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Report (OEI-05-11-00130)

Medicaid Third-Party Liability Savings Increased, But Challenges Remain

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Millions of Medicaid beneficiaries have additional health insurance through third-party sources. If beneficiaries have another source of payment, that source should pay before Medicaid does, up to the extent of its liability. Prior studies from OIG and the Government Accountability Office reported that State Medicaid agencies (States) encountered challenges getting third parties to pay when they are responsible, leading to hundreds of millions of dollars in potential losses each year. To address these challenges, the Deficit Reduction Act of 2005 contained provisions designed to enhance States' ability to identify and recover payments from liable third parties.


We determined trends in Medicaid third-party liability (TPL) savings from 2001 to 2011 by analyzing data that States reported to CMS. We also collected data from States on the amount of money at risk of not being recovered. Finally, we surveyed States regarding factors that (1) helped them save money that third parties should pay and (2) made saving money challenging.


Medicaid TPL savings increased; however, $4 billion remains at risk of not being recovered. States' reported savings from cost avoidance drove the growth in TPL savings, although savings from recoveries also contributed. States reported that improvements to their processes facilitated savings. Despite these improvements, States reported longstanding challenges with third parties when trying to identify insurance coverage and recover payments. In addition, States reported challenges-caused, they say, by laws and regulations-that hinder the recovery of payments.


Since 2001, States have made sizable gains in TPL savings. Improved State processes and congressional action seem to have had some effect. However, a significant amount of money remains at risk of not being recovered. On the basis of the amount of money that is at risk and the longstanding challenges that States continue to face, we recommend that CMS: (1) work with States to address longstanding challenges related to identification of insurance coverage and recovery of payments, (2) address States' challenges with 1-year timely filing limits for Medicare and TRICARE, and (3) work to strengthen enforcement mechanisms designed to deal with uncooperative third parties. CMS concurred with our recommendations.

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