#third party liability

The Social Security Act, signed into law by President Franklin Roosevelt in 1934, specifies in the statute § 1902( a)( 25) of the law "... that the State or local agency administering such plan will take all reasonable measures to ascertain the legal liability of third parties ... to pay for care and services" delivered to Medicaid beneficiaries. Essentially, it implies that Medicaid becomes the payer of last resort (PLR), a term also known as third party liability (TPL), or the coordination of benefits (COB). In other words, Medicaid pays last, and if a member holds some other insurance coverage, such as insurance from his or her employer, that insurer pays first and then Medicaid pays the remaining costs.

As much as ten percent of Medicaid members around the nation possess additional insurance other than Medicaid, which is considered TPL. Types of TPL include employee insurance, Workers' Compensation, Medicare, COBRA insurance from former employment, casualty insurance, dental insurance, eye insurance and insurance to cover pharmaceutical costs.

The Deficit Reduction Act (DRA) passed by Congress in 2005 stipulates in Section 6035 that all states are required to pass laws that force health insurance companies to give health insurance premium information involving individuals who are eligible for Medicaid assistance to the state. Specifics of the DRA include:

Health insurance providers must hand enrollment data over to Medicaid, or its agent, so customer benefits can be coordinated.

This information is to be used to determine additional health insurance coverage, so that improper payments are not made and payments made in error are recovered.

Payments are required to be made as long as the claim is submitted within three years after the medical service was provided.

Claims can not be rejected as long as the state started action on the claim within six years after the state submitted the claim.

Specifications must be defined that health insurance consists of other entities that are by statute, agreement or contract, legally responsible for paying a claim of a healthcare service; pharmacy benefit managers (PBMs); managed care organizations (MCOs); group health plans; and self-insured plans.

IDENTIFYING PRIMARY HEALTH  INSURANCE COVERAGE OF MEDICAID RECIPIENTS

Determining primary health insurance coverage of Medicaid members can be achieved by a state through one of three various methods and still allow the state to comply with TPL guidelines, under federal law. The problem is that if only one methodology is implemented by the state, savings and recovery are not at their greatest possible amount. The highest level of savings consists of processing at all three of the following points in the process by the state. Here are those processes:

Individuals registering in the program are asked about other insurance coverage.

The issue is that some applicants assume they will be ineligible from Medicaid, so this information is withheld. And, since adding Medicaid coverage might also imply an employment change in which employer insurance coverage is lost, this disclosure might be immaterial soon after the applicant's enrollment.

The state checks for TPL coverage in order to avoid extra cost.

Medicaid eligibility names are cross-referenced with names enrolled in state and national health insurance companies to detect primary insurers prior to the submission of Medicaid claims. But, this practice becomes impossible unless state policies call for the timely delivery of insurance data when a state also requires the prompt payment of insurance claims. Plus, several medical services, like those dealing with a pregnancy, must be paid at the time that they are claimed, according to federal law. That means that pregnancy claims have to be paid immediately before recovery can be made from responsible insurers.

Improper payments are recovered.

The third part of a comprehensive TPL plan involves Medicaid's payment, which occurs one of two ways. Medicaid can offset the provider during the next payment issued for the amount that was overpaid. This is called "provider disallowances." Or, Medicaid receives the overpayment from the correct insurance carrier. This is called commercial insurance direct billings. Strong state laws are required for this third step in a TPL plan to work since, without it, the state can receive denials from insurance companies. The bottom line is that when payment errors are prevented, time is not wasted in pay and chase activities.

WHAT AN EFFICIENT THIRD PARTY LIABILITY PLAN NEEDS TO INCLUDE

So, in order to gain an efficient TPL plan, quick and effective discovery of additional coverage is needed at Medicaid enrollment. Also, cost avoidance discovery must take on immediacy when claims are made and past mistakes need to be fixed quickly. What works best is when the federal guidelines and state laws mesh to make up a truly thorough DRA policy that realizes additional health insurance coverage with quick recovery of each claim.

ProTPL offers a solution that provides this critical information in near real-time, at the point of sale.

Since state Medicaid programs are responsible for the healthcare of a number of populations, skyrocketing pharmaceutical drug costs have become a major budgetary concern. Presently, health care spending is dominating a number of their budgets and on a per capita basis, inflation-adjusted retail prescription drug spending has increased from $90 in 1960 to $1,025 in 2017.

Due to the pressure from these increasing costs, states are looking to a variety of approaches to curb costs with the use of legislation and revised purchasing models. While the impact of politics and policy are unclear, both Medicaid enrollment and drug costs continue to rise. For that reason, it will be important for state Medicaid programs to explore every opportunity to improve efficiency.

CALIFORNIA LOOKS TO SINGLE PURCHASER MODEL

In California, Medi-Cal alone consumes 15% of the state's general funds, and over the last several years, the percentage of the population on Medi-Cal has reached 29%. With almost one-third of the state's population enrolled in the program, California's Governor, Gavin Newsom, signed an executive order in January to combine the state's purchasing power in order to negotiate lower drug costs.

The order is part of the governor's "California For All" agenda and is planned for implementation on January 1, 2021. Having said that, in order for the change to go into effect, it will need approval from CMS and it is uncertain as to how they will respond to the ambitious proposal.

OHIO: PASS-THROUGH PRICING

In 2018, Ohio announced that its managed care plans could no longer contract with PBMs that employ "spread pricing". The state's Medicaid department objects to the payment model since it lacks transparency and also because PBMs can turn a profit from it by acquiring the medication from a dispenser at a lower rate than what they charge plan providers.

Starting in January, The Ohio Department of Medicaid required that MCOs use "pass-through" payment models to promote transparency and reduce costs. Under the new payment model, Medicaid plans are charged the same amount for prescriptions that a PBM purchases them for. PBMs are then paid an administrative fee for each prescription filled.

WEST VIRGINIA: FEE-FOR-SERVICE

In West Virginia, employee health plans were paying 1% more for pharmacy claims than the PBMs paid the dispensing pharmacy. Lawmakers determined that the 1% cost the state $10 million annually and decided to eliminate the use of PBM's entirely.

Since then, West Virginia has returned to a fee-for-service model that utilizes the help of West Virginia University to identify which medications are offered. The Bureau of Medical Service's Office of Pharmacy Services (OPS) then purchases each prescription.

SAVINGS FROM IMPROPER PAYMENTS

While the state's administrative initiatives could ease some pressure, they also need to recognize that there is a significant amount of opportunity for cost savings in relation to improper payments.

Improper claims payments in the Medicaid program have turned into a $37 billion dollar problem and a common misconception surrounding these payments is that they are solely a consequence of fraud and abuse. While fraud and abuse do contribute to payments made in error, they only account for 43% of improper payments. Most of these payments actually stem from Third Party Liability (TPL) identification issues.

Improper payments occur in government-funded health care systems for three reasons:

The Coordination of Benefits (COB) and determining TPL is complicated. It requires timely data and the management of several data sources.

The Medicaid population has a high rate of churn and is in near-constant flux.

Eligibility data is not coordinated among federal and state systems and is often inaccurate.

Up until now, there has been no dependable way to identify unreported primary health coverage. For the main purpose of supporting the TPL needs of Medicaid programs, Syrtis Solutions provides a proactive cost avoidance solution to improper payments. By leveraging e-prescribing, the company is able to access active Rx coverage while identifying the corresponding medical coverage as well. This means that Medicaid plans can prospectively cost avoid pharmacy and medical claims accurately and timely. Additionally, their solution can target beneficiaries that are actually generating claims rather than trying to keep data on each plan member.

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