16 Jul Coordination of Benefits and Third Party Liability (COB/TPL) in the Medicaid Program
The intent of the Effective Practices Guide, presented by CMS in collaboration with various state COB/Third Party Liability units is to provide state Medicaid agencies with information on practices that could assist states in improving their identification and successful pursuit of legally liable third party resources. Each practice included in the guide has proven to be effective for the submitting state. State agencies that consider adopting any of these practices should assess whether the practice is transferable to their own state operations.
The Effective Practices Guide was developed in response to a recommendation by the Office of the Inspector General ((OIG), U.S. Department of Health and Human Services, following on a study of Medicaid COB/TPL savings from 2001 to 2011 (“Medicaid Third-Party Liability Savings Increased, but Challenges Remain”, OEI-05-11-00130, issued January 2013). The study determined trends in Medicaid third party liability savings during that period and gathered information from states regarding challenges and issues the d party coverage and recover payments from liable third parties.
The Guide provides an opportunity for peer assistance among the state Medicaid programs through sharing of practices that are in place, and working, in the states in December 2013. The Guide includes effective practices to address some of the challenges and issues identified in the OIG study, and other challenges to maximizing third party savings.
A sample of effective practices follow, listed by state.
- Denials from third parties for procedural reasons
- Denials from third parties with no explanation
- Third parties not responding when State submits bills
- Third parties not abiding by 3-year timely filing rules
- Third-party documentation submitted with reimbursement does not indicate which claims are being reimbursed
- Third parties not accepting States’ right to collect
- Pharmacy benefit managers claim they do not have the authority to reimburse States directly
- Third party concerns about the Health Insurance Portability and Accountability Act of 1996 and releasing insurance coverage information to states
- Confusing or incomplete Explanation of Benefits forms from third parties
- Cooperation from pharmacy benefit managers
WHY DOES THIS ISSUE OCCUR? Insurance carriers do not follow the Deficit Reduction Act or Iowa legislation 249A.37.
SUMMARY OF EFFECTIVE PRACTICE: Some insurance carriers did not effectively adopt and implement the provisions of the Deficit Reduction Act (DRA) of 2005 – indicating that Iowa did not have specific state legislation to support the DRA. In response, Iowa passed specific legislation to support the DRA as it pertains to doing business in Iowa. This legislation is codified in the Code of Iowa at 249A.37. The legislation addresses the following; Service benefit plans, managed care organizations, pharmacy benefits managers, and other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a health care item or service.
The State of Iowa contracts pay and chase activities to an external vendor. This includes post pay and chase billing follow-up; Iowa calls this Local Yield Management. Iowa has dedicated staff devoted primarily to challenging carriers for what appear to be inappropriate denials and to respond to requests for additional information. We find that one-on-one education and follow-up helps the carrier process claims correctly.
In State Fiscal Year 2013 Iowa’s Local Yield Management staff was able to recover $8,905,715. Iowa will be tracking the yield management separately from pay and chase recovery work on a going basis to monitor progress in the reduction of improper Medicaid claim denials.
ISSUE: Pharmacy Benefit Managers claim they do not have the authority to reimburse states directly.
WHY DOES THIS ISSUE OCCUR? The employer/insurance company has not given Permission to the PBM to pay claims directly to Medicaid.
SUMMARY OF EFFECTIVE PRACTICE: Minnesota sends a letter to the employer or insurance company asking them to contact the PBM and give them whatever authority they need in order to process the claims. The letter advises the employer/insurance company that they are ultimately responsible for payment of the covered services.
ISSUE: Pharmacy providers who submit erroneous denial/reject reason
WHY DOES THIS ISSUE OCCUR? Pharmacies submit claims with erroneous third party liability information. In some instances the PBMs deny the claims for 1) no prior authorization, 2) brand name drug dispensed and should have used a generic, 3) drug should have been dispensed by a specialty pharmacy. In these cases, the pharmacy submits a claim with a reason code stating the drug is not covered. In Minnesota, they pay and chase all pharmacy claims for clients who have reported insurance, but do not show a payment from the . It has been their experience that the PBMs deny the claims 1) without an explanation, 2) as duplicates, or 3) they don’t respond at all.
SUMMARY OF EFFECTIVE PRACTICE: Minnesota recently started auditing the claims before they submit them to the carriers. They review claims with larger dollar amounts and call the PBM for additional information. This seems to work better than sending them a claim. If the PBM gives information that: 1) a prior authorization is needed, 2) a generic should have been dispensed, or 3) a specialty Pharmacy should have been used, Minnesota takes the money back from the provider as being erroneously billed. The first week Minnesota did this, They recovered in excess of $60,000.00.
ISSUE: Denials from third parties for procedural reasons
WHY DOES THIS ISSUE OCCUR? Some insurance carriers are not familiar with the Deficit Reduction Act of 2005 or Ohio legislation.
SUMMARY OF PROMISING PRACTICE: Even after the implementation of the Deficit Reduction Act language in Ohio law, some insurance carriers would deny Medicaid reclamation claims for not obtaining prior authorization. To address this issue, Ohio passed specific legislation in 2009 to specifically outline a claim could not be denied for lack of obtaining prior authorization. This legislation applies to fee for service as well as Medicare Managed Care organizations. Ohio also increased the timeframe to six years for its right of recovery.
ISSUE: Cooperation from pharmacy benefit managers and other entities
WHY DOES THIS ISSUE OCCUR? Some insurance carriers/pharmacy benefit managers/third party administrators operating in the State of Texas did not want to perform data matches with the State Medicaid Agency in a timely fashion.
SUMMARY OF EFFECTIVE PRACTICE: Texas statute in place prior to 2007 only required these entities to perform data matches once every six (6) months. However, in 2007, a new statute was implemented that required entities doing business in the State of Texas to enter into an agreement with the Health and Human Services Commission (HHSC). This agreement and the associated processes are known as the Billing Coordination System (BCS).
One of the provisions within the BCS statute requires that any entity that holds a permit, license, or certificate of authority issued by a regulatory agency of the state must allow HHSC access to databases to allow for the identification of other payers. If the other entity does not allow access, then the entity is subject to an administrative penalty or other sanction as provided by the law applicable to the permit, license, or certificate of authority for a violation by the entity of a rule adopted under this section.
The initial BCS legislation was only applicable to Fee for Service (FFS) and Primary Care Case Management (PCCM) services. In the following two legislative sessions (2009 & 2011), additional provisions were added to the BCS statute and the requirement has been expanded to include all Medicaid and non-Medicaid programs overseen by HHSC. Texas is currently working on revising the carrier agreements to include not only medical insurance carriers, but pharmacy benefit managers (PBMs), long term care (LTC) carriers, and third party administrators (TPAs).
The BCS Carrier Agreements have resulted in HHSC’s ability to match more frequently (bi-weekly/monthly/quarterly) with carriers, which allows for more timely third party liability identification for purposes of cost avoidance and cost recovery. In addition, with the expansion of managed care in Texas, these agreements will allow HHSC the ability to take on sole responsibility for third party liability identification and share it with both our FFS Fiscal Agent and with the MCO’s allowing us the ability to set performance standards and service level agreements for those vendors in order for HHSC to ensure that Texas is in compliance with federal and state third party liability equirements