By Howard
Green
The federal government must quickly move away from the “Pay
and Chase” model where Medicaid routinely makes improper claims payments (those
that were the liability of primary insurance plans), then retrospectively
identifies the claims with third party liability. To make this change, the
government must review and remedy the current, antiquated processes that are in
place.
Medicaid is the payer of last resort; in other words, by
law, all other sources of insurance coverage must pay for claims before
Medicaid will pay for the care of an enrollee. This federal requirement is
called third party liability (TPL). This means claims payments are the
obligation of a third party other than the enrollee or Medicaid. To employ the
Medicaid third party liability requirements, federal regulations mandate that
states have processes in place to identify other health insurance (OHI) and
process claims accordingly.
As much as 13 percent of Medicaid enrollees across thenation hold additional insurance other than Medicaid. Types of TPL include
employee insurance, Workers’ Compensation, Medicare, COBRA health insurance
from former employment, casualty insurance, dental insurance, eye insurance and
insurance to cover pharmaceutical costs. Given the large numbers of Medicaid
enrollees with “other health insurance,” the timely identification of TPL and
mitigating improper claims payments equates to massive savings for the program.
In a recent GAO report, Medicaid accounted for 25% of
government-wide improper payments amounting to $36 billion. The GAO noted that
while states have improved TPL efforts in recent years, the increasing
proportion of Medicaid enrollees with private health insurance creates
additional opportunities to avoid and recover Medicaid funds (GAO 2015).
TWO WAYS TO AVOID COSTS ASSOCIATED WITH IMPROPER CLAIMS
PAYMENTS
Pay and chase. If primary insurance is discovered after a
claim had been paid improperly, the Medicaid plan must pay the claim and then
attempt to recover the money from the primary insurer. This has been the
primary model for most TPL efforts; unfortunately, this approach is burdened
with hefty administrative costs. When “Pay and Chase” is used to recover
improper claims payments, an average of only 17% of the funds ever gets
recovered. This is precisely why Medicaid programs must hasten their move away
from the “Pay and Chase” model.
Cost avoidance. If the Medicaid plan is aware that an
enrollee has primary insurance coverage when the claim is filed, the plan can
reject the claim and instruct the provider to submit it to the potential
primary payer. The GAO has noted that this type of cost avoidance accounts for
most of the savings to Medicaid associated with TPL (GAO 2015).
The Centers for Medicare & Medicaid Services’ stated
that methods for identifying and preventing improper payments “not reassuring.”
House Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-IL)
rebuked CMS for utilizing “pay and chase” methods of investigating improper
payments.
“Despite the fact that Congress has given the agency
expanded authority to stop payments before they are made, it continues to rely
on pay-and-chase, or making the payment and only checking after the fact to see
if it was proper,” Roskam said in his hearing remarks.
In order to address these problems, CMS issued guidance that
requires states to uphold the cost avoidance standard for pharmacy claims and
eliminate waivers that permit “pay and chase” methodologies.
Based on this guidance, states have responded by developing
coordination of benefits (COB) programs that rely on self-reported recipient
eligibility data and/or on stagnant data collected by TPL vendors for pay and
chase purposes. This data is incomplete, latent and not sufficient for true
cost avoidance. In order to successfully meet CMS’ cost avoidance guidelines,
an effective real time, point of sale solution would be required to cost avoid
claims and mitigate the need for “Pay and Chase.”
