oversight

Medicaid: Legislation Needed to Improve Collections From Private Insurers

Published by the Government Accountability Office on 1990-11-30.

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

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                                                                                                                          F ro m P ri v a te In s u re rs
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                          Uni t ed      States
GAO                       General
                          Washi n gton,
                                         Accounti n g   Offi c e
                                               D.C. 20648

                          Human            Resources              Di v i s i o n

                          B-238267

                          November                30,199O

                          The Honorabl e        Henry A. Waxman
                          Chai r man,     Subcommi t tee  on Heal t h                                      and
                             the Envi r onment
                          Commi t tee      on Energy and Commerce
                          House of Representati v es

                          Dear Mr. Chai r man:

                          Thi s report responds              to your request                  that we revi e w                       probl e ms                        experi -
                          enced by state Medi c ai d                 agenci e s      i n col l e cti n g               from certai n                        thi r d parti e s.
                          As a publ i c     assi s tance       program,           it was i n tended                         that Medi c ai d                          woul d
                          pay for heal t h          care onl y after Medi c ai d                      reci p i e nts             had used al l thei r
                          other heal t h      care resources.                As agreed wi t h your offi c e, we focused                                                           our
                          revi e w     on out-of-state         i n surers        and empl o yee                       heal t h       benefi t                   pl a ns cov-
                          ered under theEmpl o yee                     Reti r ement           Income Securi t y                          Act of 1974
                          (ERISA). State Medi c ai d              agenci e s      have reported                          probl e ms                col l e cti n g              from
                          these types of i n surers.                We agreed to provi d e                           i n formati o n                      on the type
                          and extent of the probl e ms                      and di s cuss            any potenti a l                  l e gi s l a ti v e                reme-
                          di e s needed      to resol v e      them.


                          Two maj o r probl e ms                             hi n der     states        i n col l e cti n g from                      pri v ate      i n surers         for
Resul t s   i n Bri e f   Medi c ai d reci p i e nts’                       covered        heal t h        care costs.’

                          1. States cannot prohi b i t          some out-of-state            i n surers          from taki n g       acti o ns
                          that al l o w them to avoi d payi n g            state Medi c ai d            agenci e s       for such costs.
                          States l a ck j u ri s di c ti o n over i n surers     that operate               onl y i n ci d ental l y         in
                          the state.

                          2. States’ l i m i t ed  authori t y     over ERISA pl a ns2 does not al l o w them to pro-
                          hi b i t these pl a ns from certai n         acti o ns to avoi d payments      for reci p i e nts’
                          covered       costs. Further,        many states have not exerci s ed        the authori t y


                          T‘he Secretary of Heal t h and Human Servi c es was expressl y                                   granted authori t y            to defi n e the term
                          “p ri v ate   i n surer.”         He has defi n ed       it broadl y to i n cl u de,    for exampl e ,         any commerci a l          i n surance     com-
                          pany, prepai d            medi c al   pl a n, empl o yer-empl o yee            benefi t pl a n, or sel f -i n sured      pl a n. Therefore,          i n thi s
                          report we use “p ri v ate              i n surer”     and “in surer”    (dependi n g          on the speci f i c    context), as the Secretary
                          has defi n ed        the former term i n regul a ti o n.
                          2ERISA provi d es           that empl o yers,    l a bor organi z ati o ns,          and other empl o yee       organi z ati o ns that wi s h to
                          establ i s h    wel f are benefi t pl a ns, whi c h may i n cl u de            heal t h benefi t s, must meet certai n mi n i m al
                          requi r ements.          The Department       of Labor i s responsi b l e              for admi n i s teri n g ERISA. In thi s report, we
                          refer to wel f are benefi t pl a ns, whi c h i n cl u de              heal t h benefi t s, that are covered under ERISA, as
                          “E RISA pl a ns.”



                          Page 1                                                        GAO/HRD-91-25             Medi c ai d      Col l e cti o ns          From Pri v ate       Insurers
                                                                                                                                                                       ,
                             B-238267




                             they do have to mandate             that no ERM pl a n                                                i n cl u de     any contract        provi -
                             si o n havi n g   the effect of l i m i t i n g or excl u di n g                                               payments    for Medi c ai d
                             reci p i e nts’ heal t h care costs.

                             State offi c i a l s             coul d not easi l y                i d enti f y        Medi c ai d             l o sses through                   thei r
                              payment              systems, and we di d not i n dependentl y                                                 esti m ate                  the extent of
                             the l o sses resul t i n g                  from these probl e ms.                             However,                some state Medi c ai d
                             offi c i a l s      gave exampl e s                   of thei r Medi c ai d                     l o sses. These exampl e s                             and
                              i n formati o n             from federal                agenci e s              suggest that the l o sses may be sub-
                              stanti a l - perhaps                   mi l i o ns        of dol l a rs             annual l y -and                     are l i k el y           to grow
                             i n the near future. To mi n i m i z e                                  future l o sses, federal                          l e gi s l a ti o n       is
                             needed            to cl a ri f y       Medi c ai d s’         rol e as payer of l a st resort and enhance                                                  the
                             states’ abi l i t i e s            to col l e ct        from out-of-state                            i n surers        and ERISA pl a ns.


                             Medi c ai d     i s a federal l y              ai d ed, state-admi n i s tered                           medi c al            assi s tance               pro-
Background                   gram that i n fi s cal year 1988 served about 23 mi l i o n                                                        l o w-i n come                peopl e .
                             General l y ,      peopl e       recei v i n g          publ i c        assi s tance              under the Ai d to Fami l i e s
                             Wi t h Dependent           Chi l d ren                (AFDC) and Suppl e mental                              Securi t y              Income pro-
                             grams are el i g i b l e         for Medi c ai d                 assi s tance.              Wi t hi n      broad federal                    l i m i t s,
                             states determi n e         the coverage                         and payment                    rates for medi c al                     servi c es
                             offered and normal l y                     make payments                        di r ectl y           to provi d ers             who render
                             the servi c es.

                             The federal       porti o n       of state Medi c ai d    payments     i s based on each state’s
                             per capi t a i n come.         States wi t h l o wer per capi t a i n comes      recei v e   hi g her
                             rates of federal           matchi n g.    In fi s cal year 1988, Medi c ai d     medi c al   assi s -
                             tance expendi t ures            total e d   about $51.6 bi l i o n,  of whi c h the federal           gov-
                             ernment     pai d $29.0 bi l i o n         (56 percent)      and the states $22.6 bi l i o n
                             (44 percent).

                             At the federal                  l e vel ,     the Department              of Heal t h and Human Servi c es
                             (HHS) has responsi b i l t y                        for overseei n g         state Medi c ai d         admi n i s trati o n.
                             Wi t hi n HHS, the Heal t h                       Care Fi n anci n g         Admi n i s trati o n       (HCFA) i s respon-
                             si b l e for devel o pi n g                   program      pol i c i e s,   setti n g standards,            and ensuri n g
                             state compl i a nce                     wi t h federal      Medi c ai d        l e gi s l a ti o n and regul a ti o ns.


Medi c ai d Intended to Be   The Congress              i n tended             that Medi c ai d       woul d pay for heal t h               care onl y
Payer of Last Resort          after Medi c ai d             reci p i e nts          had used al l other heal t h             care resources.              Thi r d
               Y              parti e s  provi d i n g             heal t h        care coverage      i n cl u de   heal t h     and l i a bi l i t y
                             i n surers,     ERISA pl a ns,                 empl o yee     wel f are     benefi t    pl a ns, workers’                compen-
                             sati o n pl a ns, and Medi c are.                         Up to 14 percent           of Medi c ai d     reci p i e nts         may


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                                      have other heal t h                 i n surance,                 HCFA esti m ated        i n 1989. As a condi t i o n      of
                                       Medi c ai d    el i g i b i l t y,       i n di v i d ual s          assi g n thei r ri g hts to payments            for med-
                                      i c al care to the state Medi c ai d                               agency. A state shares any thi r d-party
                                       savi n gs   wi t h the federal                            government          i n the same proporti o n    as Medi c ai d
                                      payments.

                                      On i t s face, Medi c ai d                      l a w does not expl i c i t l y            requi r e        that i n surers          treat
                                      Medi c ai d             as the l a st payer. However,                       the l a w i s structured                    to achi e ve
                                      thi s by requi r i n g                that states ascertai n                  the l e gal l i a bi l i t y          of thi r d parti e s
                                      and seek rei m bursement                                to the extent of thei r l i a bi l i t y.                  The l a w al s o pro-
                                      hi b i t s federal            cost-shari n g                 when pri v ate      i n surers             are al l o wed         to use con-
                                      tract provi s i o ns                to l i m i t thei r costs to the amount                              not pai d by Medi c ai d .
                                      The l e gi s l a ti v e         hi s tory            reveal s    that the i n tent was to prompt                              states to
                                      adopt l a ws that have the effect of requi r i n g                                       i n surers          to pay ahead of
                                      Medi c ai d .

                                      States have passed l a ws that requi r e                         i n surers        to rei m burse      the state
                                      Medi c ai d     agency for Medi c ai d           reci p i e nts’          heal t h    care costs. However,
                                      some Medi c ai d        reci p i e nts    are covered               by i n surers       not normal l y        regul a ted
                                      by the Medi c ai d        reci p i e nts’    state, that i s , i n surers               l o cated   outsi d e    of the
                                      reci p i e nts’   state or EmsA pl a ns.


Some Medi c ai d Reci p i e nts       Some Medi c ai d           reci p i e nts                who have heal t h        care coverage            are l i k el y     to be
Covered by Out-of-State               covered      by out-of-state                       i n surers     or ERISA pl a ns that fal l outsi d e                  of state
                                      regul a tory     authori t y,               al t hough          exact fi g ures      are unavai l a bl e .         For
Insurers or ERISA Pl a ns             exampl e ,     Medi c ai d            reci p i e nts          may

                                  . i f they are chi l d ren,          have heal t h              coverage          through         a parent who l i v es i n
                                    another      state. These parents               may be requi r ed                      by support         agreements            to
                                    provi d e    thei r chi l d ren       wi t h heal t h             benefi t s.      AFDC fami l i e s      make up about
                                     70 percent        of the Medi c ai d        popul a ti o n;                one parent i s usual l y           absent3
                                    About 26 percent                of absent parents                   l i v e i n a di f ferent        state than thei r
                                    chi l d ren.
                                  . have coverage           from out-of-state                  i n surers          because        they obtai n ed          i t i n one
                                     state before movi n g             to another.
                                  . have coverage           from out-of-state                   i n surers         because        they work and obtai n
                                    coverage       i n one state but l i v e i n another.
                                  . have coverage           from out-of-state                  or i n -state ERISA pl a ns through                      thei r
                                    empl o yers        or the empl o yers          of an absent parent, guardi a n,                             spouse,
                                     former spouse, or other rel a ti v e.                        A 1988 Heal t h Insurance                    Associ a ti o n         of

                                      3Fi s cal   year   1986   data, the l a test   avai l a bl e .



                                      Page 3                                                    GAO/HRD91-25      Medi c ai d   Col l e cti o ns   From Pri v ate      Insurers
                                 B-238267




                                 Ameri c a survey     i n di c ated                        that 46 percent                     of Ameri c an               workers            are cov-
                                 ered by ERISA pl a ns,


                                 We obtai n ed                 i n formati o n                  on the type and extent of probl e ms                                             states
Scope and                        experi e nced               i n recoveri n g                      from out-of-state                    i n surers                and ERISA pl a ns. To
Methodol o gy                    do so, we contacted                           offi c i a l s           from HHS, HCFA, and the state Medi c ai d
                                 agenci e s        i n Al a bama,                  Cal i f orni a ,              Idaho, Il l i n oi s ,                 Maryl a nd,        Mi c hi g an,
                                 Mi n nesota,            New York, Texas, Washi n gton,                                               and Wi s consi n .                   These states
                                 were sel e cted                   because           they had i n di c ated                       to ei t her HCFA or us that they
                                 were havi n g                 probl e ms              col l e cti n g           from certai n                l i a bl e        thi r d parti e s.        We
                                 vi s i t ed   HCFA headquarters                                   i n Bal t i m ore,    Maryl a nd,                        and Medi c ai d              agen-
                                 ci e s i n Cal i f orni a ,             Mi c hi g an,                 and Washi n gton;                     we contacted                   Medi c ai d
                                 agenci e s       i n the other ei g ht states by phone. We l i m i t ed                                                               our revi e w to
                                 obtai n i n g        exampl e s               of l o sses. As agreed wi t h your offi c e, i n order to pro-
                                 vi d e thi s report to you as soon as possi b l e ,                                                  we di d not audi t or veri f y
                                 state-provi d ed                    exampl e s                of l o sses.

                                 To expl o re            opti o ns            for correcti n g      probl e ms     wi t h thi r d-party         l i a bi l i t y,          we
                                 revi e wed            Medi c ai d            l a w and the l e gi s l a ti v e hi s tory     behi n d      the thi r d-party
                                 provi s i o ns.         Addi t i o nal l y ,          we met wi t h HHS attorneys                 to di s cuss                potenti a l
                                 l e gi s l a ti v e    remedi e s.

                                 We conducted           our work                      i n accordance                  wi t h general l y      accepted    govern-
                                  ment audi t i n g     standards.                       The maj o ri t y              of the i n formati o n        was col l e cted
                                 i n January        1990.


                                  Out-of-state             i n surers   are avoi d i n g       payi n g           costs for Medi c ai d                reci p i e nts
Out-of-State Insurers             they i n sure. They do thi s through                         acti o ns          that ei t her precl u de                or si g ni f i -
Avoi d Payi n g Costs              cantl y l i m i t state Medi c ai d             agenci e s’       abi l i t y     to recover,         accordi n g                to offi -
for Medi c ai d                   ci a l s i n 9 of 11 states we contacted.
                                  i n surers        wri t e cl a uses     i n contracts
                                                                                                  For exampl e ,
                                                                                                that excl u de,
                                                                                                                                   some out-of-state
                                                                                                                                or have the effect of
Reci p i e nts                    excl u di n g,        payment       for out-of-state            Medi c ai d          reci p i e nts.       In other
                                 i n stances,         the i n surers         wi l not recogni z e                the Medi c ai d        reci p i e nts’              assi g n-
                                 ment of ri g hts to medi c al                   payments         to the state Medi c ai d                       agency.


States Lack Juri s di c ti o n   From the l e gi s l a ti v e        hi s tory,      i t i s cl e ar that the Congress                i n tended                that
                                 states pass l a ws preventi n g                    pri v ate       i n surers  from l i m i t i n g       thei r l i a bi l i t y
Over Some Ihsurers               to amounts         not pai d by Medi c ai d .                  However,       an i n di v i d ual        state cannot
                                 necessari l y      regul a te       al l i n surers          that may be l i a bl e            for a Medi c ai d              reci p -
                                 i e nt’s medi c al         expenses         i n the state. Insurers             wi t h fewer than “m i n i m al


                                 Page 4                                                    GAO/HRD-91-25               Medi c ai d      Col l e cti o ns    From Pri v ate         Insurers
                                           B-238267




                                          contacts”         i n a state general l y                are not wi t hi n    that state’s l e gal                                       j u ri s di c -
                                          ti o n4 Furthermore,                     federal    l a w does not speci f i c al l y    address                                        an out-of-
                                          state i n surer’s        obl i g ati o n         to rei m burse    state Medi c ai d       agenci e s                                         for pai d
                                          cl a i m s.

                                          A state may not be abl e to requi r e                     that out-of-state           i n surers           pay i t s
                                           Medi c ai d     agency. However,         the state can prohi b i t                state-regul a ted
                                          i n surers-those         conducti n g      busi n ess         i n i t s state-from             treati n g        another
                                           state’s Medi c ai d     agency       as pri m ary          payer. At the ti m e of our revi e w, no
                                          state had done so, a HCFA offi c i a l                tol d us. A state has l i t tl e i n centi v e                  to
                                          protect other states’ Medi c ai d               agenci e s,         as i t wi l benefi t         fi n anci a l y       onl y
                                           from recoveri e s       made by i t s own state Medi c ai d                     agency.


Excl u si o nary Cl a uses   Used         Some i n surers         i n cl u de        cl a uses     i n thei r pl a ns that excl u de          or have the
to Deny Payment                           effect of excl u di n g                payment       for medi c al         servi c es   payabl e     by another
                                          state’s Medi c ai d             pl a n. States have reported                     to HCFA probl e ms      i n col -
                                           l e cti n g from as many as 32 i n surers.                         The pri n ci p al     cause was these
                                          i n surers’     use of excl u si o nary               cl a uses      i n thei r contracts,        a HCFA offi c i a l
                                          tol d us.

                                           The excl u si o nary                  cl a use rel i e ves           the i n surers          of any “le gal            l i a bi l i t y”              to
                                          pay out-of-state                    Medi c ai d         agenci e s,        accordi n g         to one of these “p robl e m”
                                          i n surers.       The asserti o n                   was made i n a l e tter from the i n surer’s                                          l e gal
                                           counsel       to a state attempti n g                           recovery       from the out-of-state                          i n surer.
                                            Unti l a l e gal l i a bi l i t y            i s created by federal                    statute, i t s own state’s
                                          statute, or pri v ate                     contract,         the l e tter sai d , the i n surer                 wi l conti n ue                         to
                                          refuse rei m bursement                             to out-of-state           Medi c ai d         agenci e s.       Offi c i a l s                 i n 6 of
                                          the 11 states we contacted                                sai d that they had been deni e d                          payment                          by
                                          thi s one i n surer                 for bi l i n g       total i n g      about $1 mi l i o n              between                   1987 and
                                            1989.


Medi c ai d Assi g nment     of           Medi c ai d  requi r es   that reci p i e nts    assi g n to the state Medi c ai d                                                        agency
Ri g hts Thwarted                         any ri g hts to medi c al     payments.         But thi r d parti e s  may thwart                                                          the pur-
                                          pose of thi s requi r ement       by refusi n g          to pay for any of several                                                         reasons,
                                          such as:

                                        . The      i n surer        does not recogni z e                     the Medi c ai d                   assi g nment,
                                    l     The       contract          permi t s payment                      to be made                onl y          to the pol i c yhol d er.


                                          4Determi n i n g   whether mi n i m al        contacts        are present i n a e,&ci f i c si t uati o n     can be di f fi c ul t     to ascer-
                                          tai n . Case l a w provi d es  some gui d ance.              See, for exampl e ,      Internati o nal     Shoe Company              v. Washi n gton,
                                          326 U.S. 310, or Worl d wi d e         Vol k swagon           v. Woodson,        444x.S. 286.



                                          Page 5                                                   GAO/HRD-91-25               Medi c ai d         Col l e cti o ns   From Pri v ate         Insurers
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Unl e ss the state recovers              i t s payment     from the Medi c ai d      reci p i e nt or the
pol i c yhol d er,       whi c h can be di f fi c ul t or i m practi c al , the state Medi c ai d
agency may have to pay the cl a i m . Al s o, a pol i c yhol d er                   who i s an absent
parent may col l e ct            and retai n the medi c al       payment      at the expense       of the
Medi c ai d        program,

An i n surer’s             refusal           to recogni z e                reci p i e nts’                assi g nment              of ri g hts to the
state Medi c ai d             agency creates admi n i s trati v e                                           probl e ms.             When thi s hap-
pens, the agency may try to convi n ce                                                  the reci p i e nt              to submi t a cl a i m to
the i n surer            and return any payment                                       recei v ed            to Medi c ai d .           In many
cases, i t i s not cost benefi c i a l                        for the states to pursue                                       recoveri e s           on a
cl a i m -by-cl a i m         basi s because                i n di v i d ual                    cl a i m s may be rel a ti v el y                     smal l .
In total , however,                     “s ubstanti a l             dol l a rs”                can be i n vol v ed,                  as i n the case of
money Mi n nesota                       cannot recover                       from an out-of-state                              Bl u e Cross/Bl u e
Shi e l d organi z ati o n.                  The organi z ati o n                       di d not recogni z e                       the reci p i e nts’
assi g nment             of medi c al            payments                  to the Mi n nesota                          Medi c ai d          program,           a
state Medi c ai d             offi c i a l       tol d us. As the state coul d not j u sti f y                                               the cost of
pursui n g            payment              from each reci p i e nt                         i n vol v ed,           i t experi e nced               substan-
ti a l l o sses.

Li k ewi s e,         substanti a l             l o sses occur when i n surers                               refuse to honor a Medi -
cai d assi g nment                     because          of contract        provi s i o ns               provi d i n g              for payment                   to
pol i c yhol d ers             onl y . Thi s creates probl e ms,                           parti c ul a rl y                 i f the pol i c y-
hol d ers          are absent parents                      whose coverage                   i n cl u des              thei r chi l d ren.
Chances             of col l e cti n g          from out-of-state                   absent parents                          are l o w, offi c i a l s
from some states say, because                                   the pol i c yhol d ers                      have l i t tl e i n centi v e                     to
pay ei t her the provi d er                           or the Medi c ai d               agency. To pursue                             recovery
from these absent parents                                 on a cl a i m -by-cl a i m                  basi s i s di f fi c ul t ,                   costl y ,
and ti m e-consumi n g,                        one state offi c i a l              sai d , and recovery                          i s unl i k el y .

 Fai l u re     to recogni z e        the states’ cl a i m s                   for recovery                       of payment        can
 resul t i n the fi n anci a l            gai n of out-of-state                            absent parents                  at the expense
of Medi c ai d .       Cal i f orni a        Medi c ai d        offi c i a l s             tel l of an absent parent i n
 Massachusetts                  who was recei v i n g                 medi c al             payments                from hi s Massachu-
 setts i n surer.          The payments                  were for the ongoi n g                                treatment        of hi s chi l d ,
 a Medi c ai d       reci p i e nt     i n Cal i f orni a .            Havi n g             bi l e d         the absent parent
 repeatedl y ,        wi t hout       success, the provi d er                              now has approached                       Medi c ai d
 about rei m bursement                    for the care. Heal t h care costs for the reci p i e nt
 were about $48,000                   at the ti m e of our revi e w. The Cal i f orni a                                           Attorney
 General         was aware of the state’s probl e ms                                         col l e cti n g        from out-of-state
i n surers,       a Cal i f orni a        Medi c ai d        offi c i a l        i n di c ated,                but fel t the state di d
not have the resources                      to pursue            recovery.                       In addi t i o n,       because        federal



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                              l a w i s si l e nt                    on the obl i g ati o ns          of out-of-state                 i n surers,          a state attorney
                              sai d , l i t i g ati o n                 does not hol d              much promi s e.


Lost Out-of-State             As many as 18 states have reported                               probl e ms      recoveri n g     from out-of-
Col l e cti o ns May Be       state i n surers,          a HCFA offi c i a l     tol d us. Al t hough            9 of the 11 states we
                              contacted       reported           such l o sses, offi c i a l s         sai d that they coul d not easi l y
Substanti a l                 i d enti f y through         thei r payment             systems the l o sses from out-of-state
                               i n surers.   Medi c ai d      offi c i a l s i n four states di d provi d e                 some exampl e s:

                          . Cal i f orni a             bi l e d       23 out-of-state           i n surers         over a l - year bi l i n g       peri o d for
                            more than an esti m ated                            $6.5 mi l i o n              that was not recovered.
                          . Il l i n oi s    bi l e d            four out-of-state        i n surers             over a 3-year peri o d           for an esti -
                            mated $369,000                            that was not recovered.
                          . Wi s consi n                bi l e d      two out-of-state               i n surers      over a 2-year peri o d           for an
                            esti m ated                $220,000           that was not recovered.
                          . Mi c hi g an              submi t ted          879 bi l s to 57 out-of-state                    i n surers      over an &month
                            peri o d        for about $397,000.                      For 635 of these bi l s and $378,893                             of the
                            bi l e d       amount,                 the state recei v ed              ei t her rej e cti o n       noti c es  or no response.


                              Most states have not taken advantage                                       of the Congress’s               1985 change             to
States Unabl e to             E~rw--al l o wi n g                  states to prohi b i t        ERISA pl a ns             from usi n g contract           provi -
Col l e ct From Some          si o ns that have the effect of l i m i t i n g                      or excl u di n g            payments        for Medi -
ERISA Pl a ns                 cai d reci p i e nts.
                              certai n       practi c es
                                                                  Even i f states pass these prohi b i t i o ns,
                                                                    that have the same effect. In earl y 1990, state Medi c ai d
                                                                                                                                      they cannot forbi d

                              agenci e s         sti l were havi n g           di f fi c ul t y   col l e cti n g          from some ERISA pl a ns,
                              even pl a ns i n the same state as the agency. Consequentl y ,                                                the savi n gs          to
                              Medi c ai d         anti c i p ated        from the Congress’s                      acti o n may not be real i z ed.

                              As we reported         i n 1984, ERISA pl a ns coul d l e gal l y                           avoi d payi n g            Medi c ai d
                              because     they coul d wri t e provi s i o ns                      i n thei r contracts               that excl u de             pay-
                              ment for Medi c ai d       reci p i e nts.5            ERISA provi d es               that state l a ws general l y
                              do not appl y to empl o yee                   heal t h      benefi t         pl a ns. Accordi n gl y ,         the Con-
                              gress amended         ERISA i n theConsol i d ated                            Omni b us       Budget Reconci l i a ti o n
                              Act of 1985 (COBRA). In effect, COBRA permi t ted                                        states to pass l a ws that
                              prohi b i t ERISA pl a ns     from l i m i t i n g              or excl u di n g         payments          for i n di v i d ual s
                              who woul d otherwi s e               recei v e         Medi c ai d        benefi t s.




                              “N eed         for Legi s l a ti v e       Change    Affecti n g     the Medi c ai d   Program         (GAO/HRD-85-9,           Nov. 30, 1984).



                              Page       7                                                       GAO/HID-91-25         Medi c ai d      Col l e cti o ns   From   Pri v ate   Insurers
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                                     B-288287




State Authori t y Not Used,          Onl y ni n e states have passed appropri a te                                  l e gi s l a ti o n       coveri n g                      ERISA
Some ERISA Pl a ns Note              pl a ns as now permi t ted          by COBRA.6 At l e ast two pl a ns have deni e d                                                           pay-
                                     ments to states that l a cked          l e gi s l a ti o n           speci f i c al l y            addressi n g                          ERISA
                                     pl a ns. These pl a ns wi l conti n ue                     denyi n g       Medi c ai d              reci p i e nt                 cl a i m s, pl a n
                                     representati v es     sai d , unti l the states pass the necessary                                                l e gi s l a ti o n.

                                     COBRA di d      not requi r e    that EREA pl a ns be subj e ct  i m medi a tel y        to perti -
                                     nent thi r d-party        l a ws enacted    by the states, but establ i s hed        ti m e frames
                                     that depended        on such condi t i o ns      as when pl a n contracts         were renegoti -
                                     ated. Not unti l Apri l 1989 di d al l ERM pl a ns become subj e ct                   to such
                                     state l a ws.

                                      To precl u de      ERISA pl a ns                     from usi n g            contract                    provi s i o ns      to excl u de              pay-
                                     ment for Medi c ai d                    reci p i e nts’        heal t h           care costs, states must enact spe-
                                 1   ci f i c l a ws. Offi c i a l s           from two of the                      states we contacted                             sai d that a state
                                     l a w was unnecessary                            because        ERISA          pl a ns had been payi n g                             vol u ntari l y .
                                      Others i n terpreted                    COBRA as prohi b i t i n g                        ERISA pl a ns                  from treati n g               Medi -
                                      cai d as pri m ary                payer, thus maki n g                         state acti o n unnecessary.                                  At l e ast
                                     one state’s Medi c ai d                     offi c i a l s    based            thei r i n terpretati o n                       on an Apri l 1988
                                      memorandum                from a HCFA headquarters                                          offi c i a l             to HCFA regi o ns.              The
                                      memorandum                i n di c ated                 that COBRA           prohi b i t ed                 ERISA pl a ns          from l i m i t i n g
                                     or excl u di n g    coverage                       for Medi c ai d             reci p i e nts.


State Regul a tory                   Even            i f states pass the l a ws anti c i p ated                        under COBRA, they can prohi b i t
                                     ERISA pl a ns             onl y from usi n g excl u si o nary                       contract         cl a uses         that have the
Authori t y         Over ERISA       effect of l i m i t i n g            payment      for a Medi c ai d -el i g i b l e              i n di v i d ual .        COBRA l a n-
Pl a ns Li m i t ed                   guage may not be broad enough                               to enabl e              states to prohi b i t                ERISA pl a ns
                                     from usi n g other practi c es--such                            as those empl o yed                         by out-of-state
                                     i n surers-that                   have the same effect. Speci f i c al l y ,                        states apparentl y
                                      cannot precl u de                  ERISA pl a ns   from not recogni z i n g                     the Medi c ai d              reci p i -
                                     ents’ assi g nment                   of ri g hts or fol l o wi n g            a procedure                of payi n g        onl y the
                                     pol i c yhol d er.             Thus, states have l i t tl e recourse                        i n deal i n g          wi t h EREA pl a ns
                                      that use such practi c es.

                                     Some ERM pl a ns i n cl u de          i n thei r contracts                  l a nguage       provi d i n g             that ben-
                                     efi t s are not assi g nabl e       to the medi c al              provi d er,          state offi c i a l s          sai d . Thi s
                                     resul t s i n the same probl e ms                 that occur when out-of-state                              i n surers       do
                                     not honor the assi g nment.              Wi t hout            a means to precl u de                 these practi c es,
                                     as can happen         wi t h out-of-state             i n surers,         states may be unabl e                        to
                                     recover      payments         cost effecti v el y .

                                     “R esearch      Insti t ute   of Ameri c a,     Benefi t s   Coordi n ator,          Vol . 1, par. 11,724.



                                     Page 8                                                   GAO/IUD-91-25                 Medi c ai d      Col l e cti o ns    From Pri v ate          l n surers
)
/                                                   B-238267




    Anti c i p ated Savi n gs    From               As wi t h l o sses from out-of-state                                    i n surers,        l o sses from ERISA pl a ns are not
    COBRA i n Jeopardy                              easi l y     i d enti f i e d           through           state payment                 systems, state offi c i a l s                               tol d us.
                                                    Such l o sses coul d be substanti a l ,                                    other esti m ates                       suggest. To determi n e
                                                    the potenti a l                  i m pact of the ERISA amendment                                     on COBRA, the Congressi o nal
                                                    Budget Offi c e (CBO) and HCFA esti m ated                                             recoveri e s                  expected                from ERISA
                                                    pl a ns that were excl u di n g                               payment              for Medi c ai d -el i g i b l e             i n di v i d ual s .                For
                                                    fi s cal years 1990 and 1991, CBO esti m ated                                                 recoveri e s               of approxi m atel y
                                                    $36 mi l i o n                and $40 mi l i o n,                respecti v el y .        HCFA offi c i a l s                esti m ated                  fi s cal
                                                    year 1990 recoveri e s                          of $260 to $475 mi l i o n.’                                 The probl e ms                   descri b ed
                                                    above j e opardi z e                     the real i z ati o n          of such savi n gs,


                                                    Future         Medi c ai d           l o sses may not be l i m i t ed                               to those reported         from                        out-of-
    Losses From Out-of-                             state i n surers              and ERISA pl a ns not payi n g                                      state Medi c ai d   agenci e s.                         Losses
    State Insurers and                              to Medi c ai d             are l i k el y     to i n crease because                                recentl y
    ERISA Pl a ns Li k el y to                   . a maj o r      i n surance     associ a ti o n     has taken the posi t i o n       that Medi c ai d i s not
    Grow                                           al w ays    l a st payer and
                                             l      HCFA regul a ti o ns      have requi r ed,           on the basi s of COBRA, that states assume
                                                    more of the responsi b i l t y                from provi d ers    for recoveri e s      and hence the
                                                    l o sses from nonrecoveri e s.


    Medi c ai d  Not Al w ays     Las   It           Some i n surers              appear              to be changi n g                thei r posi t i o n              wi t h regard to when
    Payer, Bl u e Cross/Bl u e                      they are l i a bl e           for payi n g             Medi c ai d             reci p i e nts’          heal t h         care costs. In 1988,
                                                    the Bl u e Cross/Bl u e                     Shi e l d   Associ a ti o n                      adopted        the posi t i o n         that
    Shi e l d Asserts                                 i n surers       need not treat Medi c ai d                               as the payer of l a st resort, The associ a -
                                                    ti o n bel i e ves         that i t s member                   pl a ns may not be requi r ed                                 to treat Medi -
                                                     cai d as l a st payer so l o ng as thei r contracts                                                compl y        wi t h state l a ws. Thi s
                                                     confl i c ts      wi t h broad l a nguage                        i n cl u ded             i n the associ a ti o n’s            thi r d-party
                                                    l i a bi l i t y  manual ,        publ i s hed          i n 1980. The manual                                 acknowl e dged               that fed-
                                                    eral l a w requi r es              Medi c ai d          to be the l a st payer. It was di s tri b uted                                        to al l
                                                      associ a ti o n        member             pl a ns and state Medi c ai d                              agenci e s.

                                                    In May 1988, a HCFA offi c i a l            met wi t h nati o nal             Bl u e Cross/Bl u e    Shi e l d
                                                    Associ a ti o n offi c i a l s to di s cuss      probl e ms           states had i n col l e cti n g     from
                                                    out-of-state    Bl u e Cross/Bl u e         Shi e l d     i n surers.       Accordi n g    to hi s wri t ten

                                                    7CB0 coul d not tell us the assumpti o ns                        upon whi c h i t s         esti m ates           were baaed or the reasons for the
                                                    di s crepanci e s          between CESO and HCFA esti m ates.                      HCFA          based i t s esti m ates       on assumpti o ns     that
                                                    (1) 40 percent of empl o yer-sponsored                         heal t h i n surance          i s sel f -i n sured,       (2) 66 percent of current thi r d-
                                                    party recoveri e s               ari s e from empl o yer-sponsored               heal t h      i n surance,         (3) 1.8 to 3.6 percent of federal
                                                    Medi c ai d       expendi t ures          wil be recovered            from thi r d-party              resources,       (4) the above percentages         appl y
                                                    to the Medi c ai d            program        uni f orml y , and (6) the i m pact             of the provi s i o n          wil “g rade   i n ” over 3 years.



                                                    Page 9                                                       GAO/HRD-91-26                  Medi c ai d      Col l e cti o ns     From Pri v ate          Insurers
                                            B.238287




                                            summary               of the meeti n g,        the associ a ti o n               questi o ned         the l e gal basi s for
                                             Medi c ai d s’         bei n g desi g nated          as l a st payer. In addi t i o n,                  even though                fed-
                                            eral l a w requi r ed               state Medi c ai d         agenci e s          to pursue          recovery       or ri s k
                                            l o si n g      federal        matchi n g    funds, the associ a ti o n                     asserted      that the l i a bi l i t y
                                            of thi r d-party               payers i s governed              by the terms of l o cal associ a ti o n                            con-
                                            tracts. If the provi s i o ns                of the i n surers’                contracts         conform         to appl i c abl e
                                            state l a w, the associ a ti o n                spokesman               sai d , the i n surer            may not be
                                            requi r ed          to honor cl a i m s by Medi c ai d                   agenci e s.


States Gi v en More                         To assure               that Medi c ai d     i s treated as l a st payer, states                                                    use two
Responsi b i l t y       for                processes-                 “p ostpay     recovery”      and “c ost avoi d ance:”
Recoveri n g       Medi c ai d   Costs
                                         . After state offi c i a l s   determi n e        that a Medi c ai d      reci p i e nt  has another
                                           heal t h    care resource       avai l a bl e ,  they attempt to recover              costs the states
                                           pai d from the l i a bl e    thi r d party (postpay             recovery).
                                         . The state then pl a ces an i n di c ator             i n the cl a i m processi n g        system so that
                                           Medi c ai d      does not pay future cl a i m s          for that person but requi r es            the
                                           provi d er      to bi l the thi r d party (cost avoi d ance).

                                            Cost avoi d ance                      provi d es          the maj o ri t y              of states’ thi r d-party                                savi n gs.           For
                                            exampl e ,          the federal                     share of state thi r d-party                           l i a bi l i t y           savi n gs          i n fi s cal
                                            year 1988 was about $1.3 bi l i o n                                         i n cost avoi d ance                              and about
                                            $109 mi l i o n              i n postpay                 recoveri e s,             states reported.                            Accordi n gl y ,              states
                                            most l i k el y          have avoi d ed                    recovery               probl e ms          to a great extent by not
                                            payi n g         the provi d er                    for costs when the state knew the reci p i e nt                                                          had
                                            i n surance.          Instead, states rej e cted                                the cl a i m s         from the provi d ers,                                  who
                                            then had to pursue                             the payment                 from i n surers.                    Provi d ers                  i n turn are
                                            havi n g         extensi v e             probl e ms           i n col l e cti n g           from ERISA pl a ns and, to some
                                            extent, out-of-state                           i n surers        who do not recogni z e                                     the reci p i e nt’s              assi g n-
                                            ment of ri g hts or are onl y payi n g                                         the pol i c yhol d er,                         a provi d er            represen-
                                            tati v e i n Washi n gton                           tol d us. In these cases, provi d ers                                         may be
                                            experi e nci n g                l o sses due to thei r i n abi l i t y                       to col l e ct                   from the pl a ns.

                                              New federal           Medi c ai d      regul a ti o ns requi r e   the states to pay the provi d er
                                            i n certai n     si t uati o ns     and assume more of the responsi b i l t y                 for recov-
                                            eri n g from the l i a bl e          thi r d parti e s.   In January      1990, HCFA fi n al i z ed      regu-
                                             l a ti o ns based on COBRA that requi r e                 states to pay prenatal           care,
                                            preventi v e         pedi a tri c    care, and absent parent-rel a ted           cl a i m s    and then




                                            Page 10                                                        GAO/IIRD-91-25                 Medi c ai d       Col l e cti o ns     From Pri v ate            Insurers
                                      5238267




                                       seek recovery                       from the known thi r d party.8 These requi r ements                                                were
                                       i n tended          to protect a mother and her dependent                                                chi l d ren      from havi n g     to
                                        pursue          an absent parent, hi s empl o yer,                                     or the i n surer             for thi r d-party
                                      l i a bi l i t y.   Further,             the Congress              was concerned                     that the admi n i s trati v e
                                       burdens            associ a ted            wi t h thi r d-party         l i a bi l i t y       col l e cti o n         efforts not di s -
                                      courage            parti c i p ati o n            i n the Medi c ai d           program                by physi c i a ns           and other
                                      provi d ers            of preventi v e                pedi a tri c    and prenatal                     care.

                                      Thi s change                   i s l i k el y           to i n crease    l o sses to Medi c ai d                 because          the state wi l
                                      have to pursue                          cl a i m s previ o usl y                  pursued           by the provi d ers.            One state
                                      offi c i a l       esti m ated                   that these requi r ements                          woul d affect over hal f of al l
                                      cl a i m s processed                           for thi r d-party            l i a bi l i t y.     As states assume more of the
                                      responsi b i l t y                   from provi d ers                 for bi l i n g          thi r d parti e s,      they wi l have
                                      more probl e ms                         col l e cti n g          from out-of-state                   i n surers   and ERISA pl a ns,
                                      Medi c ai d           offi c i a l s             from 10 of the 11 states we contacted                                    sai d .


                                      To cl o se l o ophol e s              i n the l a w that al l o w some i n surers                                        that shoul d                   pay
Legi s l a ti o n Needed to           state Medi c ai d              agenci e s             to avoi d doi n g so, l e gi s l a ti v e                        acti o n i s needed.
Cl a ri f y Federal      Pol i c y,   Legi s l a ti o n     shoul d           cl a ri f y        federal              Medi c ai d       pol i c y       and establ i s h             an effec-
Improve Col l e cti o ns              ti v e means for states to di r ectl y                                        recover         from al l appropri a te                   thi r d par-
                                      ti e s. Anal o gous              Medi c are             l e gi s l a ti o n,            known        as the Medi c are                secondary
                                      payer (MSP) provi s i o n,                          can serve as a model for si m i l a r                                 Medi c ai d           l e gi s l a -
                                      ti o n Medi c are            l a w provi d es                       a much more effecti v e                         statutory          basi s for
                                      the federal           government                      to recover                  from pri v ate            i n surers          than that cur-
                                      rentl y avai l a bl e             to states i n Medi c ai d                              statute. However,                    thi s model must
                                      be adapted            to account                    for the federal / state                       nature of the Medi c ai d                                pro-
                                      gram. Any l e gi s l a ti v e                      remedy                 necessari l y         woul d be somewhat                       compl e x.

                                      Under the MSP provi s i o n,                  the federal                government              has a ri g ht to recover
                                      from l i a bl e      thi r d parti e s      regardl e ss              of thei r contract             provi s i o ns.           The
                                       Uni t ed States can bri n g an acti o n agai n st                               an i n surer        that i s not payi n g
                                      appropri a tel y            for a Medi c are          reci p i e nt’s          costs. Further,              i n surers          are
                                      gi v en an i n centi v e         to compl y          because              the MSP provi s i o n             provi d es           for
                                      payment           of a penal t y       doubl e       the amount                 ori g i n al l y    owed as a resul t of
                                      such sui t s. Thi s doubl e              damage            provi s i o n         was necessary                   because
                                      i n surers       that di d not appropri a tel y                       pay benefi c i a ri e s’         medi c al         bi l s faced



                                      “S peci f i c al l y ,            CORRA requi r es        the state to make payment         for servi c es   and seek rei m bursement        from
                                      thi r d parti e s i n cases where there i s prenatal                        or preventi v e   pedi a tri c care, or where the thi r d-party
                                      l i a bi l i t y       i s deri v ed         from the parent whose obl i g ati o n   to pay support i s bei n g enforced        by chi l d support
                                      enforcement                      agenci e s.



                                      Page 11                                                    GAO/HRD-91-25                Medi c ai d      Col l e cti o ns    From Pri v ate          Insurers
                         B.238267




                         no penal t y        and                   saved themsel v es                   money by not doi n g                           so, as we previ -
                         ousl y reported.g                           Fi n al l y ,      as an addi t i o nal  enforcement                               mechani s m,     the
                         MSP provi s i o n                   al l o ws             anyone       to sue for doubl e   damages                                 when they
                         become aware                         that a l i a bl e            thi r d party i s not ful f i l i n g                        i t s payment    obl i -
                         gati o ns     under                 the provi s i o ns.

                         The admi n i s trati v e        aspects of the Medi c ai d                          program        typi c al l y            are han-
                         dl e d at the state l e vel , and pri m ary                      responsi b i l t y            for enforcement
                         shoul d        remai n   wi t h the states. But l e gi s l a ti o n                    based on the MSP provi -
                         si o ns coul d i m prove         col l e cti o ns si g ni f i c antl y .              Adapti n g          the Medi c are
                         model for the Medi c ai d                 program     woul d requi r e                   federal        l e gi s l a ti o n     to do
                         the fol l o wi n g:

                         1, Make          i t expl i c i t          that       Medi c ai d         i s payer        of l a st resort.

                         2. Cl a ri f y       that appropri a te     thi r d parti e s           have                             a duty              to pay     or rei m burse
                         Medi c ai d         regardl e ss     of any contract        provi s i o n.

                         3. Provi d e     an effi c i e nt             and comprehensi v e                             enforcement         scheme. The
                         exi s ti n g perti n ent         provi s i o n      i n ERISA al s o                      woul d have to be adj u sted                    to
                         gi v e states the necessary                      means to ful f i l                       al l thei r thi r d-party      obl i g ati o ns
                         under Medi c ai d        l a w.


                         Whi l e      states have been requi r ed                          by l a w to pursue             recoveri e s              from l i a bl e
Concl u si o ns          thi r d     parti e s,            the current         statutory           framework     does not provi d e                       an ade-
                         quate        means for states to recover                            from some out-of-state                      i n surers            and
                         ERISA pl a ns.               As a resul t , Medi c ai d             may be spendi n g              mi l i o ns        of dol l a rs          for
                         Medi c ai d           reci p i e nts’        heal t h       care costs that others shoul d                     be payi n g.               The
                         probl e m          i s l i k el y      to grow as the states assume more of the responsi b i l t y
                         for recoveri n g                    from l i a bl e      thi r d parti e s     and more i n surers                  expl o i t      l o op-
                         hol e s i n current Medi c ai d                        l a w to avoi d payi n g       reci p i e nts’           costs.


                         We recommend             that the Congress                  amend federal      l a w to expl i c i t l y       state
Recommendati o ns   to   that Medi c ai d     i s payer of l a st resort, gi v e states the authori t y                           needed        to
the Congress             recover     from al l l i a bl e     thi r d parti e s,         and provi d e    effecti v e      mechani s ms
                         for enforcement.             Our suggested            l a nguage,     wi t h an accompanyi n g                expl a -
                         nati o n, appears         i n appendi x      I.




                         I‘ncenti v es    Needed             to Assure     Pri v ate    Insurers    Pay Before       Medi c are          (GAO/HRD-89-19,              Nov. 1988).



                         Page 12                                                       GAO/HRD-91-26           Medi c ai d         Col l e cti o ns       From Pri v ate    Insurers
                    B-238267




                    GAO requested                        wri t ten  comments                       on a draft of thi s                             report from HHS and
Agency   Comments   the Department                         of Labor. Thei r                       wri t ten    comments,                            summari z ed bel o w,
                    are presented                     i n ful l i n appendi c es                         II and III.

                    III-IS concurred                  wi t h our fi n di n gs.           It agreed that federal                                     l e gi s l a ti o n              is
                    needed,             i n some cases, to address                        i n surance                    i n dustry         practi c es                        not effec-
                    ti v el y        deal t wi t h by current l a w and, i n other cases, to requi r e                                                                         states to
                    use authori t y                they al r eady               have to contrd%buses.                                   Because i t was sti l
                    revi e wi n g            the ful l extent of the probl e m                             and the l e gi s l a ti v e                                changes
                    needed             to resol v e         i t , HHS took no posi t i o n                    on our speci f i c                         proposed                     l e gi s -
                    l a ti v e changes.                IIHS proposed               a techni c al           change,                  whi c h we made to
                    cl a ri f y       congressi o nal              i n tent concerni n g              l e gi s l a ti o n             requi r i n g                     states to
                    pay cl a i m s            i n cases i n vol v i n g            prenatal          care and absent parents.                                                    After
                    sendi n g            the draft to HIIS for wri t ten                         comment,                      we l e arned                     that HCFA' S
                    prel i m i n ary             esti m ate          of l o sses occurri n g               because                  out-of-state                          i n surers
                    were not rei m bursi n g                          state Medi c ai d            agenci e s                  was about $200 mi l i o n
                    (federal              and state).

                    Labor commented                  about the pri m ary             focus of our ERISA-rel a ted             concerns
                     and the di s ti n cti o n          between      probl e ms       states have wi t h out-of-state
                    i n surers   and those wi t h ERISA pl a ns. We have consi d ered                                thei r comments
                    and made cl a ri f i c ati o ns,            where appropri a te.               Labor al s o i n di c ated    that
                    part of our proposed                   amendment            to ERISA may be unnecessary.                  We
                    bel i e ve that i t i s necessary;              our rati o nal e       i s i n cl u ded   i n our response        to
                    Labor’s     comments             i n appendi x         III.


                    As arranged            wi t h your offi c e, unl e ss you publ i c l y   announce  i t s contents
                    earl i e r,   we pl a n no further di s tri b uti o n     of thi s report unti l 30 days after
                    i t s i s sue date. At that ti m e, we wi l send copi e s to the Secretary                of
                    Heal t h and Human Servi c es               and other i n terested     parti e s.

                    Thi s report was prepared                  under the di r ecti o n                                               of Janet Shi k l e s, Di r ector,
                    Heal t h Fi n anci n g        and Pol i c y Issues. Shoul d                                                   you have any questi o ns           con-
                    cerni n g   thi s report, pl e ase cal l her on (202)                                                         275-5451.   Other maj o r con-
                    tri b utors     are l i s ted i n appendi x      IV.

                    Si n cerel y           yours,




             ”      Lawrence                H. Thompson
                    Assi s tant             Comptrol l e r                 General


                    Page 13                                                         GAO/HRD-91-25                   Medi c ai d       Col l e cti o ns      From Pri v ate            Insurers
contents


Letter
Appendi x         I                                                                                                                                                                  16
Suggested          Legi s l a ti v e
Language          and
Expl a nati o n
Appendi x  II
Comments    From the
Department    of Heal t h
and Human Servi c es
Appendi x         III
Comments           From the
Department            of Labor
Appendi x      IV                                                                                                                                                                32
Maj o r Contri b utors                 to
Thi s Report




                                            Abbrevi a ti o ns

                                            AFDC                Ai d to Fami l i e s        Wi t h Dependent                Chi l d ren
                                            CBO                 Congressi o nal            Budget Offi c e
                                            COBRA               Consol i d ated          Omni b us     Budget Reconci l i a ti o n                       Act of 1985
                                            ERISA               Empl o yee         Reti r ement       and Income Securi t y                           Act of 1974
                                            HCFA                Heal t h Care Fi n anci n g            Admi n i s trati o n
                                            HHS                 Department           of Heal t h and Human Servi c es
                                            MSP                 Medi c are       secondary         payer


                                            Page 14                                           GAO/IUD-91-25          Medi c ai d   Col l e cti o ns      From Pri v ate   Insurers
Page 15   GAO/HRD-91-25   Medi c ai d   Col l e cti o ns   From Pri v ate   Insurera
Appendi x   I                                                                                                                                                                               ,

Suggested Legisla ti v e                                Language
and IiC xpl a nati o n

                       SEC. [ 1. MEDICAID                                  AS PAYER OF LAST                                       RESORT.

                         (a) AMENDMENTS                                          To STATE PLAN REQUIREMENTS.-(                                                                      1) Secti o n
                            1902(a)(25)                  of the Soci a l Securi t y                                      Act (42 USC. 1396a(a)(25))                                           is
                           amended-
                         (A) by stri k i n g                      “a nd”           at the end of subparagraph                                                    (F),
                         (B) by i n serti n g                        “a nd”          at the end of subparagraph                                                    (G), and
                         (C) by addi n g                     the fol l o wi n g                         new subparagraph:
                           “( I~) that states meet the requi r ements                                                                of 1902(z) rel a ted                        to Medi c ai d
                          bei n g the payer of l a st resort;“.
                         (2) Secti o n 1902 (42 U.S.C 1396a) i s amended                                                                              by addi n g            the fol l o wi n g
                         new subsecti o n:
                           “( z)( 1) In order for a state to meet the requi r ements                                                                                  of subsecti o n
                         (a)(25)(H),                 a State must provi d e                                           that-
                           “( A) a pri v ate                  i n surer             (i n cl u di n g                   heal t h         benefi t           pl a n, fund, thi r d-party
                         admi n i s trator,                     or si m i l a r               enti t y or program                              provi d i n g            payments                  for med-
                         i c al assi s tance)                      may not take i n to account                                               that an i n di v i d ual                   i s el i g i b l e
                          for or recei v i n g                      medi c al               assi s tance                   under any State pl a n under thi s ti t l e ;
                          “( B) no payment                              for medi c al                      assi s tance               i s made under thi s ti t l e , except
                          as provi d ed                i n subparagraph                                     (C), to the extent that payment                                               has been
                         made, or can reasonabl y                                            be expected                          to be made, by a thi r d party; and
                          “( C) al l payments                                 for medi c al                  assi s tance                  under the State pl a n are condi -
                         ti o ned       on prompt                         rei m bursement                              to the pl a n when a thi r d party l e arns,
                         or recei v es             i n formati o n                       i n di c ati n g,                that it i s l i a bl e                  for payment                of such
                         medi c al         assi s tance.
                          “( 2) In order to recover                                       payment                      for medi c al                assi s tance            pai d under i t s
                         State pl a n, a State may j o i n or i n tervene                                                                i n any acti o n rel a ted                        to events
                         that gave ri s e to the need for such medi c al                                                                      assi s tance.
                          “( 3) To the extent payment                                                  for any medi c al                         assi s tance             has been made
                         under i t s State pl a n, a State shal l be subrogated                                                                             to the ri g ht of any party
                       to payment                     for such medi c al                                   assi s tance.
                         “( 4) There i s establ i s hed                                       a pri v ate                 cause of acti o n for doubl e                                   the amount
                       ori g i n al l y        owed agai n st                             any party that fai l s to provi d e                                             for payment                        or
                         appropri a te                   rei m bursement                                i n accordance                       wi t h paragraph                      (1). If a party
                       other than the State affected                                                        bri n gs an acti o n under thi s paragraph,                                                       that
                       State shal l be enti t l e d                                to a porti o n                        of any j u dgment                          or settl e ment                   equal
                       to the amount                          ori g i n al l y               owed.“.
                       (b) AMENDMENT                                           To PAYMENT RESTRICTIONS.-(l )                                                               Secti o n 1903(o)
                       of such act (42 USC. 1396b(o))                                                              i s amended                   to read as fol l o ws:
                         “N otwi t hstandi n g                                the precedi n g                        provi s i o ns             of thi s secti o n,                 no payment
                       shal l be made to a State under the precedi n g                                                                             provi s i o ns          of thi s secti o n
                         for expendi t ures                             for medi c al                      assi s tance               provi d ed                for an i n di v i d ual                    under
                       i t s State pl a n approved                                      under thi s ti t l e to the extent that a pri v ate


                       Page 16                                                              GAO/Ii R D-91-26                  Medi c ai d        C!ol l e cti o ns       From Pri v ate              Insurera
.
    Appendi x       I
    Suggested L.egi a l a ti v e                Lsnguage
    and Expl a nati o n




     i n surer        (i n cl u di n g              heal t h benefi t                    pl a n, fund, thi r d-party                                     admi n i s trator
     or si m i l a r           enti t y, or program                           provi d i n g               payments                     for medi c al                   assi s tance)
      woul d have been obl i g ated                                       to provi d e                 such assi s tance                           but for a contract
     provi s i o n,             pol i c y,         practi c e,            or pattern                   havi n g            the effect of l i m i t i n g                              or
    excl u di n g              such obl i g ati o n                    because                the i n di v i d ual               i s el i g i b l e             for or i s pro-
    vi d ed medi c al                      assi s tance               under any State pl a n under thi s ti t l e .“.
    (c) CONFORMING                                  AMENDMENTS.-(l )                                           Secti o n 1912 of such Act
    (42 U.S.C. 1396k) i s amended-
    (A) i n subsecti o n                          (a) before paragraph                                   (I), by i n serti n g                         “o r on behal f                     of”
     after “c are owed to”; and
    (B) by addi n g                        at the end the fol l o wi n g                                new subsecti o n:
      “( c) The State shal l prohi b i t                                     any contract                       provi s i o n,               pol i c y,           practi c e,             or
    pattern on the part of a pri v ate                                              i n surer             (i n cl u di n g              heal t h           benefi t              pl a n,
    fund, thi r d-party                            admi n i s trator                  or si m i l a r              enti t y or program                               provi d i n g
    payments                   for medi c al                   assi s tance)                that has the effect of preventi n g                                                        effec-
    ti v e assi g nment                        of benefi t s               as requi r ed                 by thi s secti o n.“.
    (2) Secti o n 1917(b)                             of such Act (42 U.S.C. 1396p(b))                                                       i s amended                       by
     addi n g        at the end the fol l o wi n g                                 new paragraph:
     “( 3) Paragraph                          (1) shal l not be construed                                       to prohi b i t                  rei m bursement                           of
    payments                   as necessary                      to meet the requi r ements                                        of secti o n                  1902(z).”
    (d) ERISA AMENDMENT.-Secti o n                                                                514(b) of the Empl o yee                                          Reti r ement
    Income Securi t y                           Act of 1974 (29 U.S.C. 1144(b)(8))                                                        i s amended                     (1) i n
    subparagraph                            (2)(B) by stri k i n g                      “N ei t her”                 and substi t uti n g                          “E xcept               to
    the extent necessary                                    to compl y             wi t h secti o ns                        1902(a)(25)                     and (45) of the
    Soci a l Securi t y                      Act, nei t her”;                  and
    (2) by stri k i n g                     paragraph                   (8) and substi t uti n g                             the fol l o wi n g                    new para-
     graph (8):
      “( 8) Subsecti o n                      (a) of thi s secti o n                        shal l not appl y to any State l a w to the
    extent necessary                              to compl y               wi t h secti o n                   1902(a)(25)                       and (45) of the
     Soci a l Securi t y                     Act.“.
    (e) REGULATIONS.-Wi t hi n                                                 6 months after the date of the enactment
     of thi s Act, the Secretary                                       of Heal t h and Human Servi c es                                                   shal l promul -
    gate fi n al regul a ti o ns                              necessary               to carry out the amendments                                                      made by
    thi s secti o n
     (f) EFFECTIVE                            DATES.-(                    1) Except as speci f i e d                                i n paragraph                        (a),
     amendments                          made by thi s secti o n                             shal l appl y to cal e ndar                                    quarters
    begi n ni n g              on or after the date of enactment.
    (2) In the case of a State pl a n for medi c al                                                             assi s tance                 (under ti t l e XIX of
    the Soci a l Securi t y                          Act that the Secretary                                       determi n es                    requi r es            State l e g-
    i s l a ti o n    (other than l e gi s l a ti o n                            appropri a ti n g                         funds) i n order for the pl a n
    to meet the addi t i o nal                                 requi r ements                      i m posed               by the amendments                                      made
    by thi s secti o n, the State pl a n shal l not be regarded                                                                             as fai l i n g            to compl y
    wi t h the requi r ements                                   of such ti t l e sol e l y on the basi s of i t s fai l u re                                                           to


    Page 17                                                              GAO/HRBSl - 25                   Medi c ai d         Col l e cti o ns       From Pri v ate             Insurers
                   Appendi x       I
                   Suggested Legl s l a tl v e         Language
                   and Expl a nati o n




                  meet these addi t i o nal                requi r ements                        before the fi r st day of the fi r st cal -
                  endar quarter              begi n ni n g       after the                 cl o se of the fi r st regul a r    sessi o n   of the
                  State l e gi s l a ture         that begi n s after                      the date of enactment.           For purposes         of
                  the previ o us           sentence,        i n the case                   of a State that has a 2-year l e gi s l a ti v e
                  sessi o n,       each year of such sessi o n                             shal l be deemed         to be a separate        reg-
                  ul a r sessi o n        of the State l e gi s l a ture.


                  The Consol i d ated                         Omni b us     Budget Reconci l i a ti o n           Act of 1985 (COBRA)
Expl a nati o n   set forth certai n                        state pl a n requi r ements             and other provi s i o ns           rel a ted   to
                  thi r d-party           l i a bi l i t y.       The i n tent of these provi s i o ns             was to make certai n
                  that Medi c ai d                       be the payer of l a st resort; that i s , that other avai l a bl e
                  thi r d-party           resources                  (for exampl e ,      empl o yee     heal t h     benefi t   pl a ns, com-
                  merci a l      i n surance,                  tort damage          awards, compensati o n              programs,             and so
                  forth) be used before the program                                     pays for the care of an i n di v i d ual
                  el i g i b l e for Medi c ai d .1

                  State Medi c ai d                agenci e s             have experi e nced                   several       types of probl e ms,
                   however,           i n col l e cti n g            from certai n         l i a bl e    thi r d parti e s.               It has been par-
                  ti c ul a rl y   di f fi c ul t         for states to col l e ct                   from out-of-state                   i n surers          and
                  empl o yee            benefi t          pl a ns that may be covered                              by the Empl o yee                     Reti r e-
                  ment Income Securi t y                            Act of 1974. The purpose                              of thi s secti o n              i s to el i m -
                  i n ate any obstacl e s                       that hi n der        the states’ abi l i t y                to col l e ct         ful l y from
                  these and other l i a bl e                        thi r d parti e s.         It i s si m i l a r     i n many ways to secti o n
                    1862(b)       of the Soci a l Securi t y                      Act (Act) (42 U.S.C. 1396y(b)),                                        whi c h i s
                  known          as the Medi c are                      secondary        payer (MSP) provi s i o n.

                  State Pl a n Requi r ements                     .-In recogni t i o n         of the di f fi c ul t i e s                         associ a ted
                  wi t h col l e cti n g          from l i a bl e    thi r d parti e s      (despi t e     the fact that                                 the Act
                  al r eady        provi d es        for Medi c ai d        to be the payer of l a st resort),                                          subsecti o n
                  (a) amends               state pl a n requi r ements               to i m pose       speci f i c ati o ns                         i n tended       to
                  ensure that Medi c ai d                    be the payer of l a st resort i n each and                                            every case.
                  In addi t i o n,          thi s subsecti o n        enhances         the power of the states                                        to col l e ct
                  from l i a bl e         thi r d parti e s.

                  Speci f i c al l y ,       thi s subsecti o n          requi r es     states to provi d e                              that a pri v ate
                  i n surer            may not take i n to account                  that an i n di v i d ual        is                    el i g i b l e for, or
                   recei v i n g,         Medi c ai d  benefi t s        whether         under that state’s                                Medi c ai d       pl a n or
                   any other state Medi c ai d                    pl a n. The amendment                      woul d                      make i t cl e ar that

                    T‘he McCarran-Ferguson        Act (16 USC. 1011 et seq.) provi d es               that the busi n ess                     of i n surance   be
                  subj e ct to the l a ws of the States except when federal statute speci f i c al l y              rel a tes                to the busi n ess    of
                  i n surance,  aa i n the case of Medi c ai d thi r d-party l i a bi l i t y. Thi s secti o n i s general l y                  not i n tended    to
                  al t er that arrangement.



                  Page 18                                                 GAO/HRD-91-25               Medi c ai d     Col l e cti o ns     From Pri v ate       Insurers
                                                                               -
Appendi x       I
Suggested Legi s l a ti v e           Language
aud Expl a nati o n




the term “p ri v ate             i n surer”          i s used i n the broadest           possi b l e   sense to
i n cl u de   al l enti t i e s     or programs              that are i n a posi t i o n         to be pri m ary    to
Medi c ai d .      Reference              to any state pl a n shoul d          l e ssen the di f fi c ul t i e s    cur-
rentl y associ a ted            wi t h col l e cti n g         from out-of-state          i n surers.      The phrase
 “t ake i n to account”                i s used as i t i s i n the MSP provi s i o n.

Thi s subsecti o n,      i n general ,          al s o requi r es        states to provi d e             that pay-
ments may not be made to provi d ers                              for cases i n whi c h l i a bl e           thi r d par-
ti e s have been i d enti f i e de2        Under certai n               ci r cumstances,           however,
payments         may be made, but are condi t i o ned                           on prompt         rei m bursement.
Such ci r cumstances              may i n cl u de,         for exampl e ,          those i n whi c h prompt
payment        was requi r ed         for (1) prenatal                or preventi v e       pedi a tri c       care or
(2) servi c es      on behal f      of an i n di v i d ual           for whom chi l d support                  enforce-
ment was bei n g sought.

Furthermore,                the states are provi d ed           an expl i c i t    ri g ht to j o i n or i n ter-
vene i n any acti o n gi v i n g           ri s e to the need for any medi c al                     assi s tance   that
has been pai d under i t s state pl a n (such as a tort sui t or the l i k e). As an
addi t i o nal         enforcement     mechani s m,          states are subrogated-to                          the
extent that the state pl a n has pai d for medi c al                            assi s tance-to               the
rel a ted      ri g hts of any benefi c i a ry,        provi d er,         or other party.

Thi s subsecti o n                 al s o permi t s             sui t s to be             brought         i n federal            court agai n st
l i a bl e       thi r d parti e s       to recover               payments                 made under a state pl a n. It i s
 hoped that thi s mechani s m                               wi l provi d e                 a strong i n centi v e                   for thi r d par-
 ti e s to pay or rei m burse                          states promptl y .                    A party that prevai l s                            i n such a
 sui t woul d be awarded                          doubl e           the amount                 of the ori g i n al        l i a bi l i t y.           It i s
 anti c i p ated          that access to federal                         courts            wi l mi t i g ate       consti t uti o nal                    and
 procedural              obstacl e s        i n vol v ed            i n col l e cti n g         from out-of-state                          parti e s.

In the event that a party other than a state that pai d for medi c al                                                             assi s -
tance i n sti t utes        a sui t , the state that pai d for the medi c al                                         assi s tance        is
enti t l e d   to a porti o n        of any j u dgment                       or settl e ment                   equal to the amount
that was pai d under the state pl a n. Thi s gi v es the state the opti o n                                                         of
pursui n g       rei m bursement                   di r ectl y      agai n st     a l i a bl e       thi r d party and getti n g
doubl e      the amount           ori g i n al l y             owed or benefi t ti n g                   from sui t s brought              by
others and col l e cti n g              the amount                 of the ori g i n al         l i a bi l i t y.



 A‘ l t hough       the type of thi r d parti e s affected i s necessari l y                   comprehensi v e,      thi s i s not i n tended      to
  affect the appl i c ati o n          of the Indi a n Sel f -Determi n ati o n            Act (begi n ni n g   at 26 USC. 460), whi c h            pro-
  vi d es for certai n i n sti t uti o ns      to be rei m bursed           by Medi c ai d      i n the same manner ss other si m i l a r
i n sti t uti o ns.



Page 19                                                    GAO/HRD-91-25                  Medi c ai d   Col l e cti o ns   Prom Pri v ate        Iusurers
Appendi x       I
Suggested Legi s l a tSve              Language
and Expl a nati o n




Payment                Restri c ti o ns.-Subsecti o n                                   (b) amends                     secti o n        1903(o)           for three
purposes.                Fi r st, to cl a ri f y                that pri v ate-i n surers                              shoul d         be precl u ded
from excl u di n g                   or l i m i t i n g          by any means payment                                          on behal f of any i n di -
vi d ual  el i g i b l e         or recei v i n g                 Medi c ai d .           Second, that pri v ate                             i n surers
shoul d   be precl u ded                            from excl u di n g                   or l i m i t i n g            such payment                    i n any
state whether                    or not i t i s the state where the pri v ate                                                     i n surer         i s l o cated.
And, thi r d, that the prohi b i t i o n                                      on excl u di n g                 or l i m i t i n g         such payment
shoul d   extend to al l appropri a te                                          thi r d-party                 enti t i e s.        Thi s wi l requi r e
each state to take acti o n to ensure that i t s si s ter states are not deni e d
payments,                   but i t i s anti c i p ated                   that the Secretary                                wi l , by regul a ti o n,
provi d e       the necessary                           gui d ance            to enabl e                 states to compl y .

Conformi n g           Amendments-Subsecti o n                                  (c) amends             secti o n            1912 of the
Act, requi r i n g       states to el i m i n ate                obstacl e s         to Medi c ai d             reci p i e nts’
assi g nment          of benefi t s.             Such assi g nment                makes i t easi e r for states to
recover       from l i a bl e       thi r d parti e s.           In addi t i o n,       to el i m i n ate             any confusi o n,
the subsecti o n          al s o cl a ri f i e s      that secti o n             1917 of the Act does not bar
recovery           for the purpose                 of ensuri n g       that Medi c ai d                i s the payer of l a st
resort.

EHISA Amendment                    .-The         Empl o yee         Reti r ement               Income Securi t y                       Act of
I974 (EIIISA) preempts                   state l a ws affecti n g                covered                   empl o yee           reti r ement
and wel f are         pl a ns. Thi s preempti o n                   has been rai s ed as a barri e r                                   by par-
ti e s seeki n g      to avoi d ful f i l i n g          thei r thi r d-party                  obl i g ati o ns           wi t h respect
to Medi c ai d .        COBRA amended                 EREU to provi d e                  a l i m i t ed          excepti o n            to thi s
preempti o n.           However,         thi s COBRA amendment                             has not been suffi c i e nt                                   to
el i m i n ate     at l e ast procedural                obstacl e s       to col l e cti o n                of thi r d-party              l i a bi l i -
ti e s associ a ted          wi t h Medi c ai d .

Subsecti o n         (d) broadens               the excepti o n          to the ERISA preempti o n         so that
states have the necessary                             power to ensure that Medi c ai d             i s the payer of
l a st resort even wi t h respect to pl a ns that may be covered                                       by ERISA. Thi s
 subsecti o n       al s o provi d es             that state i n surance          l a ws may be construed          as
 appl i c abl e    to empl o yee            benefi t         pl a ns, but onl y to the extent necessary                to
 faci l i t ate thi r d-party         i d enti f i c ati o n         and recovery.

When COBKA was passed, there was concern                            that because                   the ERISA
amendment           coul d expose some pl a ns to new l i a bi l i t i e s,            i t coul d produce
hardshi p s      for i n surers         who had not anti c i p ated       these l i a bi l i t i e s      when
they desi g ned          thei r pl a ns. To address       thi s concern,        the ERM amendment
provi d ed     for a del a yed          effecti v e date. Si n ce al l i n surers             shoul d    by now




Page 20                                                      GAO/Ii R D-91-26              Medi c ai d      Col l e cti o ns     From Pri v ate           Insurers
Appendi x         I
SuggwM            LegWai v e           Language
and ExpIanati o n




have adj u sted            thei r pl a ns to provi d e                      pri m ary coverage for thei r benefi -
ci a ri e s, the ERISA amendment              takes                      effect when the rest of the secti o n
becomes        effecti v e.

Regul a ti o ns.-In                    recogni t i o n              of the severe probl e ms                    experi e nced         by the
states i n col l e cti n g               agai n st       l i a bl e          thi r d parti e s         and the urgency             of
achi e vi n g       rel a ted          program             savi n gs,               subsecti o n        (e) requi r es      the Secretary
to promul g ate               i m pl e menti n g                   regul a ti o ns           promptl y       (that i s , wi t hi n     6
months of enactment).

Effecti v e   Dates-Subsecti o n               (f) provi d es              for                   the secti o n   to take effect
on the fi r st cal e ndar         quarter     begi n ni n g           on or                   after the date of the enact-
ment of the secti o n. A del a yed               effecti v e            date                  i s provi d ed   i n cases where
the Secretary        ascertai n s        that state l e gi s l a ti o n                          wi l be necessary      i n order
for the state to compl y              wi t h the secti o n.




Page 21                                                  GAO/HRD-91-25          Medi c ai d     Col l e cti o ns   From Pri v ate   Insurers
Appendi x   II

Comments From the Department                                                                                                                               of Health                                                            and
Human Servi c es


                       ~.,n.““~ ‘   (I
                 g+                  c
                                                DEPARTMENT                         OF HEALTH Es HUMAN SERVICES                                                                                   Offi c e        of Inspector       General
                 b
                      %*
                 4‘        -‘ +,a                                                                                                                                                                Washi n gton,               D.C. 20201



                                                                                                                       SEP              4 1990



                                         Me. Janet                     L. Shi k l e s
                                         Di r ector
                                         Heal t h           Fi n anci n g             and publ i c                        Heal t h             Issues
                                         Uni t ed           States           General
                                               Accounti n g                Offi c e
                                         Washi n gton,                    D.C.          20548
                                         Dear             Ms.       Shi k l e s:
                                         Encl o sed                 are    the Department' s                         comments       on your                      draft      report,
                                         "Medi c ai d :                  Legi s l a ti o n              Needed         to Improve               Col l e cti o ns              From
                                         Pri v ate               Insurers.8V                      The comments            represent              the tentati v e                    posi t i o n
                                         of the                 Department                     and are subj e ct            to reeval u ati o n                        when     the          fi n al
                                         versi o n               of thi s                  report     is recei v ed.
                                         The Department                                appreci a tes                    the          opportuni t y                 to        comment                        on       thi s
                                         draft  report                             before            its   publ i c ati o n.
                                                                                                             QGrs                                                        ,



                                                                                                                                Ri c hard               P. Kusserow
                                                                                                                                Inspector                 General
                                         Encl o sure




                                                          Page 22                                                              GAO/HRD-91-26               Medi c ai d        Col l e cti o ns                   From Pri v ate           Insurers
                    Appendi x II
                    Comments From the Department                                               of Heal t h
                    and Human Servi c es




    c                              Comments
                                          on the General                    Accounti n e          Offi c e Draft Renort,
                                             “M edi c ai d :              Legi s l a ti o n Needed         to Imorove
                                                         Col l e cti o ns             From Pri v ate Insurers”


              We have revi e wed                         the GAO draft report and are very i n terested                                                                     i n the fi n di n gs.
                We agree that a smal l but si g ni f i c ant                                   number                       of pri v ate           heal t h i n surers,
              i n cl u di n g     pl a ns covered               under the Empl o yee                                     Reti r ement               Income Securi t y Act
               of 1974, are showi n g                       great i n genui t y             i n usi n g l o ophol e s                            and gaps i n current
              Federal         and State l a w regul a ti n g                        heal t h i n surance                               to avoi d Congress’                            i n tent that
               Medi c ai d         be the payer of l a st resort. We concur i n the report’s                                                                              concl u si o ns
             that i n creasi n g                numbers          of i n surance                pol i c i e s             i n cl u de       l a nguage             i n di c ati n g             that
             coverage           i s not avai l a bl e             if the i n sured                    i s el i g i b l e             for Medi c ai d ,                Medi c are,                or
             county or muni c i p al i t y-provi d ed                             heal t h benefi t s;                             that certai n           pri v ate i n surers                     are
             refusi n g       to honor reci p i e nts’                    assi g nment                     to Medi c ai d                 of ri g hts to thi r d-party
             payments;               and that it i s becomi n g                        an i n creasi n gl y                           common             practi c e               to
            i n corporate               excl u si o nary         cl a uses i n heal t h benefi t pl a ns or pol i c i e s                                                      (excl u di n g,
            for exampl e ,                coverage            of dependent                  chi l d ren                  who are not members                                       of the same
             househol d              as the named i n sured,                        or who are born out of wedl o ck).                                                                          ‘

            We al s o concur wi t h the report’s                               concl u si o n       that Federal        l e gi s l a ti o n     i s needed.
            It i s needed            i n some cases to address i n surance                               i n dustry    practi c es           that cannot
            effecti v el y     be addressed                      under current l a w. In others it i s needed                                 to requi r e
            States to use authori t y                          they al r eady      have to control               these abuses.                However,         the
            Department                 i s stil revi e wi n g            the ful l extent of the probl e m                         and the l e gi s l a ti v e
            changes         needed                 to resol v e      it. Consequentl y ,             we take no posi t i o n                at thi s ti m e on
            the speci f i c      l e gi s l a ti v e         changes       proposed           i n the GAO report.

            We woul d l i k e to correct a statement                      i n the paragraph                 begi n ni n g at the bottom
            of page 21 of the draft report.                    The statement               i n di c ates      that the regul a ti o ns
            requi r i n g    States to pay prenatal ,           preventi v e       pedi a tri c          care, and absent parent-
            rel a ted cl a i m s and then seek recovery                     from the known thi r d party are desi g ned
            I,. . . to prevent harassment            by provi d ers            of pregnant               women and si n gl e -parent
            Medi c ai d       reci p i e nts whose chi l d ren      recei v e     support from an absent parent.”
            Thi s i s not what Congress            stated.

            The conference         report accompanyi n g        thi s l e gi s l a ti o n      states that, i n the case of
            benefi c i a ri e s on whose behal f a chi l d support enforcement                          i s bei n g carri e d out
            by a State agency under ti t l e IV-D of the Soci a l Securi t y Act, the i n tent i s to
            protect the mother and her dependent                    chi l d ren           from havi n g     to pursue the
            absent spouse, hi s empl o yer,       or hi s i n surer for thi r d party coverage.                        In



Y




        -



                   Page 23                                                                       GAO/HRD-91-26                        Medi c ai d           Col l e cti o ns          From Pri v ate      Insurers
   Appendi x II
   Comments From the Department                              of Heal t h
   and Human Servi c es




Page 2

addi t i o n,       it was i n di c ated               that the changes                  were made so as not to di s courage
parti c i p ati o n         i n the Medi c ai d             program            by physi c i a ns         and other provi d ers          of
preventi v e           pedi a tri c      and prenatal                   care, si n ce the benefi c i a ri e s         i n need of such
servi c es al r eady                have di f fi c ul t y     fi n di n g     qual i t y     provi d ers      i n many communi t i e s.




    Page 24                                                    GAO/HRD-91-26                Medi c ai d     Col l e cti o ns     From Pri v ate   Insurers
Appendi x .111

Comments                                From the Department                                                                                        of Labor


Note- GAO comments
suppl e menti n g        those In the
repot? text appear            at the
end of l h l s appendi x .               U.S. Department                   of Labor                   Perwon        and      Wel f are BeneMs      Admnsl r afl o n
                                                                                                      Washi n gton.          D.C 20210




                                         Janet         J. Shi k l e e
                                         Di r ector,
                                         Heal t h        Fi n anci n g        and         Pol i c y     Issues
                                         Uni t ed        States          General           Accounti n g                   Offi c e
                                         Washi n gton,                 DC 20548
                                         Dear       Ma.     Shi k l e s:
                                         Thank         you   for     provi d i n g              the Department                           of Labor     wi t h          an
                                         opportuni t y           to comment                   on your           draft                proposed     report              regardi n g
                                         the probl e ms            faced           by       state     Medi c ai d                    agenci e s   i n col l e cti n g                          from
                                         i n surers        and empl o yee                   benefi t       pl a ns.
                                         Attached           are the               Department' s                comments                   wi t h    respect                 to   thi s         draft
                                         propoaed           report.




                                                                                                              Ann L.                 combs
                                                                                                              Deputy                 Assi s tant                Secretary                for
                                                                                                              Pol i c y




                                   Y




                                                          Page      25                                             GAO/HRD-91-26Medi c ai d Col l e cti o nsFromPri v ateInsurers
                                                                                                                                                                                                                                                        ,

                                         Comments                  From the Department                                      of Labor




                       Department                      of Labor      Comments                                               on GAO Draft           Proposed            Report
                       Regardi n g                   the Probl e ms      Faced                                              by State   Medi c ai d          Agenci e s                                                            in
                       Col l e cti n g                 from Insurers         and                                            Empl o yee Benefi t           Pl a ns:
                       1.          m                  reswect                      to         the            wl l T S                      IN BRIEF                          secti o n                     of          the             draft
                                   -:
See comment       1,               Item      2. of the              *' R ESULTS               IN BRIEF"                 secti o n      (page      2 of                                                                                   the
                                   draft       proposed             report)            begi n s               wi t h      the statement            that
                                   "State' s         l i m i t ed        authori t y                 over             ERISA pl a ns          does  not                                                                                   al l o w
                                   them to prohi b i t                   these         pl a ns              from certai n             acti o ns      to                                                                                  avoi d
                                   payments          for Medi c ai d                 reci p i e nts'                    covered       heal t h     care
                                   costs.      " Thi s            statement                   i S an overgeneral i z ati o n                       that                                                                                      is         not
                                   supported              by the subsequent                            di s cussi o n             i n the report.
See comment   2                    Fi r st,              the report                                  recogni z es                                                  that        many              state                      Medi c ai d
                                   agenci e s                 have              experi e nced                                                        di f fi c ul t y                   col l e cti n g                               from thi r d-
                                   party               payers              because                                     onl y                         ni n e             states             have                     enacted
                                   l e gi s l a ti o n                   prohi b i t i n g                                               empl o yee                         benefi t                    pl a ns                   from adopti n g
                                   provi s i o ns                  that                         deny                   coverage                                       of medi c al                      cl a i m s                    based        on a
                                   parti c i p ant' s                           el i g i b i l t y                                                   for Medi c ai d .                                  Thi s                 i s the pri m ary
                                   cause               of states'                                  fai l u re                                 to col l e ct:                            therefore,                                    it shoul d             be
                                   the pri m ary                         concl u si o n                                             of i t em                           2.       ERISA secti o n                                        514(b)(8)
                                   expressl y                   provi d es                                  that                          such                      state        l a ws              are not preempted                                       by
                                   ERISA secti o n                              514 (a).                                            Whi l e                         some       states                   may have
                                   mi s construed                          thei r                           abi l i t y                                   to enact                   such               l e gi s l a ti o n                      or the
                                   necessi t y                  to enact                                    such                         l e gi s l a ti o n,                           the              fact                that           they        have
                                     fai l e d           to enact                               such                    l e gi s l a ti o n                                 can not be attri b uted                                                  to
                                   ERISA "not                      al l p wi n g"                                      them to do so.
See comment   3                    Second,              the           fact                that       states               can not                        "cross                      state            l i n es@'            in
                                   order           to reach                     out-of-state                            empl o yee                       benefi t                      pl a ns               i s not
                                   the resul t                      of any l e gal                         obstacl e                   created                          by ERISA.                               There          is
                                   nothi n g             i n ERISA secti o n                                   514(b)            (8) that                            limits                    its           express
                                   excepti o n                   from the preempti v e                                       effect                      of ERISA secti o n                                          514(a)
                                   to state                 l a ws            appl i c abl e                   to i n -state                             pl a ns                  as opposed                         to
                                   out-of-state                          pl a ns.                  It i s general                             l i m i t ati o ns                               on state
                                     i n surance                l a w j u ri s di c ti o n,                             not ERISA, that                                              prevents                      states
                                      from asserti n g                          thei r             authori t y                  "across                           state                l i n es@' .                  If the
                                   Soci a l           Securi t y                      Act (or other                          federal                          l a w)              i s amended                        to
                                   gi v e        states               the authori t y                            to Vross                          state                   l i n es"                to enforce
                                   Medi c ai d               secondary                         payer           requi r ements,                                    ERISA secti o n
                                   514(b)           (a),            read               i n conj u ncti o n                      wi t h             ERISA secti o n                                     514(d)
                                   whi c h         provi d es                   that             ERISA does                     not preempt                                       other             federal
                                   l a ws,         woul d             general l y                    pose          no obstacl e                                   to states                         exerci s i n g
                                   thei r          authori t y                        over         out-of-state                          pl a ns                     and i n surers.
                       2.          Wi t h            reswect                       to         the            maj . n            bodv               of         the           dl r aft               wrowosed                            rm                   :
                                   Toward          the                     end               of the subsequent           detai l e d                                                            di s cussi o n                of
                                   ERISA-rel a ted                                      i s sues,        the report      draws                                                      the              fol l o wi n g
                                   concl u si o n                            (on page               17):      "Even   if states                                                           pass                   the l a ws
                                   anti c i p ated                            under               COBRA, they        may onl y                                                      prohi b i t                        ERISA pl a ns
                                   from usi n g                             excl u si o nary                contract     cl a uses                                                        that                   limit      payment




                                         Page 26                                                                                GAO/Ii R D-91-26                           Medi c ai d              Col l e cti o ns              From Pri v ate                  Immrers
                         Appendi x                   III
                         Comments                     From the Department                                         of Labor




                       when an i n di v i d ual                       i s el i g i b l e                 for Medi c ai d .            COBRA l a nguage
                       was not broad                     enough           to enabl e                     states        to prohi b i t      ERISA
                       pl a ns              from usi n g          other         practi c es                  -- such        as those       empl o yed
                       by out-of-state                       i n surers                  -- that             have      the same effect.
                       Speci f i c al l y ,              states           can not precl u de                           ERISA pl a ns       from not
                       recogni z i n g              the Medi c ai d                      reci p i e nts'          assi g nment          of ri g hts    or
                       payi n g               onl y the pol i c y               hol d er."
See comment   4        ERISA secti o n                                        514(b)(8)                                   reads                     i n part                             that            "Subsecti o n                       (a)
                       of thi s                          secti o n                        shal l                      not appl y                               to any State                                  l a w mandati n g
                       that            an empl o yee                                           benefi t                     pl a n                 not i n cl u de                                 any provi s i o n
                                               has the effect;                                                     of l i m i t i n g                                  or excl u di n g                          coveraae                   or
                       pavment                           for any heal t h                                               care...."                                        GAO apparentl y                                 concl u des
                       that            thi s                  provi s i o n                              authori z es                                      states                        to prohi b i t                     pl a n
                       provi s i o ns                              that                   expressl y                               deny                l i a bi l i t y                         because                  the
                       parti c i p ant                                i s Medi c ai d -el i g i b l e ,                                                                  but that                        states              can
                       nei t her                         compel                    pl a ns                         to i n corporate                                            provi s i o ns                        recogni z i n g
                       such            l i a bi l i t y                            nor proceed                                          agai n st                          pl a n             admi n i s trators                            who
                       deny             l i a bi l i t y                           even                  though                         the pl a n                              i s si l e nt                    on the              i s sue
                       of a parti c i p ant' s                                                     el i g i b i l t y                                      for Medi c ai d .                                     Thi s
                       restri c ti v e                                 i n terpretati o n                                               of the rel i e f                                        from ERISA
                       preempti o n                                granted                         by ERISA secti o n                                                            514(b)(8)                        i s unsupported
                         i n the report                                       by any l e gal                                            anal y si s                            of the statutory
                       l a nguage,                             anal y si s                         of congressi o nal                                                             i n tent               as refl e cted                        in
                       the secti o n' s                                       l e gi s l a ti v e                                  hi s tory,                              or any ci t ati o n                                    of court
                        i n terpretati o n                                         of the statutory                                                               l a nguage.
                  3.   Wi t h   ressect       to the draft                                                                 l e gi s l a ti o n                          in         Annendi x                           I of               ttll:
                       prouosed         draft    reuort:
                       Appendi x      I contai n s                                                   proposed                    l e gi s l a ti o n             to address         the
                       concerns       expressed                                                 in       the               report.                     Secti o n      (d) of the
                       proposed       l e gi s l a ti o n                                              woul d                amend                   ERISA secti o ns       514(b)(2)(B)
                       and 514(b)(8).
See comment   5        Wi t hout       commenti n g               on the meri t s                             of the proposed                             amendment
                       to the Soci a l              Securi t y                Act          i t sel f ,           the propdsed                          amendment                   to
                       ERISA Secti o n              514(b)(8)                   whi c h                woul d      expressl y                      cross-
                       reference            the Soci a l                 Securi t y                    Act secti o ns                  authori z i n g
                       states        to enforce                Medi c ai d                 secondary                 payer             provi s i o ns                 does
                       not appear             to rai s e            any si g ni f i c ant                          techni c al                     concerns.                      We
                       note,       however,           that          si n ce             the amendment                          i s not drafted                             in
                       usual       statutory             drafti n g                 parl a nce,                  there            i s some ambi g ui t y
                       whether         the amendment                        to ERISA secti o n                              514(b)(8)                     woul d           sti k e
                       the enti r e           current             text          of the secti o n                            and substi t ute                          new
                       text,       or si m pl y          append               the new sentence                                 to the end of the
                       current         text.          Further,                  si n ce                ERISA secti o n                    514(d)                expressl y
See comment   6        states        that       ERISA does                    not preempt                        other            federal                 l a ws,          the
                       proposed           amendment               to ERISA secti o n                               514(b)(8)                      may not be
                       necessary            at al l         i n order                   to grant                 states              the desi r ed
                       authori t y          under        the Soci a l                      Securi t y              Act.




                           Page 27                                                                                     GAO/HRD-91-25                                Medi c ai d              Col l e cti o ns               From Pri v ate          Insurers
                                                                                                                                                                                                                               .
                                Appendi x               ID
                                Comments                 From the Department                                   of Labor




See comment   7.       The proposed                                           amendment                              to ERISA secti o n                                  514(b)(2)(B)                               is
                       unnecessary                                      and i n appropri a te.                                                  ERISA' s                 general                  preempti o n
                       rul e               i s establ i s hed                                             by ERISA secti o n                                    514(a).                       ERISA secti o n
                        514(b)(Z)(B)                                           (the                so-cal l e d                    "deemer                 cl a use")                     i s i n tended                    to
                       be read                          i n conj u ncti o n                                         wi t h        ERISA secti o n                                  514(b)(2)(A)                         (the
                       so-cal l e d                            "savi n g                           cl a usel O )               to draw                  a di s ti n cti o n                         between
                       empl o yee                          benefi t                           pl a ns               whi c h           states               are prohi b i t ed                              from
                       regul a ti n g                              under                      the general                             rul e        of ERISA secti o n                                      514(a)
                       and resi d ual                                       state                      authori t y                    to regul a te                           i n surers,                 banks,
                       trust                  compani e s                                and i n vestment                                    compani e s.                            In the context                            of
                       heal t h                   benefi t                          pl a ns,                    these            tandem                provi s i o ns                        create                certai n
                       di s ti n cti o ns                                  between                           sel f -i n sured                      pl a ns               and i n sured                        pl a ns.
                       These                  di s ti n cti o ns                                       between                 sel f -i n sured                          pl a ns             and i n surance
                       pol i c i e s                       or contracts                                          i s not rel e vant                                to the Medi c ai d
                       secondary                               payer                     i s sue,                   however.                     The ERISA-speci f i c                                        i s sue          is
                       state                  regul a ti o n                                  of empl o yee                           benefi t                 pl a ns               per se (whether
                       or not they                                      sel f -i n sure).                                      Thus,             both              the current                        text             of
                       ERISA secti o n                                           514(b)(8)                               and the proposed                                    revi s ed              versi o n               of
                       ERISA secti o n                                           514(b)(8)                               make         reference                        to the general
                       preempti o n                              rul e                  of ERISA secti o n                                       514(a),                     not the                "deemer
                       cl a useI                       of ERISA secti o n                                                  514(b)(2)(B).                                 There               i s no
                       compel l i n g                             l e gal                     or pol i c y                     reason              why an empl o yee                                  benefi t
                       pl a n             needs                  to be deemed                                            an i n surer                  under                 ERISA secti o n
                       514(b)(2)(B)                                         i n order                           to effectuate                              an excepti o n                           to the
                       broad                  preempti v e                                    scope                 of ERISA secti o n                                   514(a)                 under              the
                       proposed                            revi s i o n                           to ERISA secti o n                                    514(b)(8).




                   w




                                Page 29                                                                           GAO/HRD-91-2s                           Medi c ai d           Col l e cti o ns            From Pri v ate          Insurers
      .



                 Appendi x      III
                 Comments        From the Department              of Labor




                 The fol l o wi n g are GAO' S comments                             on the Department                         of Labor’s         l e tter
                 dated Jul y 31, 1990.


                 1. We di s agree        that the statement               di s cussed        i s an overgeneral i z ati o n.
GAO Com m ents   The i n formati o n           presented     on p. S-speci f i c al l y ,            that states are unabl e
                 to precl u de       ERISA pl a ns       from di s regardi n g            the Medi c ai d    reci p i e nt’s
                 assi g nment        of ri g hts or payi n g        onl y the pol i c yhol d er-supports                     the
                 statement.

                 2. We di s agree                      that state l a ws prohi b i t i n g       ERISA pl a ns     from adopti n g      cer-
                 tai n provi s i o ns-those                           havi n g    the effect of denyi n g        coverage     based on a
                 person’s           el i g i b i l t y       for Medi c ai d -        woul d be suffi c i e nt.     Moreover,      states
                 have l i t tl e i n centi v e                  to pass the l a ws anti c i p ated            by COBRA when EKISA
                 pl a ns are l i k el y                  to get around          them . The bottom l i n e i s that the states do
                 not have adequate                           authori t y       to stop ERISA pl a ns from excl u di n g
                 Medi c ai d ,

                 3. We          agree that ERISA does not create                            a l e gal obstacl e     to states’ crossi n g
                 state     l i n es to reach out-of-state     ERISA                      pl a ns and di d not mean to i m pl y
                 that.     We have modi f i e d     the report to                       cl a ri f y   that probl e ms      wi t h out-of-
                 state      i n surers    and ERISA pl a ns-  both                      i n -state      and out-of-state-are            i n de-
                 pendent            of one another.

                 4. We di s agree             wi t h Labor’s                suggesti o n          that an amendment                   to the l a w i s
                 unnecessary.          We bel i e ve               the current             statutory          l a nguage      i s i n adequate
                 because        ERISA pl a ns              use a vari e ty             of acti o ns        and practi c es-as              opposed
                 to contract        provi s i o ns-to                     avoi d payi n g           states; understandbl y ,                pl a ns
                 have demonstrated                         an unwi l i n gness              to concede             any l e gal i s sue that
                 woul d resul t i n thei r havi n g                         to pay. When an ERISA pl a n di s putes                              its lia-
                 bi l i t y  for payment,                 a state’s onl y recourse                     i s to i n cur the expense                  and
                 uncertai n ty       of l i t i g ati n g         the i s sue.

                 As di s cussed         i n our report, some ERISA pl a ns apparentl y                                      construe          secti o n
                 514(b)(8)          as onl y perm i t ti n g            states to prohi b i t        i n cl u di n g        i n contracts
                 “a ny provi s i o n”                 that has the proscri b ed         effect; so l o ng as contract                            provi -
                 si o ns wi t h the proscri b ed                   effect are not used, pl a n payments                             can be
                 avoi d ed.      When an EHISA pl a n takes such a posi t i o n,                                     the state’s
                 recourse-to              l i t i g ate    the i s sue-       may be i m practi c al :                  the cost of l i t i g a-
                 ti o n may exceed the di s puted                         amount.




                 Page 29                                            GAO/HRD-91-26            Medi c ai d   Col l e cti o ns     From Pri v ate       Insurers
                                                                                                                    .
Appendi x     III
Comments       From the Department             of Labor




If a state contests        an ERISA pl a n’s              refusal       to pay, the outcome                i s , we
bel i e ve,   more uncertai n          than Labor’s             comments              suggest. We are not con-
vi n ced    that a court woul d construe                     secti o n       514(b)(8)         as broadl y       as
Labor, essenti a l y ,       specul a tes.          The secti o n          does not expressl y               permi t
states, fi r st, to requi r e         speci f i c    contract          provi s i o ns      i n pl a ns or, second, to
prohi b i t   practi c es  or acti o ns           by pl a ns that may have the proscri b ed
effect.

In concl u si o n,              secti o n   614(b)(8)       i s open to the i n terpretati o n                 that the
pl a ns have adopted.                     Labor does not refer to any court deci s i o n,                          l e gal
anal y si s ,      or l e gi s l a ti v e     hi s tory  to support     a contrary         concl u si o n,            nor
have we found any. Therefore,                              amendi n g   the l a w woul d faci l i t ate                    state
recovery;           such an amendment                    woul d be of more practi c al                  val u e to the
states than an asserti o n                         by us or Labor that the pl a ns’ i n terpretati o n                           of
the secti o n         i s wrong.

5. We revi s ed the l a nguage     proposed                         for paragraph          (8), subsecti o n                (b),
secti o n 514. We bel i e ve   the current                        versi o n i s unambi g uous.

6. As Labor i n di c ates,                 secti o n       614(d) says that ERISA does not preempt
federal         l a w. It does not, however,                        make any reference                    to state l a w. It i s
concei v abl e            that a court coul d construe                        secti o n        514(d) broadl y        enough     to
enabl e        states to pass l a ws provi d i n g                       for effecti v e           recovery      from ERISA
pl a ns. But our i n tervi e ws                    wi t h state offi c i a l s           suggest that states typi -
cal l y woul d not have the resources                                  and tenaci t y            to advance       an argument
based on such a constructi o n.                            Even i f a state di d advance                       such an argu-
ment, we thi n k i t doubtful                        that a court woul d accept thi s argument
because             i t woul d essenti a l y             requi r e       a court to rul e that the state’s l a w
preempted                ERISA. Furthermore,                    presumabl y ,           the Congress           woul d not
have created the current secti o n                                 614(b) (8) i f secti o n              514(d) was broad
enough            to enabl e    states to pass ful l y effecti v e                         l a ws.

Our proposed        amendment                   woul d        el i m i n ate    any doubt. It woul d have the
effect of preventi n g       l i t i g ati o n         and         other del a ys     that di s courage states
and prevent     aggressi v e                recovery          efforts from bei n g cost-effecti v e.         More-
over, Labor rai s es no substanti v e                           obj e cti o ns    to the amendment.

7. We di s agree           that the amendment                      to secti o n        514(b)(2)(B)             of ERM       is
unnecessary             and i n appropri a te.

We acknowl e dge                 that the so-cal l e d              deemer cl a use i s general l y   read i n
conj u ncti o n          wi t h the savi n gs           cl a use. We al s o recogni z e      that the two
cl a uses       pertai n       to the di s ti n cti o n          between   sel f -i n sured pl a ns and i n sured


Page 30                                          GAO/~91-26              Medi c ai d    Col l e cti o ns   From Pri v ate   Immrers
Appendi x  III
CWnment+!! From the Department                 of Labor




pl a ns and that thi s di s ti n cti o n               i s not di r ectl y       rel e vant     to the Medi c ai d
thi r d-party   l i a bi l i t y     i s sue. The pri m ary             purpose          of the amendment,            how-
ever, i s to make i t as si m pl e                 as possi b l e       for states to make certai n                that
for Medi c ai d        thi r d-party          purposes,           al l ERISA pl a ns are subj e ct      to the same
rul e s as other i n surers.

As our report di s cusses,                         states have not uti l i z ed             the l a ti t ude     they cur-
rentl y have under secti o n                          514(b)(8).       Nothi n g     i n thi s secti o n        successful l y
communi c ates              to states thei r need to pass thi r d-party                                 l a ws expressl y
and speci f i c al l y        appl i c abl e           to ERISA pl a ns (that i s , EnI%-speci f i c                    l a ws).
Indeed, i n the rel a ti v el y                    few states that have passed rel e vant                          l a ws, the
maj o ri t y       of such l a ws are expl i c i t l y                appl i c abl e    onl y to i n surers            (that i s ,
the l a ws are non-Ems&speci f i c                           l a ws). On the basi s of our consul t ati o ns
wi t h state offi c i a l s ,           we understand                that many states may have expected
that thei r l a ws woul d                    appl y to ERISA pl a ns.

Secti o n 514 (b)(2)(B) (as a counterpart                                     to secti o n      514(b)(2)      (A)) pre-
cl u des an ERISA pl a n, i n dependent                              of secti o n      514(b)(8),       from bei n g
deemed                an i n surer.        Therefore,         i n response          to a state proceedi n g,              based
on a non-EmsA-speci f i c                       l a w agai n st        an ERISA pl a n, the pl a n coul d argue
that i t coul d not be deemed                           an i n surer        and, consequentl y ,            was not cov-
ered by the state l a w at i s sue. As a resul t , we are concerned                                             that even i f
secti o n            514(b)(8)         was amended-gi v i n g                    states greater l a ti t ude         i n pro-
scri b i n g          acti o ns      on the part of ERISA pl a ns so as to avoi d thi r d-party                                 lia-
bi l i t y-secti o n                514(b)(2)(B)         coul d be rai s ed as an obstacl e                  to appl y i n g
some current and future state l a ws to ERKA pl a ns. To el i m i n ate                                                thi s pos-
si b i l t y,         we bel i e ve       that secti o n         514(b)(2)(B)           shoul d     be amended           as
suggested.




Page 31                                          GAO/HRD-9195            Medi c ai d   Col l e cti o ns   From Pri v ate   Insurers
 Appendi x   IV

 Maj o r          Contri b utors                 to Thi s                      &port


                                     Jane L. Ross, Seni o r Assi s tant              Di r ector,         (202)       275-6196
Human Resources                      Edwi n P, Stropko, Assi s tant           Di r ector
Di v i s i o n,                      Donal d J. Wal t hal l , Seni o r Di v i s i o n          Advi s er
Washi n gton,   D.C.

                                     Frank C. Pasqui e r,           Assi g nment           Manager
Seattl e     Regi o nal   Offi c e   Katheri n e Iri t ani ,       Eval u ator-i n -Charge
                                     Nancy R. Purvi n e,            Eval u ator

                                                                                                                                                                     -
                                     Dayna K. Shah, Assi s tant          General        Counsel
Offi c e of the General              Demari s  Del g ado-Vega,        Attorney-Advi s er
Counsel ,                            Crai g H. Wi n sl o w,    Attorney-Advi s er
Washi n &on,    DC.




(l Q 1170)                           Page 32                                     GAO/HRD-91-25         Medi c ai d    Col l e cti o ns   From Pri v ate   Insurers
--   .__--~--




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