MEDICAID THIRD PARTY LIABILITY REVIEW FROM THE GAO

Identifying third party liability continues to be a challenge within the coordination of benefits for Medicaid. By law, plans are payers of last resort so whenever beneficiaries have other active coverage (OHI), those third parties should pay first. Presently, plans are required to incorporate new payment procedures to aid in ensuring that they do not pay more than they should. Despite the requirement, CMS is unsure as to whether or not plans have implemented the new procedures and the GAO is advising that the agency determines compliance.

The new payment procedures were enacted as part of The Bipartisan Budget Act of 2018. Before the legislation, Medicaid plans would regularly pay providers for services and then look for reimbursement from any liable third parties. This retrospective approach is known as Pay and Chase. Additionally, the law included a provision for the GAO to evaluate the potential impact of the legislation.

In August, the GAO released their report which included their discoveries and recommendations. They found that nine of the states reviewed are in various stages of implementing the law's third party liability changes. These changes affect whether providers must seek payment from a liable third party before the Medicaid plan pays for services. The new procedures apply to prenatal care services, pediatric preventive services, and services for children subject to child support enforcement. The report went on to point out:

"Officials from four of the nine selected states reported having fully implemented the changes for prenatal care services, which were required to be implemented starting in February 2018. Officials from the remaining five states were discussing the changes internally, researching how to implement the changes in their Medicaid payment systems, or waiting for additional guidance from the Centers for Medicare & Medicaid Services (CMS), the federal agency responsible for overseeing states' Medicaid programs."

"None of the nine states had implemented the changes to pediatric preventive services and services for CSE beneficiaries, which must be implemented starting in October 2019. Officials from six states told GAO that they were in the early stages of exploring how they would make the changes, while the remaining three states had not developed such plans."

The GAO also found issues with the guidance that CMS issued to states for implementation of the third party liability changes. CMS's guidance incorrectly informs plans that providers are not required to seek payments from OHI before plans pay for some prenatal services.

The report also reveals that CMS is not adhering to its oversight responsibilities. It specifies that the agency has not effectively determined whether plans are complying with the updated third party liability requirements. CMS expects plans to comply, yet it does not verify that the changes have been implemented unless informed of non-compliance.

The GAO also discussed the impact of the changes with Medicaid specialists and stakeholders. According to the stakeholders, the new requirements could possibly result in a reduction in beneficiary access to care because providers would be less willing to see Medicaid patients. The two primary reasons are:

1. "The changes may increase administrative requirements for providers by requiring them to identify sources of coverage, obtain insurance information, and submit claims to third-party insurers before submitting them to Medicaid."
2. "The changes may result in providers waiting longer to receive Medicaid payment for certain services to the extent that states require providers to seek third-party payments before paying the providers' claims."

Lastly, the GAO report featured two recommendations to CMS. One of which was to ensure that the agency's guidance on third party liability requirements reflects current law and the other was to figure out the extent to which plans are complying with third party liability requirements.

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CONCERNS RELATING TO CA's PHARMACY CARVE OUT

California's Governor, Gavin Newsom, signed an order at the beginning of 2019 to transition all pharmacy services for Medi-Cal from managed care to a FFS model. The consolidated purchasing power would make use of the state's population size to negotiate drug prices with pharmaceutical manufacturing companies. Private payers and insurance providers would also be allowed to participate in the public health system and negotiate prices.

The state's plan to take control of the pharmacy benefits for all of Medi-Cal's recipients has been controversial. There are concerns over its likely impact on MCOs, PBMs, pharmacies and the coordination of care. Currently, California's pharmacy benefit for Medicaid managed care is administered by ten separate PBMs. They are responsible for 90 percent of the state's Medicaid beneficiaries.

L.A. Care CEO, John Baackes, believes that the carve out will make coordinating care more challenging. He stated, "I think one of the advantages of a managed Medi-Cal plan like ours is that for people who are in very difficult circumstances health-wise, we do provide an element of care management that's important and if there's an element of the benefit that we don't control, then it's awkward."

In addition, critics are concerned about the impact that the pharmacy benefit carve out could have on pharmacies. While purchasing in bulk directly from manufacturers could drive down costs, it's unclear as to how drugs will be dispensed and how local pharmacies will maintain a profit.

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MEDICAID'S IMPROPER PAYMENT RATE FOR FY 2018

DHHS has published its annual Agency Financial Report for FY 2018. The report provides an overview of improper payments in the Medicaid program, root causes for the payments, and corrective actions. In line with the agencies goal of reforming, strengthening, and modernizing the nation's healthcare system, HHS cites improved processes and technology solutions to strengthen the integrity of Medicaid and lower the program's improper payment rate.

IMPROPER PAYMENTS REDUCED 

Each year DHHS has set targeted improper payment rates. Despite not achieving their goal in the previous two years, the review does indicate a reduction. The improper payment rate in FY 2017 was 10.10 percent and in FY 2018 it was lowered to 9.79 percent. HHS says that the reduced rate is a result of the department's implemented strengthened reduction and recovery efforts.

MEDICAID'S CALCULATIONS AND FINDINGS

The report estimates that Medicaid improper payments made by recipients of federal funding amounted to $36.25 billion in 2018. The root cause categories for payments made in error included the inability to authenticate eligibility and access data ($11.6 billion), administrative or process errors ($16.6 billion), and insufficient documentation ($7.6 billion).

• National Medicaid gross improper payment estimate = 9.79 percent ($36.25 billion)
• National Medicaid net improper payment estimate = 9.63 percent ($35.67 billion)
• Medicaid FFS improper payment rate = 14.31 percent
• Medicaid managed care improper payment rate = 0.22 percent

ELIGIBILITY DISCOVERIES AND CORRECTIVE ACTIONS

To prevent future improper payments and improve eligibility verification processes, states found vulnerabilities in their systems and procedures with Eligibility Review Pilots. After evaluating Medicaid plans, the pilots identified eligibility errors stemming from caseworker and system vulnerabilities. The most notable discoveries were that states did not properly establish income of beneficiaries and there was insufficient documentation to make eligibility determinations. Much of the documentation needed was missing.

The corrective actions to help resolve these program weaknesses concentrate on training, system solutions, and improved processes for managing documentation. Specifically, the efforts include:

• Conducting provider training sessions and meetings with provider associations
• Issuing provider notices, bulletins, newsletters, alerts, and surveys
• Implementing improvements and clarifications to written state policies highlighting documentation requirements
• Performing additional provider audits to determine areas of vulnerability and target solutions

PROVIDER DISCOVERIES AND CORRECTIVE ACTIONS

The department's financial report shows that errors as a result of non-compliance involving provider screening, enrollment, and national provider identifier (NPI) requirements have been a major contributor to Medicaid's improper payments. The majority appeared either in instances where the information required from a claim was absent or states did not enroll providers with the appropriate process.

However, state compliance has improved and the program's FFS improper payment rate lowered 2.06 percent last year. The report also found that improper payments cited on claims of revalidated providers who were not properly screened at revalidation was a new major contributor to the rate. HHS will measure all states for provider revalidation compliance in FY 2020.

In order to reduce these process or system errors, state corrective actions consist of:

• Implementing new claims processing edits
• Switching to a more advanced claims processing system
• Continuing to implement provider enrollment process improvements to make it easier for ordering and referring providers to enroll in the program

HHS CITES THE NEED FOR MEDICAID IT SOLUTIONS

In order to reduce Medicaid's improper payments, the report recognizes the value of implementing IT solutions at the state level. States will need to update and improve their program's systems in order to be more efficient and strengthen integrity. HHS has authorized federal funding in nine states to implement analytics technologies that will be integrated into the state Medicaid Enterprise Systems. The state systems workgroup will also routinely meet to review program vulnerabilities and how they affect measuring improper payments.

HHS has also established a plan to update the data systems for Medicaid to alleviate state burden and improve the quality of data. The agency's hope is that by making use of technology solutions, Medicaid will have a more comprehensive data structure and improved oversight.

One effort, specifically, is the development of the Transformed Medicaid Statistical Information System (T-MSIS). T-MSIS will obtain high-quality data and minimize data requests from states. The system will aid in the submission of timely claims data, expand the MSIS dataset, and enable HHS to review the quality of submissions in real-time. Since August 2018, 48 states, Washington D.C., and Puerto Rico have started submitting T-MSIS data.


While DHHS is working to reform, strengthen, and modernize the nation's healthcare system, their recent report identified vulnerabilities that compromise the Medicaid program's integrity. Improper payments are costing billions of dollars and continue to occur due to obsolete systems, processes, and low-quality data. To achieve reduced improper payment rates in the future, the Medicaid program will need to implement innovative technology solutions.

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CA RFP FOR FFS RX BENEFIT MANAGEMENT

In January, California's newly appointed Governor  Governor Gavin Newsom authorized an executive order to significantly reform health care in the state. Executive Order N-01-19 introduced a number of actions and budget proposals to decrease the cost of prescription drugs and health care. One proposal, specifically, shifts all pharmacy services for Medi-Cal managed care to a fee-for-service (FFS) model.

Pharmaceutical drugs are one of the key drivers of growing health care costs. Last year the state's individual market experienced a 10% increase in health care costs and reports suggested the drug manufacturers planned to increase pricing in 2019.

FFS RX BENEFIT

At the moment, Medi-Cal acquires drugs with the aid of public and private purchasers that negotiate with manufactures independently. Under the FFS model, California would become the largest single payer of pharmaceutical drugs and the state would have increased bargaining power to negotiate prices with manufacturers.

Governor Newsom stated, "We will use our market power and our moral power to demand fairer prices for prescription drugs. And we will continue to move closer to ensuring health care for every Californian."

RFP # 19-96125

In July, DHCS sent out a request for proposals for managing the FFS pharmacy benefit. RFP # 19-96125 is requesting proposals for the takeover, operation, and ensuing turnover of administration of the FFS pharmacy services. Entities including commercial businesses, nonprofit organizations, state or public universities that fulfill the qualification criteria are eligible for submission.

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COST AVOIDANCE TECHNOLOGY FOR MEDICAID

Aside from climbing health care costs and increased spending from the program's expansion, Medicaid is losing billions of dollars a year from improper payments. Protecting the integrity of the Medicaid program has become a top priority for the Centers for Medicare and Medicaid Services (CMS). CMS and individual states are looking to technology for cost avoidance solutions to protect the program from fraud, waste, and abuse.

T-MSIS  

Earlier in the year, CMS and the US Comptroller General met with the Senate Homeland Security and Governmental Affairs Committee to go over the agencies initiatives to curb fraud, waste, and abuse. Administrator Verma testified and presented a variety of solutions geared toward audits, but in addition, she emphasized the importance of data optimization.

According to CMS, enhancing data will "drive toward better health outcomes and improve program integrity, performance, and financial management in Medicaid and CHIP."

Verma went on to present the Transformed Medicaid Statistical Information System (T-MSIS). The system partners with states to implement advanced analytics and technologies in the collection of health services data. T-MSIS monitors submitted key information such as beneficiary eligibility, beneficiary and provider enrollment, service utilization, claims and managed care data, and expenditure data. This data will make it possible for states to operate more efficiently and reduce costs.

At the moment, states access federal databases for data matching and the identification of improper payments. However, the data is not current, available, complete, or accurate. While T-MSIS is still being developed and is years away from completion, Medicaid plans will continue to lose billions of dollars.

MAIS

Each state is required to pursue the recovery of erroneous payments but they lack the technology and data to do so. Rhode Island and Texas have resorted to technology to strengthen and improve their Medicaid programs. Both states have enrolled in the Medical Assistance Intercept System (MAIS).

States submit Medicaid recipient records into the MAIS database and they are then matched daily with personal injury and workers' compensation insurance claims. The system identifies and provides plans with matches and outreach services. States can then issue a lien to the insurer using the data from these matches. MAIS can also file with the insurers on the state's behalf. At the time of settlement, Medical claims are then collected by the state.

Rhode Island started employing MAIS in 2013 to intercept payments for reimbursement to it's Medicaid program. All insurance companies who do business in the state were required to participate in the program.

According to the state, "The MAIS program and Rhode Island's Executive Office of Health and Human Services (EOHHS) hit a new total of $25 Million in liens in April 2019. Achieving an exceptional increase of 25% since lien amounts were last reported [in September], MAIS has exceeded expectations and continues to grow in both scale and scope with a record single lien of $2.6 million."

This year, Texas became the second state to implement the MAIS program. It is using MAIS as a cost control initiative and expects to offset medical assistance costs in the state.

ProTPL 

Outside of government-sponsored programs, there are a number of recovery services; however, none of them effectively reduce improper payments. More than a decade ago, Syrtis Solutions recognized the need for cost avoidance in the Medicaid program and created ProTPL, a real-time, prospective TPL solution for payers of last resort.

Formerly, plans would attempt to maintain data of each beneficiary to coordinate claims correctly. The constant flux of member eligibility, the complexity of coordinating benefits (COB), and the lack of quality data made this extremely challenging. The result was that claims were regularly paid in error and plans had to turn to 'pay and chase' to recover funds. The recovery efforts of these improper payments were also very costly.

The ProTPL program minimizes the need for post-payment recovery with accurate, useful, and real-time ePrescribing eligibility data. The tool seamlessly integrates into Medicaid plans existing processes and immediately decreases improper claims and the need for 'pay and chase.'

Lawmakers, government agencies, and plan administrators are focused on protecting the integrity of the Medicaid program and are turning to technology solutions to do so. Even though recovery efforts are necessary, Medicaid plans recognize that cost avoidance makes more sense. The technology needed to successfully cost avoid is now available from Syrtis Solutions.

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MEDICAID COSTS PUT EMPHASIS ON RECOVERY EFFORTS AND COST AVOIDANCE

In 1965, Title XIX of the Social Security Act established the Medicaid program to provide health care coverage to low-income individuals. Over time it has developed into one of the nation's largest payers for health care, covering one out of five Americans. In FY 2017, the jointly funded program made up 9.5% of federal spending. Because of Medicaid expansion and climbing health care costs, the program has become an even greater component of state budgets. To ensure that the program meets its goals and objectives, legislatures and plan administrators are working to improve program integrity by resolving its vulnerabilities.

COB Challenges

There are presently 56 unique Medicaid programs and each state is responsible for administering its program while remaining compliant to federal guidelines. These broad requirements give states the flexibility to determine covered populations, services, delivery models, and methods of payment. Additionally, states can also test and implement approaches outside of federal standards by obtaining Section 1115 waivers.

While the ability to tailor individual programs helps states meet their individual needs, problems emerge in the Coordination of Benefits (COB) and Third Party Liability (TPL), which is "the legal obligation of third parties to pay part, or all of the expenditures for medical assistance furnished under a Medicaid state plan."

Factors including the complexity of COB and TPL, the continuous flux of the Medicaid population, and uncoordinated eligibility data between federal and state systems leave the Medicaid program vulnerable to improper payments.

Medicaid Expansion Creates Added Complexity

Medicaid expansion has experienced intense debate after the Affordable Care Act revised Medicaid eligibility in 2010. Two years later, the Supreme Court ruled expansion optional and since then 37 states have chosen to expand their eligibility requirements. While more individuals are eligible for coverage, the increased population size has also added to the complexity of the program and emphasized the need for improved program integrity and recovery processes. Existing vulnerabilities, such as improper payments, must be resolved with effective cost avoidance solutions to help ensure the program's sustainability.

$36.2 Billion In Improper Payments

A High-Risk Issue from the Government Accountability Office (GAO) reported, "Medicaid covered about 75 million people in fiscal year 2018, at an estimated cost of $629 billion--$ 393 billion of which was paid by the federal government. CMS has projected that Medicaid spending will grow at an average rate of 5.7 percent per year from fiscal years 2017 through 2026. In fact, Medicaid spending is expected to reach $1 trillion by fiscal year 2026."

The GAO estimated that improper payments represented 9.8 percent ($36.2 billion) of Medicaid spending in 2018.

Medicaid has been on the GAO's high-risk list since 2003 due to the lack of federal oversight, it's size, and the complexity of the program. As health care costs increase and program eligibility expands, it is becoming a significant expenditure for the federal government and state budgets. Plan administrators need to implement cost avoidance technology solutions in order to save their plans money.

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CMS AUDITS MEDICAID IMPROPER PAYMENTS

Recent reporting from the HHS OIG and the Louisiana Auditor General have indicated a high rate of Medicaid improper payments as a result of inaccurately determining Medicaid eligibility. The Senate Finance Committee wrote CMS on March 1st to inform the agency of their concerns over the apparent lack of effort in recovering misspent federal money within the Medicaid program. They emphasized, "that the government needs to do more to uphold Section 1903(u) and safeguard the integrity of the Medicaid program."

The letter declared, "The apparent lack of effort in recouping misspent federal money is problematic. Recent reviews by HHS OIG of beneficiaries made newly eligible by the Patient Protection and Affordable Care Act, also known as Obamacare, found more than seven percent of beneficiaries were potentially ineligible in Kentucky, more than 25 percent were potentially ineligible in California, and more than 30 percent were potentially ineligible in New York. In Louisiana, a state Department of Health audit found an astounding 82 percent of recipients ineligible in a random sample ... Furthermore, if states accidentally enroll an individual as an expansion enrollee instead of a traditional enrollee, states are perversely, and significantly, rewarded for their error, unless the federal government subsequently takes action to recoup those mistakenly paid funds."

As a result, CMS is in the process of carrying out audits on the Medicaid plans of California, New York, Kentucky, and Louisiana. While the agency will not have the power to recoup improper payments detected by the audits, the audits will, "determine whether beneficiary eligibility was adjudicated appropriately for the new adult group and whether services for beneficiaries in the new adult group were assessed the correct Federal Medical Assistance Percentage (FMAP)."

MEDICAID IMPROPER PAYMENTS RECOVERY INITIATIVES

In spite of not having the authority to recover payments made in error, there have been regulatory changes made recently that could allow for some form of recovery. CMS Administrator, Seema Verma, also stated that "CMS does have authority to issue disallowances, and, in certain circumstances, states are required to return overpayments." This authority is part of the Payment Error Rate Measurement program (PERM) that begins in 2022.

Additionally, CMS is also escalating its oversight in relation to eligibility determinations for expansion populations. The agency will seek states to provide, "documentation to clearly articulate how individuals in the Medicaid adult group are accurately determined, categorized, and claimed in state systems to ensure that claims are appropriately applied to the correct eligibility category and ultimately reported at the proper FMAP rate."

Medicaid improper payments are threatening the integrity of the Medicaid program and legislators are concerned. The Senate Committee on Finance reached out to CMS to address the problem. As a result, the agency is conducting a number of audits to ensure that the proper adjudication processes are in place and that states are compliant.

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