does not allow states to
apply any procedures other than cost avoidance for prenatal care claims.




Page 13                                           GAO-19-601 Medicaid Third-Party Liability
                           these changes would likely result in some cost-savings to MCOs in the
                           future.


Most Selected States       Medicaid officials from six of the nine selected states noted that they were
Were in Early Stages of    in the very early stages of planning whether—or how—they would
                           implement the wait-and-see periods for pediatric preventive services and
Planning Implementation    services to CSE beneficiaries. 29 For example, some Medicaid officials
of Third-Party Liability   from these six states described how they were assessing what changes
Payment Changes for        would need to be made to their MMIS, deciding whether to implement the
Pediatric Preventive       wait-and-see periods, or exploring how to assess the potential impact of
Services and Services to   these changes. Some Medicaid officials also expressed uncertainty
                           regarding how such changes would affect Medicaid beneficiaries or the
CSE Beneficiaries          amount of effort required by their agency to implement the third-party
                           liability changes. Officials from one state noted that they had begun
                           discussions about implementing the third-party liability changes for both
                           pediatric preventive services and services for CSE beneficiaries in June
                           2018, and were in the process of identifying the necessary system
                           changes needed to implement third-party liability changes by the October
                           2019 effective date. Officials from two of these states stated that they do
                           not believe their state will implement the wait-and-see periods for
                           pediatric preventive services or CSE beneficiaries when the changes go
                           into effect. Officials from the remaining three states noted at the time of
                           our interviews they had not yet developed plans for assessing
                           implementation of these changes. Table 2 summarizes the status of
                           selected states’ implementation of the third-party liability changes.




                           29
                              During a wait-and-see period, the state must reject a claim with probable third-party
                           liability while the provider attempts to collect payment from the third party. The Bipartisan
                           Budget Act of 2018 gives states the option of implementing a 90-day wait-and-see period
                           for pediatric preventive services if states determine that implementing a wait-and-see
                           period would be cost-effective and would not adversely affect beneficiaries’ access to
                           care. In addition, the Bipartisan Budget Act of 2018 gives states the option of not
                           extending the wait-and-see period for child support enforcement beneficiaries to 100 days
                           if the state determines that not extending the wait-and-see period would be cost-effective
                           and necessary to ensure access to care. See Pub. L. No. 115-123, § 53102(b)(2), 132
                           Stat. 64, 298 (2018), as amended by Medicaid Services Investment and Accountability Act
                           of 2019, Pub. L. No. 116-16, § 7, 133 Stat. 852 (codified as amended at 42 U.S.C. §
                           1396a note).




                           Page 14                                            GAO-19-601 Medicaid Third-Party Liability
Table 2: Status of Selected States’ Implementation of Bipartisan Budget Act of 2018 Medicaid Third-Party Liability Changes

                 Prenatal care changes                           Pediatric preventive and child support enforcement beneficiaries’ changes
 State           (effective February 2018)                       (effective October 2019)
 #1              Not implemented                                 No plans developed
 #2              Not implemented                                 Has plans to implement (will implement if they determine it is the best course of action)
 #3              Not implemented                                 No plans developed
 #4              Not implemented                                 Has plans to implement
 #5              Implemented                                     In discussions on the advantages and disadvantages and exploring wait-and-see periods
 #6              Not implemented                                 No plans developed at this time
 #7              Implemented                                     Evaluating the changes and the approach they might take for implementing these
                                                                 changes
 #8              Implemented                                     Has plans to implement. In process of identifying what system and process changes are
                                                                 needed
 #9              Implemented                                     Has plans to implement
Source: GAO interviews with officials from nine selected state Medicaid agencies. | GAO-19-601

                                                                  Note: Under the Bipartisan Budget Act of 2018 and subsequently-enacted legislation, state Medicaid
                                                                  programs were required to use cost avoidance, as opposed to pay and chase, payment procedures
                                                                  when processing claims for prenatal care and pregnancy-related services for which a third party may
                                                                  be liable beginning in February 2018. This law also gives states the option to establish 90-day and
                                                                  100-day wait-and-see periods for claims for pediatric preventive services and services for CSE
                                                                  beneficiaries. During a wait-and-see period, the state must reject a claim with potential third party
                                                                  liability while the provider attempts to collect payment from the third party. These pediatric changes
                                                                  will go into effect in October 2019. See Pub. L. No. 115-123, § 53102(a)-(b), 132 Stat. 64, 298 (2018),
                                                                  as amended by Medicaid Services Investment and Accountability Act of 2019, Pub. L. No. 116-16, §
                                                                  7, 133 Stat. 852 (codified as amended at 42 U.S.C. §§ 1396a(a)(25), note).


                                                                  For pediatric preventive services, state Medicaid officials generally noted
                                                                  that the third-party liability changes would involve identifying the relevant
                                                                  codes and making changes to their MMIS to ensure those claims were
                                                                  subject to a wait-and-see period, if implemented. Several state Medicaid
                                                                  officials characterized this effort as “significant” or “difficult.” For services
                                                                  delivered to CSE beneficiaries, officials from several state Medicaid
                                                                  agencies speculated that making the third-party liability changes to their
                                                                  MMIS would necessitate having some sort of indicator in their system to
                                                                  identify which claims were for the CSE beneficiaries and, therefore,
                                                                  should be subject to a wait-and-see period, if implemented. Some state
                                                                  Medicaid agency officials said that this would require obtaining the
                                                                  information from another state agency responsible for administering CSE
                                                                  agreements.

                                                                  Several of the state Medicaid officials we interviewed expressed concerns
                                                                  regarding how to implement the wait-and-see periods for pediatric
                                                                  preventive services and services for CSE beneficiaries. Specifically, these
                                                                  officials noted that—within their MMIS—it is not possible to capture on a


                                                                  Page 15                                                 GAO-19-601 Medicaid Third-Party Liability
Medicaid claim when a provider has billed a third party, waited a specified
amount of time, and not received payment. As a result, officials from one
state noted that additional guidance from CMS on how to implement and
track provider billing of third parties—including wait-and-see periods and
providers’ collection of payment—would be necessary before moving
forward with implementing the third-party liability changes. Officials from
two states said that the administrative burden associated with these
changes would possibly make them not cost-effective to implement.
However, MCO officials we interviewed generally acknowledged that
while these changes would require changes to their claims processing
systems and internal processes, they were not significant and could
potentially result in some cost-savings to their MCO in the future.

The third-party liability change affecting all Medicaid services provided to
CSE beneficiaries was a particular concern for officials from three state
Medicaid agencies and three MCOs. Specifically, these officials said
there is currently no way to identify CSE beneficiaries in their MMIS or
claims processing systems, which could potentially make this change
difficult, if not impossible, to implement. Officials from one state described
how setting up a system to receive this information would involve a
significant effort, potentially necessitating new hardware and system
modifications, as well as a data sharing agreement with the state entity
maintaining the CSE information. Officials from one MCO noted that the
third-party liability changes affecting CSE beneficiaries was a particular
concern, because those changes would potentially require additional
administrative work and changes to their processes in order for providers
in their network to track down insurance information from a non-custodial
parent.




Page 16                                    GAO-19-601 Medicaid Third-Party Liability
CMS Has Issued
Implementing
Guidance with
Information
Inconsistent with
Federal Law and Has
Not Overseen States’
Implementation of
Third-Party Liability
Changes

CMS’s Implementing           After enactment of the Bipartisan Budget Act of 2018 in February 2018,
Guidance Contains            CMS issued guidance in the form of an informational bulletin to states on
                             June 1, 2018, to facilitate states’ implementation of the key provisions of
Information Inconsistent
                             the Bipartisan Budget Act of 2018 related to third-party liability in
with Provisions of Federal   Medicaid. However, CMS’s June informational bulletin is missing some
Law Related to Medicaid      key information and contains information that is inconsistent with the
Third-Party Liability        federal law. This is inconsistent with CMS’s responsibility for ensuring
                             states’ compliance with federal requirements. In particular,

                             •     Pregnancy-related claims. Under federal law, states must apply
                                   standard cost avoidance procedures to all non-pediatric claims,
                                   including claims for prenatal services beginning in February 2018. 30
                                   However, CMS guidance indicates that a state need not apply cost
                                   avoidance procedures to claims for labor and delivery services if
                                   those claims can be differentiated from prenatal services. 31 The
                                   guidance also provides that, effective October 1, 2019, states will
                                   have 90 days to pay claims related to labor, delivery, and postpartum
                                   care claims. As a result, CMS’s guidance is inconsistent with federal
                                   law, which requires states to reject any such claim under cost


                             30
                               See 42 U.S.C. § 1396a(a)(25)(A) (requiring standard cost avoidance procedures for all
                             Medicaid claims with probable third-party liability under subsection (A) except for certain
                             pediatric claims identified in subsections (E) and (F)).
                             31
                                 See Center for Medicaid and CHIP Services, Informational Bulletin (June 1, 2018), p. 2.




                             Page 17                                            GAO-19-601 Medicaid Third-Party Liability
      avoidance procedures until the third-party liability is resolved,
      regardless of how many days that might take. 32
•     Pediatric preventive claims. Under federal law, states must
      generally apply pay-and-chase procedures to pediatric preventive
      services. However, beginning in October 2019, states are permitted to
      implement a 90-day wait-and-see period before making payment for
      these services if the state determines that it would be cost-effective
      and would not adversely affect access to care to do so. 33 However,
      CMS guidance simply provides that states will have 90 days to pay
      such claims, suggesting that states need not make the cost-
      effectiveness or access determinations required by statute. 34
•     CSE beneficiary claims. Under federal law, beginning in October
      2019, for claims for services to CSE beneficiaries, states may choose
      to make payment within 30 days (as opposed to implementing a 100-
      day wait-and-see period), if the state determines doing so is cost-
      effective and necessary to ensure access to care. 35 If the state does
      not make such a determination, the statute would require the state to
      avoid making payment for such services for up to 100 days to allow
      third parties to make payment first. However, CMS guidance does not
      identify this as an option for states. Instead, CMS guidance simply
      provides states with the option of implementing the wait-and-see
      period, omitting the option for states to make payment within 30 days.
CMS officials told us that the Bipartisan Budget Act of 2018 did not
change state responsibilities related to cost-effectiveness and access to
care, and CMS does not intend to issue additional guidance on this issue.
However, prior to enactment of the Bipartisan Budget Act of 2018 in
February 2018, federal third-party liability law did not authorize states to




32
    See 42 U.S.C. § 1396a(a)(25)(A).
33
    See 42 U.S.C. § 1396a note.
34
    See Center for Medicaid and CHIP Services, Informational Bulletin (June 1, 2018), p. 2.
35
    See 42 U.S.C. § 1396a note.




Page 18                                            GAO-19-601 Medicaid Third-Party Liability
apply cost avoidance procedures to preventive pediatric claims or
pediatric services provided to CSE beneficiaries. 36

Furthermore, other CMS guidance documents, such as the third-party
liability handbook and CMS regulations on third-party liability, are out of
date and not a reliable source of information for states to use in
implementing the new federal third-party liability requirements. In
particular, the third-party liability handbook was last revised in 2016 and
does not reflect the Bipartisan Budget Act of 2018 changes. Additionally,
CMS regulations implementing federal requirements for state payment of
claims for prenatal care, labor and delivery services, postpartum care,
preventive pediatric services, and services to CSE beneficiaries were last
amended in 1997 and, accordingly, do not reflect current statutory
requirements, including the Bipartisan Budget Act of 2018 requirement to
cost avoid prenatal and other non-pediatric claims beginning February
2018. 37

CMS officials told us the agency is in the process of updating its third-
party liability handbook and anticipates issuing the updated document in
September 2019. Agency officials also told us they plan to revise the
agency’s regulations regarding pay-and-chase and release the revised
regulations in early 2020. However, federal law requires state Medicaid
plans to provide for proper third-party liability procedures, which states
often carry out through references to federal regulation, according to CMS
officials. Without updated third-party liability guidance that is timely,
complete, and consistent with federal law, states may lack the necessary
information to update their state Medicaid plans so that they comply with
these requirements.




36
  Under CMS regulations, states are permitted to request a waiver of cost avoidance or
recovery of reimbursement requirements if the state determines that such a requirement is
not cost-effective. See 42 C.F.R. § 133.139(e) (2018). However, this cost-effectiveness
determination for purposes of the waiver does not involve a determination of access to
care or permit a state to waive pay-and-chase requirements. According to CMS officials,
no waivers are currently in effect.
37
 Compare 42 C.F.R. § 433.139 (2018) with 42 U.S.C. §§ 1396a(a)(25)(A), (E), (F), note.




Page 19                                          GAO-19-601 Medicaid Third-Party Liability
CMS Has Not Overseen        CMS has not taken steps to determine the extent to which state Medicaid
States’ Implementation of   agencies are meeting the third-party liability requirements, and therefore
                            CMS officials were unaware of whether states were meeting the new
Third-Party Liability
                            requirements. In particular, CMS officials did not know the extent to which
Changes                     the selected states in our review had implemented the required third-party
                            liability changes. In our interviews with nine selected state Medicaid
                            agencies conducted between November 2018 and March 2019, we
                            learned that five states continued to apply pay-and-chase procedures to
                            prenatal care claims, despite the federal requirement to implement cost
                            avoidance since February 2018. 38

                            During our interviews, we also learned that CMS had not monitored state
                            Medicaid agencies’ third-party liability approaches prior to the Bipartisan
                            Budget Act of 2018. For example, officials from one of the selected states
                            told us that they had been using cost avoidance for most claims for
                            pediatric preventive care, rather than applying pay-and-chase
                            procedures, as required by law. 39 We also learned from an official from
                            another selected state that the state had been applying cost avoidance
                            procedures to claims for prenatal care services well in advance of the
                            enactment of the Bipartisan Budget Act of 2018, despite the federal
                            requirement to apply pay-and-chase procedures to such claims from 1986
                            to 2018.

                            CMS’s failure to monitor the implementation of the third-party liability
                            changes in the Bipartisan Budget Act of 2018 is inconsistent with the
                            agency’s responsibilities for oversight of the Medicaid program, including
                            ensuring that federal funds are appropriately spent. We have previously
                            recommended that, given the significant federal Medicaid outlays, the
                            federal government has a vested financial interest in further increasing
                            states’ third-party liability cost savings, and that CMS should play a more
                            active leadership role in monitoring, understanding, supporting, and
                            promoting state third-party liability efforts. 40


                            38
                              Federal law requires Medicaid state plans to provide for the cost avoidance of prenatal
                            care claims effective February 9, 2018. See 42 U.S.C. § 1396a(a)(25)(A) (as amended by
                            the Bipartisan Budget Act of 2018, Pub. L. No. 115-123, § 53102(a), 132 Stat. 64, 298).
                            39
                              Officials from the state noted that they apply pay-and-chase procedures to claims for
                            pediatric immunizations and apply cost avoidance procedures to all other pediatric
                            services.
                            40
                              See GAO, Medicaid: Additional Federal Action Needed to Further Improve Third-Party
                            Liability Efforts, GAO-15-208 (Washington, D.C.: Jan. 28, 2015).




                            Page 20                                           GAO-19-601 Medicaid Third-Party Liability
However, CMS officials stated that they expect states to comply with
current law for Medicaid third-party liability, and that they do not verify
whether states have implemented the required third-party liability changes
unless the agency is made aware of non-compliance. When asked how
CMS ensures that states apply pay-and-chase procedures required under
federal law, such as for pediatric preventive claims, CMS officials stated
that it is the agency’s expectation that states comply with current law.
According to agency officials, if a state has difficulty complying and
reaches out to CMS for technical assistance, the agency will work with
that state to come into compliance. CMS officials told us that CMS plans
to review all state Medicaid plans and provide technical assistance for
any necessary action only after the agency has updated its regulations
related to third-party liability. 41 As of May 2019, CMS anticipated that it
would release updated regulations in early 2020.

Because CMS has not monitored states’ compliance with federal third-
party liability requirements, the agency does not know whether states
have applied the federally required third-party liability procedures to
certain Medicaid claims as required by federal law. In the case of prenatal
care services claims, the failure to implement cost avoidance payment
procedures could result in unnecessary Medicaid expenditures, to the
extent that Medicaid pays providers for services for which a third party is
liable. To the extent that states are not properly applying pay-and-chase
procedures to pediatric preventive service claims, children’s access to
such services could be impacted.




41
  However, CMS officials noted in response to our identification of specific state
compliance concerns that the agency would follow up with the identified states directly.




Page 21                                           GAO-19-601 Medicaid Third-Party Liability
Stakeholders
Anticipate Third-Party
Liability Changes
Could Affect
Beneficiary Access to
Care; Selected States
Discussed Using
Existing Methods to
Assess Effects of
Changes

Most Stakeholders          According to most of the stakeholders we interviewed, Medicaid
Anticipate Increased       providers—especially prenatal care and rural providers—could face
                           increased administrative requirements or delays in payments for services
Administrative
                           as a result of the third-party liability payment changes to the three service
Requirements for           categories in the Bipartisan Budget Act of 2018. Several stakeholders
Providers and a Possible   agreed that the tasks associated with identifying sources of third-party
Decrease in Beneficiary    liability and attempting to collect from third parties would shift from state
Access to Care             Medicaid agencies to providers as a result of the payment changes,
                           although opinions differed on the extent to which this shift would affect
                           providers.

                           •   Several stakeholders said that the third-party liability changes could
                               increase administrative requirements for providers, because obtaining
                               accurate information on third-party liability sources for Medicaid
                               beneficiaries and resubmitting claims that result from incorrect or
                               outdated third-party liability information can be resource intensive and
                               time consuming. One provider and officials from one state Medicaid
                               agency noted that providers may lack the administrative resources or
                               claims-processing expertise to deal with these changes. Officials from
                               one state Medicaid agency, two state provider associations, and an
                               organization advocating for Medicaid beneficiaries also noted that
                               providers may encounter Medicaid beneficiaries who may be unaware
                               or may not disclose that they have other insurance policies; for
                               example, children who are covered under multiple insurance policies
                               by custodial and non-custodial parents or experience insurance
                               transitions following birth. These issues may increase the amount of



                           Page 22                                   GAO-19-601 Medicaid Third-Party Liability
     time and resources providers spend on processing and resubmitting
     claims.
•    Other stakeholders were less certain that the added requirements
     would cause difficulties for providers. Officials from one state
     Medicaid agency and one MCO said that the payment changes would
     not be difficult to implement, because providers were familiar with
     billing third parties for medical services for other beneficiaries.
     Officials from four state Medicaid agencies and two MCOs noted that
     providers may prefer to submit claims to commercial insurers,
     because these insurers pay at a higher rate compared with state
     Medicaid programs.
Several stakeholders we interviewed agreed that providers could wait
longer periods of time for payment as they track down third-party insurers
or wait up to 100 days for potential payment from these insurers before
seeking payment from the state Medicaid agency. According to one
provider and officials from two provider associations and one MCO, these
delays could put providers at risk of not receiving payments for services
or not having enough cash on hand to sustain operations. Additionally,
officials from three provider associations noted that payment delays
would affect pediatric providers in particular, because the majority of the
services that pediatricians provide are preventive care—which would be
affected by the third-party liability changes.

According to several stakeholders we interviewed, smaller or independent
providers and those located in rural areas could be more affected by the
third-party liability changes compared with providers affiliated with
managed care systems or those located in urban areas. Officials from
one state Medicaid agency, two provider associations, and one MCO
noted that smaller or rural-based providers generally have fewer staff and
resources to deal with the larger volume of administrative paperwork and
delays in payment for services that could result from the payment
changes.

Most of the stakeholders we interviewed said that providers might be less
willing to serve Medicaid beneficiaries due to the administrative and
payment issues, potentially reducing access to care or delaying services
for children and pregnant women. 42 However, some other stakeholders

42
  Providers may not refuse to see a Medicaid beneficiary on the basis of their potential
third-party liability, although a provider may reduce or stop their participation in the
Medicaid program. 42 U.S.C. § 1396a(a)(25)(D).




Page 23                                           GAO-19-601 Medicaid Third-Party Liability
                               said that the third-party liability changes would have little to no effect on
                               Medicaid beneficiaries. Officials from one state Medicaid agency and one
                               MCO noted that third-party liability payment practices for other Medicaid
                               populations and services have been in place for many years, and
                               providers would already be familiar with processing claims with third-party
                               liability.

                               Several stakeholders said that providers may opt to reduce or eliminate
                               the number of Medicaid beneficiaries they serve, because of actual or
                               perceived increase in administrative requirements or payment delays.
                               Officials from three state provider associations speculated that the
                               potential for additional delays in payment for services could be the “final
                               straw” in providers’ decision to stop serving Medicaid beneficiaries. Other
                               stakeholders, including a Medicaid expert, one provider, and officials from
                               one state provider association noted that providers may decide to see
                               fewer Medicaid beneficiaries, but are unlikely to stop seeing them entirely,
                               because some providers are reluctant to deny care to these beneficiaries.

                               Payment delays could also lead to delays in beneficiaries receiving time-
                               sensitive services, such as immunizations, as well as reduced access to
                               specialists, such as midwives or mental health professionals, according to
                               several stakeholders. Officials from one national provider association and
                               an organization advocating for Medicaid beneficiaries noted that providers
                               may seek to identify sources of third-party liability before providing
                               services to beneficiaries. In addition, officials from one state Medicaid
                               agency, a state provider association, and an organization advocating for
                               Medicaid beneficiaries expressed concern that the third-party liability
                               changes had the potential to reduce access to care for populations, such
                               as children and pregnant women, that already faced challenges in
                               accessing adequate, timely, or quality health care.


Selected States Discussed      Medicaid officials we interviewed from seven of the nine selected states
Using Existing Methods for     said that their agencies will—or could—use existing methods to assess
                               the effects of the third-party liability changes on provider availability and
Assessing Provider
                               beneficiary access to prenatal care services, pediatric preventive
Availability and Beneficiary   services, and services for CSE beneficiaries. Officials from the remaining
Access to Care Once            two states did not discuss or provide information on how they could
Payment Changes Are            assess the effects of the changes.
Implemented
                               Medicaid officials provided examples of existing methods that could be
                               used to assess the effects of payment changes:



                               Page 24                                    GAO-19-601 Medicaid Third-Party Liability
•   Tracking beneficiary access by comparing a set of access-to-care
    measures for a state’s Medicaid population with its non-Medicaid,
    commercially insured population, as well as carrying out customer
    satisfaction surveys with Medicaid beneficiaries,
•   Using a third-party liability hotline to track patient issues and
    conducting secret shopper calls to monitor if providers are accepting
    new patients,
•   Contracting with a state university to evaluate Medicaid beneficiary
    access for prenatal and pediatric services.
In addition, one state has an independent health advocacy agency that
monitors and seeks to resolve provider availability and beneficiary access
issues on behalf of the state’s Medicaid population.

However, one state Medicaid official and a Medicaid expert agreed that
measuring any possible effects of the third-party liability changes—such
as a decline in provider availability or beneficiary access—would be
difficult without baseline data. According to officials from two state
Medicaid agencies and a Medicaid expert, many other factors could
potentially affect provider availability and beneficiary access, making it
difficult or impossible to pinpoint if a decline in provider availability or
beneficiary utilization of services was the result of the third-party liability
changes or something else—such as changes in the managed care
market or levels of private coverage among beneficiaries.

We found other evidence suggesting that it might be challenging for some
states to assess the effects of the third-party liability changes.
Specifically, Medicaid officials from eight of the nine selected states did
not readily identify the number of beneficiaries in their state that had third-
party liability and would be affected by the changes. Moreover, officials
from two states noted that obtaining this data would require a “significant”
effort.

•   Officials from five states shared information on the number of children,
    pregnant women, or births covered by Medicaid in their state, but did
    not specify how many of these beneficiaries had other insurance
    coverage.
•   Seven of the nine selected states had no data readily available on
    CSE beneficiaries who were also covered by Medicaid. In several
    cases, officials noted that their MMIS or other data systems had no
    way to track whether a child was a CSE beneficiary.




Page 25                                     GAO-19-601 Medicaid Third-Party Liability
                  Omissions and inaccuracies in CMS’s guidance to states on third-party
Conclusions       liability changes from the Bipartisan Budget Act of 2018 have the potential
                  to adversely affect the extent to which Medicaid expenditures are being
                  used to pay for services for which a third party is liable, as well as states’
                  compliance with federal requirements. Furthermore, CMS has not
                  assessed whether state Medicaid agencies are complying with federal
                  third-party liability requirements, under which states must change how
                  they pay claims for certain services as a result of the Bipartisan Budget
                  Act of 2018 and subsequently enacted legislation. In the absence of CMS
                  overseeing states’ compliance, the agency cannot ensure that federal
                  funds are being spent properly and that states are complying with current
                  federal statute.


                  We are making the following two recommendations to CMS:
Recommendations
                  •   The Administrator of CMS should ensure the agency’s Medicaid third-
                      party liability guidance is consistent with federal law related to
                      •     the requirement for states to apply cost avoidance procedures to
                            claims for labor, delivery, and postpartum care services,
                      •     the requirement for states to make payments without regard to
                            potential third-party liability for pediatric preventive services unless
                            the state has made a determination related to cost-effectiveness
                            and access to care that warrants cost avoidance for 90 days, and
                      •     state flexibility to make payments without regard to potential third-
                            party liability for pediatric services provided to child support
                            enforcement beneficiaries. (Recommendation 1)
                  •   The Administrator of CMS should determine the extent to which state
                      Medicaid programs are meeting federal third-party liability
                      requirements and take actions to ensure compliance as appropriate.
                      Such actions can include ensuring that state plans reflect the law.
                      (Recommendation 2)



                  We provided a draft of this report to the Department of Health and Human
Agency Comments   Services for comment. In its written comments, which are reprinted in
                  appendix I, HHS concurred with our recommendations and indicated a
                  commitment to providing states with accurate guidance on the third-party
                  liability changes in the Bipartisan Budget Act of 2018. The agency noted
                  that it is in the process of updating its guidance and third-party liability
                  handbook to reflect the changes and ensure that such guidance is


                  Page 26                                       GAO-19-601 Medicaid Third-Party Liability
consistent with federal law. The agency also noted that it will determine
the extent to which state Medicaid programs are meeting federal third-
party liability requirements and will take actions to ensure compliance.


We are sending copies of this report to the appropriate congressional
committees, the Secretary of Health and Human Services, and other
interested parties. In addition, the report is available at no charge on the
GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-7114 or yocomc@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs can be found on the last
page of this report. Major contributors to this report are listed in appendix
II.




Carolyn L. Yocom
Director, Health Care




Page 27                                    GAO-19-601 Medicaid Third-Party Liability
Appendix I: Comments from the Department
             Appendix I: Comments from the Department of
             Health and Human Services



of Health and Human Services




             Page 28                                       GAO-19-601 Medicaid Third-Party Liability
Appendix I: Comments from the Department of
Health and Human Services




Page 29                                       GAO-19-601 Medicaid Third-Party Liability
Appendix I: Comments from the Department of
Health and Human Services




Page 30                                       GAO-19-601 Medicaid Third-Party Liability
Appendix II: GAO Contacts and Staff
                  Appendix II: GAO Contacts and Staff
                  Acknowledgments



Acknowledgments


                  Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov
GAO Contact
                  In addition to the contact named above, Tom Conahan (Assistant
Staff             Director), Andrea E. Richardson (Analyst-in-Charge), Marybeth Acac,
Acknowledgments   Drew Long, Corinne Quinones, Jennifer Rudisill, and Ethiene Salgado-
                  Rodriguez made key contributions to this report.




(102766)
                  Page 31                                GAO-19-601 Medicaid Third-Party Liability
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