Third-party liability, also known as TPL, is the legal obligation of third parties to pay part or all of the expenditures for medical assistance under a Medicaid state plan. In other words, if a beneficiary has other forms of health insurance, those primary payers are required to pay their legal liability first, and Medicaid covers any remaining liability as the payer of last resort. This policy has been in place since the Employee Retirement Income Security Act amended the Social Security Act in 1974. However, state Medicaid agencies face ongoing challenges in meeting TPL requirements, and it is costing the program billions of dollars every year.

This October, the OIG published an updated report that highlighted the specific challenges states are facing in meeting third-party liability requirements and in ensuring that Medicaid functions as the payer of last resort. The OIG conducted its audit by sending questionnaires to State agency officials to determine how each state collects OHI, identifies TPL, processes claims with TPL, and reports TPL cost avoidance and recoveries. While there has been improvement, the OIG’s auditing efforts indicate that billions of dollars are still at risk. Here is a summary of the report’s findings and recommendations.


According to States, the primary challenges in their efforts to meet TPL requirements are related to:

• difficulties obtaining complete, accurate, and up-to-date coverage information from Medicaid enrollees and providers;

• difficulties obtaining timely and reliable coverage information from third parties;

• difficulties coordinating TPL with out-of-State third parties;

• technical issues related to third-party coverage information received and electronic billing of Medicaid claims with third parties;

• a lack of Federal prompt payment requirements and penalties for third parties that do not cooperate with States’ efforts to meet TPL requirements;

• difficulties with third parties that deny Medicaid claims for procedural reasons;

• difficulties coordinating TPL with TRICARE and;

• difficulties coordinating TPL with Medicare.


The OIG made the following recommendations to CMS to address TPL challenges:

• use the information we obtained from States about the challenges they are still encountering and develop an action plan for helping States more easily identify liable third parties and recover Medicaid payments;   

• work with States, as appropriate, to encourage better cooperation from third parties that routinely resist States’ TPL identification and recovery efforts;   

• for the four States we identified as not having fully complied with the DRA’s TPL provisions: (1) verify whether the States have since come into compliance and (2) pursue corrective actions for States that have not fully complied;  

• verify whether Virginia has refunded the $1.25 million Federal share of the Medicaid TPL collections underreported during two fiscal quarters and, if not, require Virginia to refund any remaining amount owed;  

• provide guidance to States to assist them with developing processes that improve the reporting of Medicaid TPL amounts on the form 64.9A;  

• ensure that States have current instructions on completing the form 64.9A;  

• ensure that States correctly report TPL amounts on the form 64.9A; and  

• remove or disable lines from the form 64.9A that States are supposed to leave blank.


States’ TPL challenges stem primarily from bad-quality data. Medicaid payers are unable to identify primary coverage on pharmacy and medical claims because the majority of data that they have access to is not current, available, complete, or accurate. As a result, plans have no choice but to pay claims in error and then chase reimbursement once other primary coverage is identified. To make matters worse, the actual monies recovered from these improper payments remain around twenty cents on the dollar.

Without quality data, Medicaid will not be able to overcome its TPL challenges, and it will continue to lose billions in improper payments. Syrtis Solutions recognized this, and in 2010, they introduced ProTPL. Their solution was a real-time point-of-sale cost avoidance service for payers of last resort that delivers powerful and accurate eligibility data that plans can act on. ProTPL gives payers of last resort the ability to cost avoid pharmacy and medical claims in addition to the associated costs of recovery. Syrtis Solutions identifies active health coverage that no other vendors can find by checking claims against the nation’s largest and most complete active healthcare coverage information database. Customers implementing ProTPL see an average twenty-five percent increase in OHI discovery. With ProTPL, Medicaid plans can save on claims that are the liability of other primary payers and effectively be the payer of last resort.

In July, Medicaid enrollment increased to 84.5 million people. Due to the size of the program’s population, Medicaid plans need to focus on innovative ways of identifying third-party liability, improving efficiency, and reducing costs. Currently, one of the best ways for Medicaid payers to do that is to adopt technology solutions like ProTPL, which will enable them to identify active third-party payers and meet TPL requirements.