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Transcript for the audio podcast:
Medicaid Third-Party Liability Savings Increased, But Challenges Remain

From the Office of Inspector General of Department of Health and Human Services

[Roberta Baskin] I'm Roberta Baskin, Director of Media Communications, speaking with Ann Maxwell, the Regional Inspector General in Chicago for our Office of Evaluation and Inspections. Let's talk about your recently released evaluation about Medicaid third-party liability. First, what is third-party liability?

[Ann Maxwell] Third-party liability refers to the fact that other payers - like health insurance plans - are liable for health care claims before Medicaid. In other words, if a Medicaid recipient has some other source of payment for health care, that source is supposed to pay before Medicaid does. And those other payment sources are known as third parties.

If a State knows that a Medicaid recipient has another payment source, it will avoid paying for the claim by denying payment. But, sometimes States don't find out about another payment source, until after they've already paid the provider.

[Roberta Baskin] What happens then?

[Ann Maxwell] Then, the State does what's called 'pay & chase' - where it has to chase the third-party to recover the money it already paid.

[Roberta Baskin] So, tell us what your report found?

[Ann Maxwell] Well, first, we found that between 2001 and 2011, States really made a sizable gain in liability savings. By denying payments for Medicaid recipients who have other payment sources, States' savings increased from $33 billion to $70 billion.

[Roberta Baskin] Huge savings. Saving Medicaid exactly how much?

[Ann Maxwell] This saved Medicaid 13 percent, or $512 billion dollars over ten years. So that's great news.

[Roberta Baskin] So what about recovering money that already went out?

[Ann Maxwell] States also made gains in recoveries. Between 2001 and 2011, recoveries grew from $1 billion dollars to $1.6 billion dollars.

[Roberta Baskin] That is a good news story!

[Ann Maxwell] That part is, definitely. But, we also found that $4 billion dollars remains at risk of not being recovered.

[Roberta Baskin] Why are billions of dollars still left on the table?

[Ann Maxwell] That's a great question. Simply put, States have a hard time identifying people with third-party insurance coverage. They also have to work with uncooperative third parties. Forty-five States reported recovering, an average of only 18 percent of what they billed to third-party health insurance.

[Roberta Baskin] What are some specific challenges that prevent States from recovering this money?

[Ann Maxwell] States have trouble identifying recipients because third parties don't always provide complete information to States. States face challenges recovering payments because some third parties refuse to process or pay claims.

[Roberta Baskin] So isn't there some kind of enforcement when third parties refuse to pay back the states?

[Ann Maxwell] No. There is no enforcement mechanism for uncooperative third parties. States told us, that without a way to enforce penalties, it makes it very difficult to make third parties return the money they owe to the Medicaid program.

[Roberta Baskin] Are these new challenges that the States are facing?

[Ann Maxwell] Actually, no. Both OIG and the Government Accountability Office, or GAO, have done studies with similar findings in the past. Just like this study, those studies found that States had trouble identifying beneficiaries with third parties and had trouble getting third parties to pay when they were responsible.

[Roberta Baskin] Following those reports did anything change?

[Ann Maxwell] Congress stepped in. In the Deficit Reduction Act of 2005, Congress put in provisions to enhance a State's ability to identify and recover payments from liable third parties.

[Roberta Baskin] But your report reveals that problems continue. So what effect did the Deficit Reduction Act have?

[Ann Maxwell] We think it helped in some respects. The growth that we saw in savings and recovering payments suggests that it had some effect.

But, States still face many of the same challenges they've faced for years. For example, the law tried to address problems States had with third parties denying payments for procedural reasons, but States indicated to us that this was still happening.

[Roberta Baskin] So given these long-standing challenges that States are still grappling with, what needs to be done to recover more of the money?

[Ann Maxwell] Given the $4 billion dollars possibly at risk, the OIG calls on the Centers for Medicare and Medicaid Services, or CMS, to strengthen Medicaid third-party liability. We recommend that CMS work with States to address the challenges of working with uncooperative third parties. We also recommend that CMS work to strengthen enforcement mechanisms that States can use against uncooperative third parties. Enforcement mechanisms would allow States, and the Federal Government, to send a very strong message that third parties must comply with the law.

[Roberta Baskin] Thank you, Ann Maxwell, Regional Inspector General for the Office of Evaluation and Inspections, for sharing this important work on challenges with third-party liability in Medicaid.

[Ann Maxwell] Thank you, Roberta.


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