H.R. 938 Misses the Point: The Need to Make Medicaid More Efficient

07 Jun H.R. 938 Misses the Point: The Need to Make Medicaid More Efficient

H.R. 938, the Medicaid Third Party Liability Act, was recently introduced by Rep. Michael Burgess (R-Texas) to help Medicaid save money. As legislators return to Washington this week, health care remains at the top of their agenda. The main issue amongst Republicans is how to handle the Medicaid debate, especially in states that expanded the program,or are choosing to expand under the ACA . But they will have a difficult time funding the expansions without continued federal support. The outcome of the decision is sure to affect patients, health care workers and the overall economy.

The Trump administration has left all sectors involved in health care with uncertainty. The pledge to repeal and replace the Affordable Care Act with the AHCA passed by a razor thin margin last month in the House of Representatives. Waivers to alter Medicaid are being submitted to HHS for review. And the publication of the president’s budget creates ambiguity with regard to the amount of federal funding states can count on.

Trump’s budget, “A New Foundation for American Greatness,” eviscerates spending in almost every department except defense. While it has little to no chance of passage, health care professionals warn that it shouldn’t be ignored because it shows clear intent. “It’s hard to imagine that it’ll be enacted fully, but at a minimum, it reflects the priorities of the administration,” says Elizabeth Burak, senior program director at Georgetown University’s Center for Children and Families.

The administration’s proposed budget would slash Medicaid spending by $800 billion over a decade. This is above and beyond proposed cuts in the American Health Care Act to replace the ACA, which the President’s budget assumes will become law. If both the President’s proposed budget and the AHCA were to pass, states will experience well over a $1 trillion reduction in Medicaid funding.

Trump’s budget director, Mick Mulvaney, emphatically argues that the reductions in funding, alongside the shift to per capita caps and block grants, would give states more flexibility in the administration of their respective Medicaid programs. However, most health care experts believe that such deep cuts would only give states flexibility in disenrollment plans for a large swath of Medicaid beneficiaries.

So now, more than ever, Medicaid plans should be focusing their efforts on finding ways to further efficiency and cost savings ahead of potential funding cuts. Finding ways to save taxpayer money is obviously a good practice regardless of the political headwinds, but now more than ever; Medicaid administrators cannot rest on their laurels and assume the status quo of federal funding will continue. They need to start getting aggressive in cost containment. Recently, House Bill H.R. 938 was presented to do just that.

H.R. 938, known as The Medicaid Third Party Liability Act, attempts to remove loopholes that forces Medicaid to pay for claims that are the liability of primary payers. As much as 13 percent of Medicaid members across the nation hold additional insurance other than Medicaid, which is called Third Party Liability (TPL). 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. In these instances, Medicaid pays last, and if a Medicaid member holds other insurance coverage, that insurer pays first and then Medicaid pays any remaining costs.

H.R. 938 was drafted to increase savings and promote efficiency by eliminating loopholes that third parties have been capitalizing on. The bill prevents payers that are liable for costs from holding back reimbursements to Medicaid. The main provisions in H.R. 938 that help Medicaid avoid the costs of improper claims payments are:

  1. H.R. 938 would thwart attempts of liable commercial payers to deny reimbursement of claims due to a lack of prior authorization.
  1. H.R. 938 would afford Medicaid Managed Care Organizations (MCOs) the same rights as state-run Fee For Service plans to be the payer of last resort.
  1. H.R. 938 would replicate the same prompt payment standards regularly enforced in the commercial marketplace, but in this case, the recovery of improper claims payments made by Medicaid that are actually the liability of a primary insurer.

While the provisions of The Medicaid Third Party Liability Act are solid steps in the right direction, they are in a sense addressing the symptoms of improper claims payments, instead of the disease of “Pay & Chase“. What we need is more pressure or incentive to compel Medicaid plans to get better at identifying TPL before improperly paying for claims. The Social Security Act, signed into law by President Franklin Roosevelt in 1934, stipulates in the statute § 1902(a)(25) of the law “…that the State or local agency administering such plan will take all reasonable measures to ascertain the legal liability of third parties…to pay for care and services” delivered to Medicaid recipients.

Passage of the Medicaid Third Party Liability Act (H.R. 938) will help recover money that was spent improperly, but until we shift our focus from Pay & Chase to prospectively avoiding the costs of improper payments, Medicaid will still see massive amounts of waste.