Medicaid Third-Party Liability
Federal Guidance Needed to Help States Address Continuing Problems
Gao ID: GAO-06-862 September 15, 2006
Medicaid, jointly funded by the federal government and the states, finances health care for about 56 million low-income people at an estimated total cost of about $298 billion in fiscal year 2004. Congress intended Medicaid to be the payer of last resort: if Medicaid beneficiaries have another source of health care coverage--such as private health insurance or a health plan purchased individually or provided through an employer--that source, to the extent of its liability, should pay before Medicaid does. This concept is referred to as "third-party liability." When such coverage is used, savings accrue to the federal government and the states. Using data from the U.S. Census Bureau and the states, GAO examined (1) the extent to which Medicaid beneficiaries have private health coverage and (2) problems states face in ensuring that Medicaid is the payer of last resort, including the extent to which the Deficit Reduction Act of 2005 may help address these problems.
On the basis of self-reported health coverage information from the Census Bureau's annual Current Population Surveys covering the 2002 through 2004 time period, an average of 13 percent of respondents who reported having Medicaid coverage for the entire year also reported having private health coverage at some time during the same year. This coverage most often was obtained through employment rather than purchased by individuals directly from an insurer: employment-based coverage averaged 11 percent nationwide, while individual coverage averaged 2 percent. Problems states have faced in ensuring that Medicaid is the payer of last resort fall into two general categories: verifying Medicaid beneficiaries' private health coverage and collecting payments from third parties. Officials from 27 of 39 states responding to GAO's request for information about the top three problems they faced reported problems in verifying beneficiaries' private health coverage--a key step states must take to avoid paying claims for which a third party is liable. In cases where states have paid claims before identifying that other coverage was available, states must seek payment for the claims they have already paid. Officials from 35 responding states had problems collecting such payments. Provisions in the Deficit Reduction Act of 2005 require states to have laws in effect that could help address some of the reported problems, but it is too soon to assess the extent to which the problems will be addressed. Further, GAO identified two issues that require resolution in order to aid states in complying with the Deficit Reduction Act's requirements, specifically, (1) the time frame by which states must have their laws in effect, and (2) which entities are subject to certain of the act's requirements. Regarding both issues, officials from the Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, said in June 2006 that they were considering how to interpret the law and how to best provide guidance to states to help them implement the requirements.
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GAO-06-862, Medicaid Third-Party Liability: Federal Guidance Needed to Help States Address Continuing Problems
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Report to the Chairman, Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
September 2006:
Medicaid Third-Party Liability:
Federal Guidance Needed to Help States Address Continuing Problems:
Medicaid Third-Party Liability:
GAO-06-862:
GAO Highlights:
Highlights of GAO-06-862, a report to the Chairman, Committee on
Finance, U.S. Senate
Why GAO Did This Study:
Medicaid, jointly funded by the federal government and the states,
finances health care for about 56 million low-income people at an
estimated total cost of about $298 billion in fiscal year 2004.
Congress intended Medicaid to be the payer of last resort: if Medicaid
beneficiaries have another source of health care coverage”such as
private health insurance or a health plan purchased individually or
provided through an employer”that source, to the extent of its
liability, should pay before Medicaid does. This concept is referred to
as ’third-party liability.“ When such coverage is used, savings accrue
to the federal government and the states.
Using data from the U.S. Census Bureau and the states, GAO examined (1)
the extent to which Medicaid beneficiaries have private health coverage
and (2) problems states face in ensuring that Medicaid is the payer of
last resort, including the extent to which the Deficit Reduction Act of
2005 may help address these problems.
What GAO Found:
On the basis of self-reported health coverage information from the
Census Bureau‘s annual Current Population Surveys covering the 2002
through 2004 time period, an average of 13 percent of respondents who
reported having Medicaid coverage for the entire year also reported
having private health coverage at some time during the same year. This
coverage most often was obtained through employment rather than
purchased by individuals directly from an insurer: employment-based
coverage averaged 11 percent nationwide, while individual coverage
averaged 2 percent.
Problems states have faced in ensuring that Medicaid is the payer of
last resort fall into two general categories: verifying Medicaid
beneficiaries‘ private health coverage and collecting payments from
third parties. Officials from 27 of 39 states responding to GAO‘s
request for information about the top three problems they faced
reported problems in verifying beneficiaries‘ private health coverage”a
key step states must take to avoid paying claims for which a third
party is liable. In cases where states have paid claims before
identifying that other coverage was available, states must seek payment
for the claims they have already paid. Officials from 35 responding
states had problems collecting such payments.
Table: Number of States Reporting Problems in Verifying Coverage and
Collecting Payment from Third parties and Their Contractors, with
Available Estimates of Associated Annual Losses:
Category of Problems: Verifying coverage;
Number of States reporting problems(n=39): 27;
Number of states able to estimate annual losses: 10;
Total estimated annual losses[A] (dollars in millions): $54-60.
Category of Problems: Collecting payments;
Number of States reporting problems(n=39): 35;
Number of states able to estimate annual losses: 14;
Total estimated annual losses[A] (dollars in millions): 184-196.
Source: GAO analysis of information provided by state officials.
[End of table]
Provisions in the Deficit Reduction Act of 2005 require states to have
laws in effect that could help address some of the reported problems,
but it is too soon to assess the extent to which the problems will be
addressed. Further, GAO identified two issues that require resolution
in order to aid states in complying with the Deficit Reduction Act‘s
requirements, specifically, (1) the time frame by which states must
have their laws in effect, and (2) which entities are subject to
certain of the act‘s requirements. Regarding both issues, officials
from the Centers for Medicare & Medicaid Services (CMS), which oversees
Medicaid, said in June 2006 that they were considering how to interpret
the law and how to best provide guidance to states to help them
implement the requirements.
What GAO Recommends:
GAO recommends that the Administrator of CMS determine and provide
guidance to states on (1) when states must have laws in place to
implement the Deficit Reduction Act‘s requirements and (2) which
entities are required to provide states with coverage and other data.
CMS concurred with GAO‘s recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-862].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Kathryn G. Allen at (202)
512-7118 or allenk@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
An Estimated 13 Percent of Medicaid Beneficiaries Have Private Health
Coverage:
States Face Problems in Verifying Coverage and in Collecting from Third
Parties:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: GAO's Analysis of the Current Population Survey Conducted
by the U.S. Census Bureau:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: Contact and Staff Acknowledgments:
Tables:
Table 1: Percentage, by State, of Individuals Who Reported Having
Medicaid Coverage for the Entire Year Who Also Reported Having Private
Health Coverage at Some Time during the Same Year (2002-2004):
Table 2: Number of States Reporting Problems Verifying Whether Medicaid
Beneficiaries Have Private Health Coverage, with Estimates of
Associated Annual Losses:
Table 3: Number of States Reporting Problems Collecting from Third
Parties and Their Contractors, with Estimates of Associated Annual
Losses:
Table 4: Percentage and Confidence Intervals, by State, of Individuals
Who Reported Having Medicaid Coverage for the Entire Year Who Also
Reported Having Private Health Coverage at Some Time during the Same
Year (2002-2004):
Abbreviations:
CMS: Centers for Medicare & Medicaid Services:
CPS: Current Population Survey:
United States Government Accountability Office:
Washington, DC 20548:
September 15, 2006:
The Honorable Charles E. Grassley:
Chairman:
Committee on Finance:
United States Senate:
Dear Mr. Chairman:
Medicaid finances health care for about 56 million low-income
individuals, including children and aged or disabled adults. Jointly
funded by the federal government and the states at an estimated total
cost of about $298 billion in fiscal year 2004, Medicaid has been on
our list of high-risk programs since 2003 because of concerns about the
program's size, growth, and fiscal oversight, including concerns over
whether federal and state efforts ensure that payments are
appropriate.[Footnote 1] Congress intended that Medicaid be the payer
of last resort; in other words, if a Medicaid beneficiary also has
another source of payment for health services, that source is to pay
instead of Medicaid. Federal law and regulation refer to these other
sources of payment as "third parties," which may include private health
insurers and employer health plans.[Footnote 2] In addition, insurers
and employer health plans often hire contractors--such as plan
administrators[Footnote 3] or benefit managers--to administer part or
all of their health care plans. Some adults may have access to private
health coverage because they may be working and covered by an
employer's health plan even though they also qualify for Medicaid. In
addition, children may qualify for Medicaid and also be included on a
parent's health plan provided by the parent's employer or purchased
directly by the parent from a private insurer. To the extent that
private health coverage pays for health care services instead of
Medicaid, savings can accrue to the federal government and to the
states. Such savings can be substantial. States reported savings of
nearly $5.5 billion in fiscal year 2004 from ensuring that private
third parties paid before Medicaid.
In administering their Medicaid programs, states are required to take
reasonable measures to identify other sources of health coverage that
Medicaid beneficiaries may have and to ensure that such parties pay to
the extent of their liability. States have considerable flexibility in
designing and operating their Medicaid programs, although they must
comply with federal requirements. States can typically avoid paying
claims for Medicaid beneficiaries when they have verified that other
coverage is available--for this purpose, knowing which services are
covered and the eligibility period for the other coverage is
critical[Footnote 4]--or they can seek reimbursement from third parties
for previously paid claims for which the third party is legally
liable.[Footnote 5] In the early 1990s, we reported certain problems
that hindered states' ability to ensure that beneficiaries' other
health care resources paid before Medicaid.[Footnote 6] Some third
parties, for example, avoided paying costs for Medicaid beneficiaries
by taking actions that significantly limited states' ability to recover
the costs.[Footnote 7] In response to our earlier recommendations,
Congress passed legislation in 1993 to help strengthen states' ability
to collect from responsible third parties.[Footnote 8] Recently,
however, Members of Congress have become aware that states are
experiencing difficulties with their third-party efforts. In February
2006, Congress passed the Deficit Reduction Act of 2005, which
contained some provisions related to Medicaid third-party
liability.[Footnote 9] Because of your interest that Medicaid not pay
for costs that are the responsibility of third parties, you asked us to
review states' efforts to ensure that Medicaid is the payer of last
resort. Specifically, we examined (1) the extent to which Medicaid
beneficiaries have private health coverage and (2) problems affecting
states' ability to ensure that Medicaid is the payer of last resort,
including the extent to which the Deficit Reduction Act of 2005 might
address these problems.
To determine the extent to which Medicaid beneficiaries nationwide and
in individual states have private health coverage, we analyzed data
from the only national data source containing this information, the
Current Population Survey (CPS) conducted by the U.S. Census Bureau.
CPS is designed to represent a cross section of the nation's civilian
noninstitutionalized population. The survey provides estimates for a
variety of demographic characteristics for the nation as a whole and,
for some estimates, furnishes data for individual states and other
geographic areas.[Footnote 10] Each March, CPS gathers information
about health coverage that survey respondents had at any time in the
previous calendar year, including government health coverage, such as
Medicaid, and private health coverage, such as coverage provided
through an employer or union (employment-based health coverage) and
coverage directly purchased by the beneficiary (individual health
coverage).[Footnote 11] CPS also asks for the number of months that
survey respondents had Medicaid coverage. To identify individuals who
had Medicaid and private health coverage concurrently in the same year,
we focused our analysis on individuals who reported that they had
Medicaid coverage for the entire year along with private health
coverage at some point during the same year. In 2005, about 84,700
households nationwide were included in the survey. Because the CPS
sample size is relatively small in some states in any particular year,
we calculated a 3-year average for each state to help mitigate single-
year anomalies. We used data collected in CPS from 2003 through 2005,
which asked respondents health coverage questions about the 2002
through 2004 time period. To assess the reliability of our use of CPS
data, we discussed our methodology with officials from the U.S. Census
Bureau and reviewed the agency's data quality-control procedures and
related documentation. We determined that the data were sufficiently
reliable for the purposes of this report. We also interviewed officials
from the Centers for Medicare & Medicaid Services (CMS), the agency
within the Department of Health and Human Services that oversees the
Medicaid program, about available data on Medicaid beneficiaries'
private health coverage. For additional information on CPS and our
methods for and outcomes from analyzing the data, see appendix I.
To determine what problems affect states' ability to ensure that
Medicaid is the payer of last resort, in December 2005 we requested
information from states' Medicaid third-party liability coordinators
regarding the three most significant problems they encountered in
ensuring that Medicaid was the payer of last resort; we received
responses from 39 states.[Footnote 12] These 39 states covered
approximately 82 percent of Medicaid beneficiaries and 72 percent of
Medicaid payments in fiscal year 2003. We also asked states to
estimate, to the extent possible, any financial losses to the state
resulting from each identified factor or problem. We did not assess the
underlying basis for states' reported estimates; however, we did
compare the total losses reported by states with Congressional Budget
Office estimates of potential Medicaid savings from the third-party
liability provisions of the Deficit Reduction Act of 2005 and
determined that the states' estimates were sufficiently reliable for
the purposes of this report. We met with officials from a consulting
firm that assists 27 states with third-party liability issues.[Footnote
13] We reviewed the Deficit Reduction Act of 2005 (hereafter referred
to as the "Deficit Reduction Act" or the "act"), which was enacted in
February 2006 during our review; examined its potential effect; and
discussed the act's requirements with CMS officials and state
representatives. We conducted our work in accordance with generally
accepted government auditing standards from October 2005 through
September 2006.
Results in Brief:
On the basis of self-reported health coverage information from the
Census Bureau's annual CPS covering the 2002 through 2004 time period,
an average of 13 percent of respondents who reported having Medicaid
coverage for the entire year also reported having private health
coverage at some time during the same year. Medicaid beneficiaries in
Alabama, Arizona, and California reported the lowest rates of private
health coverage among Medicaid beneficiaries (about 9 percent), while
Medicaid beneficiaries in Iowa, South Dakota, and Wyoming reported the
highest rates of such coverage (about 22 percent to 23 percent). Most
often, the source of the coverage for Medicaid beneficiaries was an
employer or union: employment-based coverage averaged 11 percent
nationwide, while individual health coverage averaged 2 percent. In
addition, states identify and collect information on beneficiaries'
private health coverage as part of administering their own Medicaid
programs. According to CMS officials, however, inconsistencies in how
state Medicaid agencies collect and report their data preclude using
these state data to measure the extent to which beneficiaries
nationwide have private health coverage or to make comparisons across
states or with CPS data.
In responding to our information request about the top three problems
they faced in ensuring that Medicaid is the payer of last resort, state
officials reported problems that fell into two general categories:
* Problems verifying Medicaid beneficiaries' private health coverage.
Officials in 27 of 39 states reported one or more types of problems
related to their ability to verify coverage information from third
parties or their contractors, such as pharmacy benefit managers.
Specific problems included third parties' or their contractors' not
verifying coverage information when requested to do so, and citing
patient privacy provisions as justification for withholding such
information, and not granting states electronic access to their member
coverage files.
* Problems collecting payments from third parties. Officials in 35 of
the 39 responding states reported problems collecting payments from
third parties or their contractors once the states had established that
those parties were liable for a claim the state had paid. Some state
officials reported that third parties denied claims because they were
not filed within a certain time frame; others reported that these
entities simply refused to acknowledge or respond to claims the states
had submitted for payment. Several state officials also pointed to weak
or problematic federal or state laws.
The Deficit Reduction Act could help address some of the problems
reported by state officials because it adds a Medicaid requirement that
states have legislation in effect so that, as a condition of doing
business in the state, health insurers and certain other entities, such
as pharmacy benefit managers and others that are legally responsible
for payment of a claim, (1) provide states with information on coverage
and other specified information and (2) agree not to deny claims from
the state solely because of the date the claim was submitted or the
form that was used, as long as the state seeks payment within time
periods specified by the Deficit Reduction Act. It is too soon,
however, to assess the extent to which--or when--the act will address
reported problems. Further, we identified two issues that require
resolution in order to aid states in complying with the Deficit
Reduction Act's requirements. First, the time by which states must have
their laws in effect is uncertain because an applicable provision of
the law contains an inconsistency. Specifically, a section of the law
concerning the effective date of certain third-party provisions refers
to another section of the law that does not exist. Second, according to
CMS officials and a private consulting firm, some disagreement exists
in the industry as to the entities that are covered by the law's
provisions requiring that information be provided to states on coverage
and other matters. Regarding both issues, CMS program officials said in
June 2006 that they were considering how to interpret the law and how
to best help states implement the new requirements.
To resolve issues critical to the implementation of the Deficit
Reduction Act's third-party provisions and to assist states in their
efforts to ensure that Medicaid is the payer of last resort, we are
recommending that the Administrator of CMS (1) determine and provide
guidance to states concerning when states must have laws in effect
implementing the Deficit Reduction Act's requirements regarding third
parties and, if necessary, seek appropriate legislation to establish an
effective date and (2) determine which entities are required to provide
states with coverage and other information and provide guidance to
states regarding this determination.
In commenting on a draft of this report, CMS concurred with our
recommendations, stating that the agency plans to shortly issue a
decision on both the issue of the time frames by which states must have
laws in effect implementing the Deficit Reduction Act's requirements
and the issue of the entities covered by the Deficit Reduction Act's
requirement to provide states with coverage and other information.
Background:
Established under title XIX of the Social Security Act[Footnote 14] as
a joint federal-state health financing program, Medicaid is one of the
largest programs in the federal and state budgets. States, in
administering their Medicaid programs, must comply with federal
requirements. States pay qualified health providers for a broad range
of covered services provided to eligible beneficiaries. The federal
government then reimburses states for a share of their expenditures.
The federal share of each state's program expenditures is calculated
according to a formula specified in the Medicaid statute, which allows
the federal share to range from 50 to 83 percent.[Footnote 15]
With Medicaid as payer of last resort, states are responsible for
having plans in place to identify Medicaid beneficiaries' other sources
of health coverage, determine the extent of the liability of such third
parties, avoid payment of third-party claims, and recover reimbursement
from third parties after Medicaid payment if the state can reasonably
expect to recover more than it spends in seeking
reimbursement.[Footnote 16] Individuals eligible for Medicaid assign
their right to third-party payments to the state's Medicaid agency,
which allows the state to claim payments for medical care directly from
third parties. In general, state Medicaid agencies are required
whenever possible to avoid paying for services for which the state
agency has reason to believe another party is legally liable.[Footnote
17] Whenever states are reimbursed by third parties, they must ensure
that the federal government is given its share of the
reimbursement.[Footnote 18]
Third parties that may be liable for payment of services furnished to
Medicaid beneficiaries can include private insurers and health plans of
employers who self-insure.[Footnote 19] Private health coverage can be
delivered through managed care plans--plans in which enrollees, or
their employers, pay a monthly payment in exchange for health care
services through affiliated physicians, hospitals, and other providers.
In addition, private insurers and health plans often contract with
other entities, such as plan administrators or pharmacy benefit
managers, to administer part or all of their health care plans. Plan
administrators process claims and manage the day-to-day operations of
the associated health plan. Pharmacy benefit managers negotiate drug
prices with pharmacies and drug manufacturers on behalf of health plans
and, in addition to other administrative, clinical, and cost-
containment services, process prescription drug claims for the health
plans. When a Medicaid beneficiary has pharmacy coverage administered
through a pharmacy benefit manager, the state generally bills the
pharmacy benefit manager directly for reimbursement instead of billing
the insurer or the employer.
For states to avoid paying costs for which a third party may be liable,
or to recover from a liable third party payments the state may already
have made, states need to verify when Medicaid beneficiaries have other
health coverage, as well as the services that are covered and the
period of eligibility. States obtain information on other health
coverage in two common ways:
* When initially applying for enrollment in a state's Medicaid program,
applicants are asked to report to the state any other sources of health
coverage they may have.[Footnote 20] States then verify the applicant's
coverage with the source of the health coverage, including coverage
dates, type, benefits, and limits. State Medicaid programs often have
staff who, on receiving information suggesting that a Medicaid
applicant has other health coverage, contact the sources of such
coverage by phone, mail, or other means to obtain specific coverage
information.
* States also often independently identify and verify health coverage
of Medicaid beneficiaries by electronically matching the states'
coverage files with those of the other coverage sources. This type of
verification is important because information provided by Medicaid
applicants may be incomplete. Applicants may not report other sources
of health coverage, or they may not know if they have such coverage;
for example, a custodial parent may not realize that his or her child
has health coverage through the noncustodial parent's employment-based
health plan. Additionally, Medicaid beneficiaries who do not have other
coverage when they first enroll in Medicaid may obtain it later. States
may have agreements, called data-matching agreements, through which
insurers, health plans, and other potential third parties periodically
provide states with an electronic copy of their coverage files or with
access to company databases. Third parties that are willing to work
with states to electronically share their coverage files facilitate
appropriate billings and reduce the administrative burden, on states
and on third parties, associated with verifying coverage on a case-by-
case basis.
Once verification of any available private health coverage occurs, the
state can redirect health care providers' claims to a responsible third
party (a process known as cost avoidance), and it can seek
reimbursement from the third party for payments it has already made (a
process known as "pay and chase").[Footnote 21] Identifying and
verifying coverage early is important, because it is administratively
more costly and time-consuming for states to seek reimbursement for
payments that have already been made. If third parties do not readily
pay claims for which the state Medicaid agency is seeking payment, it
is often not cost-effective for states to spend resources pursuing
payment on a claim-by-claim basis, even though substantial total
dollars could be involved. For example, the states might not have the
resources to further pursue payment through legal action. Conversely,
success in verifying coverage, avoiding Medicaid payments for those
beneficiaries with private health coverage, and collecting on
previously paid claims from third parties can result in substantial
Medicaid savings. Of the $5.5 billion that states reported in third-
party-related savings in fiscal year 2004, states reported more than
$4.9 billion in Medicaid payments avoided and more than $524 million in
third-party recoveries.[Footnote 22]
An Estimated 13 Percent of Medicaid Beneficiaries Have Private Health
Coverage:
On the basis of self-reported health coverage information from the
Census Bureau's annual CPS covering the 2002 through 2004 time period,
an average of 13 percent of respondents who reported having Medicaid
coverage for the entire year also reported having private health
coverage at some time during the same year. Individual state estimates
ranged from 9 percent in Alabama, Arizona, and California to 22 percent
in Iowa and South Dakota and 23 percent in Wyoming (see table 1). Most
often, the source of private health coverage was an employer or union.
Nationwide, an estimated 11 percent of Medicaid beneficiaries reported
having employment-based health coverage (ranging from about 7 percent
in Arizona and Alabama to about 17 percent in Colorado, Michigan, New
Hampshire, and Wyoming), whereas about 2 percent reported having
individual health coverage (ranging from about 1 percent in 11 states
to about 8 percent in Iowa).
Table 1: Percentage, by State, of Individuals Who Reported Having
Medicaid Coverage for the Entire Year Who Also Reported Having Private
Health Coverage at Some Time during the Same Year (2002-2004):
State: Alabama;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 7;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Alaska;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Arizona;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 7;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Arkansas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: California;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 8;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Colorado;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 20;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 4.
State: Connecticut;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 4.
State: Delaware;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: District of Columbia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Florida;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Georgia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Hawaii;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Idaho;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Illinois;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Indiana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Iowa;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 22;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 8.
State: Kansas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 5.
State: Kentucky;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Louisiana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 8;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Maine;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Maryland;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Massachusetts;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Michigan;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 19;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Minnesota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Mississippi;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Missouri;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Montana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 8;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Nebraska;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Nevada;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: New Hampshire;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 21;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 4.
State: New Jersey;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: New Mexico;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: New York;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: North Carolina;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: North Dakota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 6.
State: Ohio;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Oklahoma;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Oregon;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 4.
State: Pennsylvania;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Rhode Island;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: South Carolina;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: South Dakota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 22;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 5.
State: Tennessee;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Texas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Utah;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 1.
State: Vermont;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Virginia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Washington;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 5.
State: West Virginia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
State: Wisconsin;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 3.
State: Wyoming;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 23;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 7.
State: Nationwide;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Total[A]: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Employment-based: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Individual: 2.
Source: GAO analysis of CPS data.
Note: Numbers represent average percentages of Medicaid beneficiaries
reporting coverage for calendar years 2002 through 2004, as collected
by the Current Population Surveys of 2003 through 2005.
[A] The sum of employment-based and individual health coverage does not
always equal the total because some respondents indicated that they had
both employment-based and individual health coverage, and other
respondents indicated that they had private health coverage but did not
specify whether it was employment-based or individual health coverage.
[End of table]
States also identify and collect information on private health coverage
as part of administering their own Medicaid programs, but this
information cannot be used to assess Medicaid beneficiaries' private
health coverage on a nationwide basis. State Medicaid agencies capture
from their automated systems information on private health coverage
they have identified for their Medicaid beneficiaries. According to
CMS, however, this information is not reliable for measuring the extent
of beneficiaries' private health coverage nationwide, for comparing
among states, or for comparing states' identified coverage with that
identified by CPS.[Footnote 23] Certain states may, for example,
capture information only for those beneficiaries whose coverage has
been verified, while other states may capture coverage even though the
state has not yet verified the services that are covered or the period
of eligibility.
States Face Problems in Verifying Coverage and in Collecting from Third
Parties:
Problems states face in ensuring that Medicaid is the payer of last
resort fall into two broad categories: problems verifying whether
beneficiaries have private health coverage and problems collecting
payments (or "paying and chasing") when such coverage exists. Third-
party liability provisions in the Deficit Reduction Act could help
address some of these problems, although two issues require resolution
in order to aid states as they implement the act. In particular,
federal guidance is needed to clarify the time by which states must
comply with the relevant provisions and also to clarify the entities
covered by requirements to provide states with information regarding
third-party coverage.
Problems Verifying Whether Medicaid Beneficiaries Have Private Health
Coverage:
Verification of available private health coverage for Medicaid
beneficiaries is key to ensuring that states are able to appropriately
avoid paying claims or to collect from those that are liable.
Nevertheless, state officials often told us, one of the top three
problems they faced in ensuring that Medicaid was the payer of last
resort was related to verifying beneficiaries' other coverage. Some
state officials reported their problem broadly, stating, for example,
that third parties would not cooperate in providing eligibility or
coverage information. Others cited specific problems related to the
verification process, stating, for example, that third parties would
not assist with the state's verification process by sharing coverage
files electronically. Officials from 27 of the 39 responding states
reported one or more different types of problems with verifying the
services that were covered and the period of eligibility, which we
summarized in two categories (see table 2): (1) verifying coverage
information and (2) accessing electronic coverage files. Although most
states' officials were not able to estimate the losses to the Medicaid
program due to these verification problems, officials in 10 states did
provide an estimate.[Footnote 24] The estimated loss for these 10
states totaled $54 million-$60 million (the loss is stated as a range
because some states estimated their losses as a range rather than as a
single dollar estimate).
Table 2: Number of States Reporting Problems Verifying Whether Medicaid
Beneficiaries Have Private Health Coverage, with Estimates of
Associated Annual Losses:
Category: Problems with verification;
Number of states reporting problems (n = 39): 27[B];
Number of states able to estimate annual losses: 10;
Total estimated annual losses[A] (dollars in millions): $54-60.
Category: Problems with verification: Verifying coverage information
(not specific to accessing electronic coverage files);
Number of states reporting problems (n = 39): 23;
Number of states able to estimate annual losses: 8;
Total estimated annual losses[A] (dollars in millions): 47-52.
Category: Problems with verification: Accessing electronic coverage
files;
Number of states reporting problems (n = 39): 5;
Number of states able to estimate annual losses: 2;
Total estimated annual losses[A] (dollars in millions): 7-8.
Source: GAO analysis of information provided by state officials.
[A] Amounts reported as a range because officials in some states could
estimate their losses only as a range.
[B] Numbers do not add to 27 because officials in some states reported
both types of problems.
[End of table]
Problems verifying coverage information. Officials in 23 states
reported problems verifying coverage information; of these, officials
in 8 states were able to estimate their annual losses due to third
parties' failure to provide coverage information, for a total of $47
million-$52 million.[Footnote 25] State officials reported a range of
problems they experienced in verifying coverage information. For
example, officials in 12 states indicated that certain third parties or
their contractors, such as self-insured plans, pharmacy benefit
managers, or plan administrators, ignored the state's requests for
verification information about Medicaid beneficiaries or declined to
verify coverage. Four states reported that third parties cited privacy
provisions in the Health Insurance Portability and Accountability Act
of 1996 as one reason they could not share coverage information with
state Medicaid offices.[Footnote 26] Additionally, an official in 1
state reported that some third parties would not verify coverage for
seasonal workers and that some insurance companies limited the number
of verifications they were willing to provide during a single phone
call.
Problems accessing electronic coverage files. Officials in five states
reported verification problems specifically related to accessing the
electronic coverage files of third parties and their contractors;
officials in two of these states were able to estimate their annual
losses due to lack of access to electronic coverage files, for a total
of $7 million-$8 million. The systematic cross-checking of state and
third-party health coverage data, which access to electronic files
makes possible, improves states' ability to identify beneficiaries with
third-party health coverage. Officials in two states commented, for
example, that data-matching agreements would enhance their discovery of
private health coverage or would greatly improve their billing
capabilities. Officials in five states reported that third parties
would not participate in data-matching agreements or that electronic
coverage files were not made available to the states.
The potential losses to Medicaid because of lack of verification
information, both electronic and other, may be sizable. Officials from
the private consulting firm we contacted estimated that its recoveries
from a major pharmacy benefit manager increased by more than 200
percent after the pharmacy benefit manager shared coverage information
with the consulting firm. Given such an increase from this one-time
sharing of information, the consulting firm estimated that recoveries
from the four largest pharmacy benefit managers could potentially rise
by more than $300 million a year if such information sharing occurred
regularly.
Problems Collecting Payments from Third Parties and Their Contractors:
If a state has not established the existence of third-party coverage at
the time a claim is submitted, it must pay the claim and collect its
payment from the liable party later, after that coverage has been
verified. Officials in 35 of the 39 reporting states listed problems
with such "pay-and-chase" scenarios among their top three problems
faced in ensuring that Medicaid is the last payer. We summarize these
problems in five categories: (1) time limits for filing claims, (2)
restrictions imposed by managed care and health plans, (3) inconsistent
claiming requirements imposed by third parties, (4) lack of response or
cooperation from third parties, and (5) weak or problematic state or
federal legislation. Although officials in most states were unable to
estimate their losses due to problems associated with collecting
payments from third parties, officials in 14 states estimated a total
annual loss of $184 million-$196 million (see table 3). (The loss is
stated as a range because some states estimated their losses as a range
rather than as a single dollar figure.)
Table 3: Number of States Reporting Problems Collecting from Third
Parties and Their Contractors, with Estimates of Associated Annual
Losses:
Category: Problems collecting payments;
Number of states reporting problems (n = 39): 35[B];
Number of states able to estimate annual losses: 14[B];
Total estimated annual losses[A] (dollars in millions): $184-196.
Category: Problems collecting payments: Time limits for filing claims;
Number of states reporting problems (n = 39): 15;
Number of states able to estimate annual losses: 10;
Total estimated annual losses[A] (dollars in millions): 76-77.
Category: Problems collecting payments: Restrictions imposed by managed
care and other health plans;
Number of states reporting problems (n = 39): 17;
Number of states able to estimate annual losses: 10;
Total estimated annual losses[A] (dollars in millions): 74.
Category: Problems collecting payments: Inconsistent claiming
requirements among third parties and limited capacity of states to bill
electronically;
Number of states reporting problems (n = 39): 13;
Number of states able to estimate annual losses: 3;
Total estimated annual losses[A] (dollars in millions): 13.
Category: Problems collecting payments: Lack of response or cooperation
from third parties;
Number of states reporting problems (n = 39): 12;
Number of states able to estimate annual losses: 3;
Total estimated annual losses[A] (dollars in millions): 4-6.
Category: Problems collecting payments: Weak or problematic state or
federal legislation;
Number of states reporting problems (n = 39): 7;
Number of states able to estimate annual losses: 2;
Total estimated annual losses[A] (dollars in millions): 17-26.
Source: GAO analysis of information provided by state officials.
[A] Amounts reported as a range because some states estimated their
losses only as a range.
[B] Numbers do not add because some states experienced several
problems.
[End of table]
Problems with time limits for filing claims. Officials in 15 states
reported problems related to timely filing of claims; officials in 10
states were able to estimate their annual losses in this category, for
a total of $76 million-$77 million. State officials reported that some
third parties and their contractors have established specific time
limits for filing claims. That is, a third party or its contractor
might process a claim only if it is filed within a certain time period
after services are provided--such as within 60 or 90 days from the date
of service. If a state does not submit its claim for services provided
to a Medicaid beneficiary within the specified time, some third parties
deny payment of the claim. According to state officials, time limits--
such as 60 or 90 days from the date of service--pose a particular
problem because of how long it can take to verify Medicaid
beneficiaries' private health coverage. An official in 1 state, for
example, estimated that in 1 year (November 2004 through October 2005),
third-parties rejected more than $32 million in claims from the state
because the state did not submit the claims within the third-parties'
established time frames.
Problems with restrictions imposed by managed care and health plans.
Officials in 17 states reported problems imposed by managed care and
health plan restrictions; officials in 10 of these states were able to
estimate their annual losses in this category, for a total of $74
million. State officials reported a range of issues relating to
restrictions the plans imposed as to when services are covered or to
whom reimbursements for claims can be made. For example, officials in 9
states reported that some third parties or their contractors would not
reimburse the state for services provided to covered Medicaid
beneficiaries if the Medicaid beneficiaries did not follow requirements
established in the third parties' managed care plans, such as obtaining
prior authorization for services.[Footnote 27] One state official
estimated an annual loss to the state's Medicaid program of more than
$11 million per year because of managed care plans' requirements that
the Medicaid beneficiaries also covered under the managed care plan
obtain preauthorization for services; if such authorization was not
obtained by the beneficiary, the managed care plans would not reimburse
the state Medicaid program. Another type of restriction that states
reported related to requirements for whom the health plan would
reimburse. For example, officials in 2 states reported problems with
health plans whose coverage provisions did not allow them to pay state
Medicaid programs directly but instead required that payments be made
to the Medicaid beneficiaries themselves. An official in 1 state
remarked that it was labor intensive and often impossible to recoup
such payments from beneficiaries.
Problems with inconsistent claims requirements among third parties and
limited state capacity to bill electronically. Officials in 13 states
reported problems related to third parties' or their contractors'
inconsistent requirements for claims or problems related to limits in
the states' capacity to bill electronically; officials in 3 states were
able to estimate their annual losses in this category, for a total of
$13 million. Some third parties or their contractors, for example,
required claims to be submitted electronically, while others could not
accept electronic claims. Third parties or their contractors also
rejected claims because they were not in a format acceptable to the
third party or did not contain specific pieces of information. For
example, an official in 1 state told us that third parties may require
information on their claim forms that Medicaid does not require or
collect, such as a unique provider number, and a state can have
difficulty obtaining such information after the fact. The official in
this state estimated a loss of $600,000 in a single year because of
such problems. Administrative problems like these are compounded
because states submit claims to many different third parties, each with
their own formats and requirements.
Problems with lack of response or cooperation from third parties or
their contractors. Officials in 12 states reported problems related to
third parties' lack of response to or cooperation with claims filed for
payment; of these, 3 states were able to estimate their annual losses
in this category, for a total of $4 million-$6 million. Some problems
arose, for example, when third parties' contractors, such as pharmacy
benefit managers, were not specifically authorized by the third parties
to process or pay the claims on the third parties' behalf when the
claims originated from state Medicaid programs. According to CMS, one
problem involves Medicaid beneficiaries who have pharmacy coverage
administered through a pharmacy benefit manager that has not been
specifically authorized by its contracting health plan or insurer to
process Medicaid claims from the state. If the beneficiary provides a
pharmacist with information on his or her Medicaid coverage, rather
than information on the pharmacy benefit manager, the pharmacist may
receive payment from the state Medicaid program, which must then seek
reimbursement for its payment from the pharmacy benefit manager ("pay
and chase"). Often, the pharmacy benefit manager returns these claims
unpaid to the state and suggests that the state bill the third party
directly. This situation creates an administrative problem for the
state, since beneficiaries' health plan cards generally identify only
the pharmacy benefit manager and not the contracting insurer or health
plan. An official in 1 state also commented that third parties created
inappropriate denial reasons, such as the state's failure to submit a
copy of a Medicaid beneficiary's health insurance card with the state's
claim. Officials in 3 states reported that third parties would not
respond to their claims. An official in another state observed that
third parties can ignore claims submitted to them because no penalty or
requirement exists for third parties to reimburse Medicaid.
Weak or problematic state or federal legislation. Officials in seven
states--responding to our information request before the 2006 enactment
of the Deficit Reduction Act--reported that weak or problematic state
or federal legislation hindered their efforts to ensure that Medicaid
was the payer of last resort; officials in two of these states were
able to estimate their annual losses in this category, for a total of
$17 million-$26 million. Officials suggested the need for stronger
state or federal legislation, which would require third parties to pay
Medicaid claims, participate in electronic data matching of coverage
information, or extend the time frames for states to file claims. One
state official, for example, indicated that stronger legislation, with
more comprehensive requirements that third parties doing business in
the state reimburse the state, would be helpful. Two other state
officials indicated that an existing provision in Medicaid legislation,
which requires the states to pay claims under certain circumstances
even when the state is aware of other coverage, was problematic.
Specifically, this requirement--intended to prevent delays in care for
pregnant women and for children--requires states to pay and chase when
claims are for prenatal care and preventive pediatric services and when
services are provided to a minor for whom the state is enforcing a
child-support order against a noncustodial parent. The President's
fiscal year 2007 budget included a legislative proposal to change this
requirement. Under the proposal, states would be allowed to avoid
costs, rather than pay and chase, for claims for prenatal and
preventive pediatric services when a third party is responsible through
a noncustodial parent's obligation to provide coverage, if the states
ensure protection for providers and beneficiaries.[Footnote 28]
Although in most cases--21 of 35 states that reported problems
collecting from third parties or their contractors--state officials we
contacted were unable to estimate the losses to Medicaid due to
problems collecting from third parties, the total losses could be
sizable. The private consulting firm that works with states reported
collecting $60 million for states in 2005 by rebilling third parties
for previously unprocessed claims. According to state officials and
CMS, many states do not have the resources to follow up repeatedly on
claims that have been rejected or otherwise unpaid and so potentially
suffer annual losses in the millions of dollars.
Legislation Enacted in 2006 Includes Provisions Related to Third-Party
Liability Problems Raised by States, but Certain Issues Require
Resolution:
The Deficit Reduction Act addresses some of the problems reported by
state officials. For example, the new law adds to the existing list of
entities that may be considered third parties certain entities that
were previously not specifically listed, including "self-insured
plans"; "managed care organizations"; "pharmacy benefit managers"; and
"other parties that are, by statute, contract, or agreement, legally
responsible for payment of a claim for a health care item or service."
In addition, the law requires states to have in effect laws requiring
certain specified entities, as a condition of doing business in their
state, to:
* provide the state, upon request, with coverage and other data,
including information on the nature of coverage and the periods of time
during which individuals or their spouses or dependents were
covered;[Footnote 29]
* accept the states' right of recovery for services and assignment of a
Medicaid enrollee's right to payment by those entities or
organizations;
* respond to inquiries by the state regarding a claim for payment
submitted within 3 years after the date a service was provided; and:
* agree not to deny a claim submitted by the state solely on the basis
of the date of submission of the claim, the type or format of the claim
form, or failure to provide proper documentation at the time of
service, as long as the claim is submitted by the state within 3 years
of the service date and the state enforces its rights with respect to
the claim within 6 years of submitting it.
Officials from some states and the private consulting firm that works
with states told us that the act's requirements may help alleviate
states' reported problems with verifying coverage information, time
limits for filing claims, and certain third parties' lack of response
or cooperation with claims submitted for payment--three of the problems
most often reported by states responding to our questions. Losses due
to these problems can be substantial: in response to our information
request, 30 states estimated such losses at collectively more than $120
million annually. The private consulting firm reported that, after
discussing with pharmacy benefit managers the new Deficit Reduction Act
provision related to time limits for filing claims, the firm agreed to
loosen its own time frames for filing, resulting in an estimated $2
million dollars in savings for outstanding claims.
Because the Deficit Reduction Act requires states to have legislation
in effect to implement the new provisions, it is too soon to assess the
extent to which the act will address the problems that states reported
to us. Further, we identified two issues that require resolution in
order to aid states in complying with the act's requirements:
* First, the time frame by which states must have their laws in effect
is uncertain because of an apparent inconsistency within the Deficit
Reduction Act concerning the effective date of that provision.
Specifically, the section of the law that determines the date by which
states must have these laws in effect references a section of the law
that does not exist.[Footnote 30] In June 2006, CMS officials said they
had not determined how to interpret the apparently inconsistent
language and whether legislation would be necessary to resolve it.
Until this determination is made, states may be uncertain as to the
date by which they must comply with this requirement of the Deficit
Reduction Act. Some state legislatures, for example, may act upon new
Medicaid requirements such as this one only upon notification of a
specific implementation date.
* Second, there is also some disagreement in the industry as to whether
the statutory provisions regarding the requirement to provide states
with coverage and other information apply to certain entities.
According to CMS and officials from the private consulting firm, some
entities, such as certain pharmacy benefit managers and plan
administrators, have indicated that the requirement that states have
laws in effect to require reporting of coverage and related information
does not apply to them. For example, private insurers and health plans
may hire pharmacy benefit managers and plan administrators to process
the claims--that is, to pay the claims on their behalf--and the
pharmacy benefit managers and plan administrators may not view
themselves as "legally responsible for payment of a claim for a health
care item or service." Without cooperation from these contracted
entities in sharing coverage information and in paying claims, states
may continue to have many of the problems they reported. CMS officials
said that they had met with trade associations representing pharmacy
benefit managers and plan administrators to discuss and obtain input
about these entities' responsibilities under the Deficit Reduction Act.
With regard to both provisions, in June 2006, CMS officials said that
they were determining how best to help states implement the new
requirements. The agency was reviewing how to interpret the law to
address both the effective date for the requirement to have state
legislation in effect and which entities are covered by requirements to
provide states with information on coverage and other matters. The
effectiveness of the Deficit Reduction Act's third-party liability
provisions in addressing the problems that states identified may depend
on the guidance CMS issues and in what manner states carry out the new
law's provisions.
Conclusions:
In an era of fiscal pressure on both federal and state budgets, it is
important to ensure that Medicaid is administered as efficiently and
effectively as possible. States have a key role in Medicaid's
successful administration, including efforts to ensure, as Congress
intended, that Medicaid does not pay for services when other sources of
health care coverage are available. With an estimated 13 percent of
Medicaid beneficiaries having private health coverage available to
them, significant savings can accrue to both the federal government and
the states when states are able to avoid costs and recover payments
from liable third parties. We found, however, that states often
encounter problems in identifying beneficiaries' private health
coverage and in collecting payments from liable third parties. The
Deficit Reduction Act includes provisions related to some of the
states' concerns, and CMS could facilitate states' efforts to implement
the act's requirements by providing guidance to states as to the time
frame under which states must have their laws in effect and the types
of entities to which the law applies.
Recommendations for Executive Action:
To resolve issues that are critical to the implementation of the
Deficit Reduction Act's third-party provisions and to assist states in
their efforts to ensure that Medicaid is the payer of last resort, we
recommend that the Administrator of CMS take the following two actions:
* Determine and provide guidance to states with regard to the time
frames by which states must have in effect laws that implement relevant
third-party requirements of the Deficit Reduction Act.
* Determine and provide guidance to states with regard to the entities
covered by the Deficit Reduction Act's requirements to provide states
with coverage and other information.
Agency Comments:
We provided a draft of this report to CMS for comment and received a
written response from the agency (reproduced in app. II). The agency
acknowledged that our report identified many of the challenges state
Medicaid agencies face in attempting to ensure that Medicaid is the
payer of last resort. CMS concurred with both recommendations and said
that the agency planned to issue a decision with respect to the
effective implementation date of, and the entities covered under, the
Deficit Reduction Act. CMS also provided technical comments, including
a comment that the report should clarify discussions regarding the
provision of both coverage and eligibility data. We clarified our text
to indicate that in this report we refer collectively to the process of
determining the eligibility period and the services that are covered as
"verifying health coverage." We made a corresponding clarification to
our recommendation. Other technical comments were incorporated as
appropriate.
As arranged with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
after its issue date. At that time, we will send copies of this report
to the Secretary of Health and Human Services, the Administrator of the
Centers for Medicare & Medicaid Services, and other interested parties.
We will also make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff members have any questions, please contact me at
(202) 512-7118 or allenk@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Major contributors to this report are acknowledged
in appendix III.
Sincerely,
Signed by:
Kathryn G. Allen:
Director, Health Care Issues:
[End of section]
Appendix I: GAO's Analysis of the Current Population Survey Conducted
by the U.S. Census Bureau:
To assess the extent to which Medicaid beneficiaries have private
health coverage, we analyzed the Annual Social and Economic Supplement
of the Current Population Survey (CPS), conducted by the U.S. Census
Bureau for the Bureau of Labor Statistics. This appendix describes CPS,
our analysis of CPS, and our results.
Description of the Current Population Survey:
CPS is designed to represent a cross section of the nation's civilian
noninstitutionalized population. The sample provides estimates for the
nation as a whole and serves as part of model-based estimates for
individual states and other geographic areas. The supplement is
designed to estimate family characteristics, including health coverage,
during the previous year. In 2005, about 84,700 households were
included in the sample for the Annual Social and Economic Supplement,
with a total response rate of about 83 percent. In 2004 about 84,500
households were included with a total response rate of 84 percent. The
totals for 2003 were approximately 81,000 and 85 percent, respectively.
Each March, CPS gathers information about health coverage that
respondents had at any time during the previous calendar year,
including government health coverage such as Medicaid and private
health coverage such as coverage provided through an employer or union
(employment-based health coverage) and coverage directly purchased by
the beneficiary (individual health coverage).[Footnote 31] CPS also
asks for the number of months that beneficiaries had Medicaid coverage
during that same year. Research has shown that health coverage is
underreported in CPS for a variety of reasons; for example, many people
may be unaware that a health insurance program covers them or their
children if they have not recently used covered services. In addition,
CPS underreports Medicaid coverage compared with enrollment and
participation data from the Centers for Medicare & Medicaid Services.
Description and Results of GAO's Analysis:
We analyzed data from the Annual Social and Economic Supplement to CPS
from 2003 through 2005, which asked about health coverage during the
prior year (2002 through 2004). To prepare official statistics from CPS
on type of health insurance coverage, CPS identifies Medicaid
beneficiaries by analyzing responses from multiple questions about
whether the respondent had Medicaid at any time during the prior year.
One of these questions has a related field allowing respondents to
report the number of months that Medicaid coverage was provided. To
identify individuals who had Medicaid and private health coverage
concurrently in the same year, we focused our analysis on individuals
who responded positively to the one Medicaid question and also reported
having Medicaid coverage in all 12 months of the year. Specifically, we
selected individuals who reported that they were covered by Medicaid
for the entire prior year and determined the percentage of these
Medicaid beneficiaries who reported that they also had employment-based
health coverage or individual health coverage at some point in the
prior year.[Footnote 32]
To assess the reliability of the CPS data, we discussed with officials
from the Census Bureau's Poverty and Health Statistics Branch the use
of this definition of Medicaid beneficiaries, and we reviewed the
Census Bureau's data quality-control procedures and related
documentation. We determined that the data were sufficiently reliable
for the purposes of this report. For additional information on Census
efforts to ensure the reliability of CPS data--including adjustment for
nonresponse, controls on nonsampling error, computing composite
weights, estimation of variance, and derivation of independent
population controls--see U.S. Department of Labor, Bureau of Labor
Statistics; and U.S. Department of Commerce, U.S. Census Bureau,
Current Population Survey: Design and Methodology, Technical Paper 63RV
(Washington, D.C.: March 2002), [Hyperlink,
http://www.bls.census.gov/cps/tp/tp63.htm] (downloaded April 13, 2006).
Updated survey information is available on the Web at [Hyperlink,
http://www.bls.census.gov/cps].
Because CPS is a probability-based sample, estimates derived from it
are subject to sampling error: slightly different estimates can result
from different samples. We expressed our confidence in the precision of
the particular samples' results as 95 percent confidence intervals
(i.e., plus or minus 4 percentage points). This confidence interval is
the interval that would contain the actual population value for 95
percent of the samples that could have been drawn. We used CPS's
general variance methodology in the technical documentation to estimate
this sampling error for our 3-year average, reported as confidence
intervals. All CPS percentage estimates contained in this report have
95 percent confidence intervals within plus or minus 7 percentage
points of the estimate itself.
Table 4: Percentage and Confidence Intervals, by State, of Individuals
Who Reported Having Medicaid Coverage for the Entire Year Who Also
Reported Having Private Health Coverage at Some Time during the Same
Year (2002-2004):
State: Alabama;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 6-12.
State: Alaska;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-24.
State: Arizona;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 6-13.
State: Arkansas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 8-14.
State: California;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 9;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 8-11.
State: Colorado;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 20;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 15-26.
State: Connecticut;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 10-20.
State: Delaware;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-22.
State: District of Columbia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 7-12.
State: Florida;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-14.
State: Georgia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 8-16.
State: Hawaii;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-21.
State: Idaho;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-18.
State: Illinois;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-15.
State: Indiana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-16.
State: Iowa;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 22;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 17-28.
State: Kansas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 11-23.
State: Kentucky;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 8-16.
State: Louisiana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 7-14.
State: Maine;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-19.
State: Maryland;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-19.
State: Massachusetts;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 11-17.
State: Michigan;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 19;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 16-22.
State: Minnesota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 11-21.
State: Mississippi;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-19.
State: Missouri;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-20.
State: Montana;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 10;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 6-14.
State: Nebraska;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-17.
State: Nevada;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 6-17.
State: New Hampshire;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 21;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 15-28.
State: New Jersey;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-19.
State: New Mexico;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 11-18.
State: New York;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 10-14.
State: North Carolina;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-15.
State: North Dakota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-24.
State: Ohio;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 17;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-20.
State: Oklahoma;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-16.
State: Oregon;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 15;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 10-19.
State: Pennsylvania;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-20.
State: Rhode Island;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 15-22.
State: South Carolina;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-20.
State: South Dakota;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 22;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 17-27.
State: Tennessee;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 12;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-15.
State: Texas;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 11;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-14.
State: Utah;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 14;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-19.
State: Vermont;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 15-22.
State: Virginia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 16;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 11-21.
State: Washington;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 18;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 13-22.
State: West Virginia;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 10-17.
State: Wisconsin;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 9-17.
State: Wyoming;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 23;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 17-29.
State: Nationwide;
Estimated proportion of Medicaid beneficiaries with private health
coverage: Percentage: 13;
Estimated proportion of Medicaid beneficiaries with private health
coverage: 95 percent confidence interval: 12-13.
Source: GAO analysis of CPS data.
Note: Numbers represent average percentages of Medicaid beneficiaries
reporting coverage for calendar years 2002 through 2004, as collected
by the Current Population Surveys of 2003 through 2005.
[End of table]
[End of section]
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
AUG 4 2006:
To: Kathryn G. Allen:
Director, Health Care:
Government Accountability Office:
From: Mark B. McClellan, M.D., Ph.D.
Administrator:
Centers for Medicare & Medicaid Services:
Subject: Government Accountability Office (GAO) Draft Report: "Medicaid
Third-Party Liability: Federal Guidance Needed to Help States Address
Continuing Problems" (GAO-06-862):
Thank you for the opportunity to review and comment on the above-
referenced GAO report. We are pleased that the report identifies many
of the challenges State Medicaid agencies face in attempting to assure
that Medicaid is the payer of last resort. We particularly appreciate
the efforts made by GAO to determine the number of Medicaid
beneficiaries with private health insurance coverage. The Centers for
Medicare & Medicaid Services (CMS) continues to be committed to an
aggressive strategy in resolving the remaining issues and removing the
barriers that stand in the way of coordinating benefits among various
payers.
As pointed out by GAO, the Deficit Reduction Act of 2005 (DRA), P.L.
109-171, includes a number of provisions that are designed to help
guide state efforts in this area and address some of the problems
reported by State officials. We are confident that the DRA will provide
important additional tools to assist States in identifying third
parties and to facilitate the processing of Medicaid claims.
GAO Recommendation:
Determine and provide guidance to States with regard to the time frames
by which States must have in effect laws that implement relevant third
party requirements of the DRA.
CMS Response:
We concur. We agree that the technical error included in the DRA needs
to be clarified. CMS will shortly issue a decision with respect to the
effective date issue.
GAO Recommendation:
Determine and provide guidance to States with regard to the entities
covered by the DRA requirement to provide States with coverage
eligibility and other information.
CMS Response:
We concur. CMS is in agreement with the recommendation and will shortly
issue a decision with respect to the entities that are covered by the
DRA requirements.
We have provided a number of technical comments for your consideration.
Thank you again for the opportunity to respond to this report.
Attachment:
[End of section]
Appendix III: Contact and Staff Acknowledgments:
GAO Contact:
Kathryn G. Allen, (202) 512-7118 or allenk@gao.gov:
Acknowledgments:
In addition to the contact mentioned above, Katherine M. Iritani,
Assistant Director; Ellen W. Chu; Kevin Dietz; Kevin Milne; Jill M.
Peterson; and Terry Saiki made key contributions to this report.
FOOTNOTES
[1] See, for example, GAO, High-Risk Series: An Update, GAO-05-207
(Washington D.C.: January 2005).
[2] This report focuses on private health coverage, excluding federal
health programs, such as Medicare or veterans health programs. It
excludes automobile insurance, court judgments and settlements with a
liability insurer, state workers' compensation, and estate recoveries.
In addition to private health insurance purchased by individuals,
employers, or unions, "private health coverage" may include health
coverage provided by employers who self-insure, which we refer to in
this report as employer "health plans." According to the Centers for
Medicare & Medicaid Services' (CMS) regulations, a third party is an
individual, entity, or program that is or may be liable to pay for all
or some of the expenditures for services provided under a state
Medicaid plan. See 42 C.F.R. § 433.136 (2005).
[3] A plan administrator--also referred to as a third-party
administrator--is generally a person or group that, according to a
service contract, processes claims and may also provide one or more
administrative services.
[4] Throughout this report, we refer to the process of determining both
the eligibility period and the services that are covered as "verifying
health coverage."
[5] In certain circumstances (described in footnote 17), states may not
avoid paying claims.
[6] GAO, Medicaid: Legislation Needed to Improve Collections from
Private Insurers, GAO/HRD-91-25 (Washington, D.C.: Nov. 30, 1990);
Medicaid: Ensuring That Noncustodial Parents Provide Health Insurance
Can Save Costs, GAO/HRD-92-80 (Washington, D.C.: June 17, 1992).
[7] For example, some third parties included provisions in their
benefit plans that excluded payments to Medicaid programs under certain
conditions. See GAO/HRD-91-25.
[8] Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, §
13622, 107 Stat. 312, 632-633.
[9] Pub. L. No. 109-171, § 6035, 120 Stat. 4, 78-80 (2006).
[10] We report information collected in CPS for the District of
Columbia but not for U.S. territories.
[11] CPS refers to private health coverage purchased by an individual
(termed "individual health coverage" in this report) as "direct-
purchase" coverage. CPS's information on employment-based health
coverage captures both private health insurance coverage purchased by
employers or unions and private health plan coverage provided by
employers or unions that self-insure.
[12] Specifically, we asked state third-party liability coordinators by
e-mail to specify what, in their view, represented the three most
significant factors or problems that hindered their ability to collect
from private third parties and to include an estimate of losses to the
state from each of these factors or problems. We followed up with
states through phone calls and e-mails to clarify their responses and
to improve our response rate. We did not independently assess, in the
instances identified by state officials, whether the private health
coverage was legally liable for payment for services provided to
Medicaid beneficiaries. The 39 responses included the District of
Columbia, which we include in our discussion of states.
[13] Many state Medicaid agencies hire consulting firms to assist them
with their activities in identifying and collecting from liable third
parties. States contract with private consulting firms to carry out
activities such as matching states' and health insurers' or health
plans' electronic coverage files (data matching) to identify private
health coverage, verifying covered services and eligibility periods,
and billing and collecting from third parties on claims paid by state
Medicaid agencies for which third parties were liable. In performing
these activities, these firms face the same challenges that state
Medicaid programs face in working with third parties. For this reason,
we have used some information from a firm in discussing some of the
problems faced by states. Where we used such information, we discuss it
apart from the responses provided to us by states and identify the
information as coming from that firm.
[14] Codified at 42 U.S.C. §§ 1396 et seq. (2000).
[15] States with lower per capita incomes receive higher federal
matching percentages.
[16] See 42 C.F.R. part 433, subpart D (2005).
[17] Exceptions to this requirement are for prenatal care services,
preventive pediatric services, and services provided to a minor for
whom the state is enforcing a child-support order against a
noncustodial parent. See 42 C.F.R. § 433.139(b)(3) (2005).
[18] See Social Security Act §1903(d)(2)(B).
[19] Insurance companies sell health coverage to businesses and to
individuals and pay a certain proportion of covered individuals' health
care costs. Rather than purchase health coverage through insurance
companies, however, large employers may elect to pay directly for
health benefits for their employees and dependents (referred to as
"self-insured" or "self-funded" health plans). The Employee Retirement
Income Security Act of 1974 (ERISA), Pub. L. No. 93-406, 88 Stat. 829,
established the framework within which employer group health plans must
operate.
[20] States are required to take all reasonable measures to determine
the legal liability of third parties, including collecting health
insurance information at the time of any determination or
redetermination of eligibility for Medicaid. See Social Security Act
§1902(a)(25)(A).
[21] States are required to ensure that their automated claims systems
compare any verified private health coverage with claims paid by the
state over at least the previous year to identify any funds recoverable
from that third party. See State Medicaid Manual, part 03, 3902.3.
[22] This information is based on data states report to CMS. According
to CMS's report, 39 states provided information on third-party payments
avoided, and 47 states provided information on third-party recoveries.
[23] The automated system that states use to capture health coverage
data is known as the Medicaid Management Information System. Health
coverage information gathered by states is maintained in this system.
By determining the number of beneficiaries for whom it has identified
other health coverage in its Medicaid Management Information System, a
state can estimate the proportion of all of its Medicaid beneficiaries
for whom such coverage has been identified. See Centers for Medicare &
Medicaid Services, "Overview: Medicaid Management Information System,"
http://www.cms.hhs.gov/mmis/ (downloaded May 25, 2006).
[24] In addition to these 10 states, 1 state estimated the percentage
of increased annual savings it could accrue if its problems were
resolved but was not able to provide a dollar amount. Another state
estimated losses from all three of its reported top problems in
aggregate and could not estimate its losses due to each problem. We did
not include these 2 states in our total of states estimating annual
losses due to third-party problems.
[25] We report these values as a range because some states could
estimate their losses only as a range.
[26] See Pub. L. No. 104-191, ßß 262ñ264, 110 Stat. 1936, 2033. Rules
implementing the Health Insurance Portability and Accountability Act of
1996 place limits on the use and disclosure of individually
identifiable health information. See 67 Fed. Reg. 53182 (2002).
Exceptions to these rules permit the disclosure of appropriate
information to ensure payment for health care services. See 45 C.F.R. ß
164.506(a) (2005).
[27] Certain managed care features, such as prior authorization for
services, may constitute substantive benefit limitations, and claims
that do not conform with the managed care requirements may not be
reimbursable. We did not independently assess, in the instances
identified by state officials, whether the private health coverage was
legally liable for payment for services provided to Medicaid
beneficiaries.
[28] Specifically, the administration proposed that legislation be
passed to "allow states to avoid costs for prenatal and preventive
pediatric care claims where a third party is responsible through a non-
custodial parent's obligation to provide coverage for a limited time
while assuring protection for providers and beneficiaries." In
providing technical comments on a draft of this report, CMS officials
told us they believed that the purpose of the legislative proposal is
to allow states to avoid costs for all categories of claims for which
states must currently pay and chase.
[29] In particular, the law requires a state to provide assurances to
the Secretary of Health and Human Services that the state has laws in
effect requiring health insurers--including self-insured plans; group
health plans; service benefit plans; managed care organizations;
pharmacy benefit managers; or other parties that are, by statute,
contract, or agreement, legally responsible for payment of a claim for
a health care item or service--as a condition of doing business in the
state, to provide, with respect to persons who are eligible for or who
are provided Medicaid services, information to determine during what
period the individual or their spouses or dependents may be (or have
been) covered and the nature of the coverage that is or was provided by
the health insurer. See Pub. L. No. 109-171, § 6035(b), 120 Stat. 4, 79-
80 (to be codified at 42 U.S.C. § 1396a(a)(25)(I)).
[30] Section 6035(c) of the Deficit Reduction Act of 2005 establishes
the effective dates of the third-party provisions (found in section
6035(b)) but appears to contain an error. Section 6035(c) provides that
"[e]xcept as provided in section 6035(e), the amendments made by this
section take effect on January 1, 2006." The statute, however, does not
contain a section 6035(e). The conference report on the legislation
suggests that the reference to section 6035(e) in section 6035(c)
should be, instead, section 6034(e). See H.R. Conf. Rep. No. 109-362 at
78-79, 308-310. Section 6034(e), in turn, provides in effect a delayed
effective date in those instances in which the Department of Health and
Human Services determines a state is required to enact legislation in
order to comply with the requirements of section 6035(b). Courts have
held that a statute should be construed literally, except in those
instances in which literal application of a statute will produce a
result demonstrably at odds with the intentions of its drafters. See,
for example, Appalachian Power Co. v. EPA, 249 F.3d 1032 (D.C. Cir.
2001);
Consolidated Rail Corp. v. U.S., 896 F.2d 574 (D.C. Cir. 1990). In such
instances, the legislative history should be given significant
consideration in construing the statute.
[31] CPS refers to health coverage purchased by an individual (called
"individual health coverage" in this report) as "direct-purchase"
coverage. See http://www.census.gov/hhes/www/hlthins/hlthinsvar.html
(downloaded June 8, 2006) for information on the definitions of private
health coverage.
[32] Our analysis--focusing on individuals who reported having Medicaid
coverage the entire prior year--comprised 71 percent of individuals in
the CPS who reported that they had Medicaid coverage at any time during
the prior year.
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