TPL HISTORY
Over the last 56 years, Medicaid has helped provide integral health services for the most vulnerable populations in the United States. All Medicaid plans have an agreement with the state and Federal government, activities. For Medicaid to stay fiscally stable, state plans rely on its program administrators and contractors to retain financial responsibility. That being said, third party liability (TPL) is paramount in saving Medicaid plans money.
Third Party Liability
Medicaid beneficiaries could in fact, have one or more sources of coverage at the time of utilization. Third Party Liability refers to the legal obligation of third parties to be financially responsible for part or all services provided under the scope of a state Medicaid plan. These third parties such as insurers, entities, individuals, or programs, by law must pay claims before Medicaid. Medicaid being the payer of last resort and standing as a healthcare safety-net. States themselves have a legal obligation to take any possible measure to identify the liability of third parties to be financially responsible for care and services that are provided by state Medicaid plans. TPL has historically been hard for state Medicaid plans to manage, the main reason being the technology needed to accurately identify TPL was not yet available for the first 40 years Medicaid was operational.
Improper payments
Improper payments have plagued Medicaid in wasteful spending for years. In 2020 alone, Medicaid improper payments amounted to a staggering $86.49 billion in wasteful spending. This number took a dramatic increase from $57.4 billion in 2019. Improper claim payments have landed the program on the Government Accountability Office’s High-Risk List since 2003. The Office of Management and Budget (OMB) has also identified Medicaid and CHIP as programs at risk of high levels of improper payments.
LEGISLATIVE EFFORTS TO COMBAT IMPROPER PAYMENTS
The Federal Government has taken a stark initiative in combating improper claim payments by improving TPL processes. Laws have been passed, regulations added, Government Accountability Office (GAO) and Office of the Inspector General (OIG) reports have been written and given to Congress. Here is a timeline of the most notable legislative efforts.
Employee Retirement Income Security Act
Congress passed the Employee Retirement Income Security Act of 1974, which is now commonly known as ERISA. This law was aimed at self-insured companies, ensuring that they abided by the same health insurance requirements as other large group plans. Subsequently placing self-insured plans to the same Medicaid TPL stipulations as other large group plans as well.
Improper Payments Information Act
The Improper Payments Information Act (IPIA) passed in 2002, required agencies to actively identify programs or activities that are subject to high levels of improper payments. From this law, agencies must make an annual report to congress on the number of overpayments or underpayments and measures taken to resolve such issues. In compliance with this new Act, the Payment Error Rate Measurement (PERM) was developed. PERM reviews Medicaid and CHIP data to measure improper payments and estimate program-level error rates.
Deficit Reduction Act
The Deficit Reduction Act (DRA) added more entities to the list of those considered third parties. By law, all entities defined as third parties are required to comply with Medicaid TPL processes, which includes supplying beneficiary eligibility information to states (much like ERISA dictates for self-insured plans). The DRA also added requirements to enhance cooperation that a state will abide by Federal rules and may claim Federal matching funds for its program in data sharing between third parties and states. Part of which was the Medicaid Integrity Program, now allowing contractors to review Medicaid provider activities, audit claims, identify overpayments, and educate providers and others on Medicaid integrity issues.
GAO Report
The GAO concluded that further federal guidance was necessary to curb improper Medicaid payments. This report found that about 13% of Medicaid beneficiaries had some other health coverage during any given year. Based on this statistic, more than 1 in 10 Medicaid beneficiaries may be having claims covered by Medicaid that in fact should be paid by a third party. This report also found that there were technical discrepancies requiring more detailed federal regulation.
Qualifying Individual Program Supplemental Funding Act
The Qualifying Individual (QI) Program Supplemental Funding Act of 2008 changed state participation requirements of the Public Assistance Reporting Information System (PARIS). It required states to link their eligibility systems through PARIS, providing data for matching purposes across participating entities. CMS found that beneficiaries crossing state lines were one source of improper payments because a mechanism did not exist for states to share information and “match” beneficiary information.
Executive Order 13520
Executive Order 1352 was an effort to reduce Medicaid improper payments. It aimed to intensify efforts to eliminate payment errors, waste, fraud, and abuse while still ensuring that Medicaid and other federal programs would still continue to serve their beneficiaries. Two of these intensified efforts included identifying federal programs with the highest dollar amount of improper payments and establishing reduction and recovery target rates.
Improper Payments Elimination and Recovery Act
Congress passed the Improper Payments Elimination and Recovery Act of 2010 to increase data sharing, coordination between state agencies and third parties, and increase reporting requirements. A few notable measures taken include: • Amendment of the 2002 Improper Payments Information Act (IPIA) to require the leader of each federal agency (in the case of Medicaid, the Secretary of HHS) to review and identify susceptibilities in their programs that could lead to improper payments • Revisions of the requirements related to improper payment estimations • Requirement of a statement from agencies as to whether it has “sufficient resources with respect to internal controls, human capital, and information systems and other infrastructure to pre-vent improper payment”
HHS-OIG Report
The 2013 HHS OIG report found that more federal guidance was needed in combating improper payments. It recommended to Congress that the federal government and states cooperate more closely in order to “strengthen enforcement mechanisms designed to deal with uncooperative third parties.”
GAO Report
The GAO report identified about $13.6 billion in combined federal-state cost savings from private health insurers in 2011, compared to about $3.7 billion in 2001. A figure that has skyrocketed 268%.
Fraud Reduction and Data Analytics Act
The Fraud Reduction and Data Analytics Act required the Office of Management and Budget (OMB) to develop new guidelines for federal agencies in efforts to improve TPL management. Under the act, agencies needed to “establish financial and administrative controls to identify and assess fraud risks,” and required agencies to submit annual reports to Congress regarding their progress on these efforts.
Federal Improper Payments Coordination Act
Congress passed the Federal Improper Payments Coordination Act which authorized the judicial branch, legislative branch, and state government agencies managing federal programs to utilize the U.S. Treasury Department’s Do Not Pay (DNP) Program. According to the Treasury, DNP is a “no-cost robust analytics tool which helps federal agencies detect and prevent improper payments made to vendors, grantees, loan recipients, and beneficiaries.” Congress addressed administrative procedures, reporting requirements, and data-sharing, all designed to improve cost-avoidance and address TPL.
Medicare and CHIP Reauthorization Act
Medicare and CHIP Reauthorization Act of 2015 (MACRA) includes several sections pertinent to Medicaid programs, including a section affecting TPL issues. It instructed the Secretary of HHS to look at “incentives for states to work with the Secretary under the Medicare-Medicaid Data Match Program.” Another push from Congress seeking to increase data sharing.
GAO Testimony to Congress
Again in 2015, the GAO recommended more federal action to improve TPL efforts. The estimate that 13% of Medicaid beneficiaries had other coverage remained unchanged since 2006. Notably, this statistic varies across age groups, with only 8.4% of children with a third-party payer and potentially up to 34.5% of the elderly population. However, the issue remains of how to increase cooperation from non-governmental payers. The state of Minnesota reported impressive gains in TPL identification via the GAO report. It had saved about $50 million over five years by contracting with a vendor for electronic data matching.
GAO Report
The 2017 GAO report, included alarming evidence that the Medicaid TPL problem was still not under control. The GAO stated that Medicaid was responsible for one-quarter of all government-wide improper payments, totaling to nearly $36.7 billion in wasteful spending.
Payment Integrity Information Act
Congress passed the Payment Integrity Information Act in order to reorganize and revise several existing improper payments statutes, which establish requirements for federal agencies to cut down on improper payments made by the federal government. This act allowed The Office of Management and Budget (OMB) to establish one or more pilot programs to test potential accountability mechanisms for compliance with requirements regarding improper payments and the elimination of improper payments.