Full Medicaid Recovery Coming to a Claim Near You: October 1st

Conditional Payments, Medicaid, Medicare, Medicare Set-Aside Blog, MSP News on September 25, 2017 | Posted by Jean S. Goldstein, JD

As we have seen, Medicare Advantage Plans, Military/Governmental Healthcare Providers, and Private Insurers are aggressively pursuing liens with a priority right approach to recovery.  We often discuss these entities in the context of being a secondary payer, and the omnipresent concern that these entities will seek reimbursement of payments that have been conditionally made, when a primary payer exists through a non-group health plan [1]. Less discussed are state-based Medicaid programs, because these programs have generally been subject to a number of limitations over the years; that is until October 1, 2017, when full Medicaid recovery will be possible.

What is Medicaid?

Medicaid is a state-based program that pays for medical costs for those with limited resources, and many Medicaid beneficiaries may have additional health care coverage. The existing federal regulations, impart that that the Medicaid program in each state, “… take all reasonable measures to ascertain the legal liability of third parties (including health insurers, self-insured plans, group health plans… service benefit plans, managed care organizations, pharmacy benefit managers, or other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a health care item or service) to pay for care and services available under the plan…” 42 U.S.C. Section 1396a(a)(25).  Essentially, third party liability is the legal obligation of third parties (entities, insurers, or programs) to pay for the medical expenses paid through a Medicaid state program. Medicaid is to be the payer of last resort, which means Medicaid pays last when another insurer or entity has assumed liability.  If Medicaid has made a medical payment, a Medicaid agency can seek recovery of any such payment, just as other secondary payers can.

Interestingly, it was in 2015, when we were first alerted to the fact that many state Medicaid agencies were beginning to utilize resources to resolutely identify third party liability situations.  In fact, many states had comprehensive programs and resources at that time to identify Medicaid third party liability.  Across the country, state Medicaid agencies, just like other payers, have been focusing on facilitating and improving the identification of primary payers for the last several years.  Many states have instituted reporting requirements, through data exchange programs and registries, which provide information to determine third party liability.  These reporting initiatives will surely continue to assist with Medicaid recoveries as data matching continues to expand and improve.

Of significance is the historical limitation of recoveries of state-based Medicaid programs, which in the past had been limited to only the portion of a settlement/judgment allocated for medical expenses; that is until next week. [2]  As of October 1, 2017, state Medicaid programs will have the right to assert a full recovery against all amounts paid to a claimant, meaning the entire settlement– not just the settlement amount set aside for medical expenses. [3] This significant change will allow Medicaid agencies to recover costs in a much more substantial manner than ever before, which is quite similar to the Medicare conditional payment recovery process.

Why Is October 1, 2017 Significant to You and Your Claims?

CMS’ public data indicates that, “[t]oday there are over 10 million Medicare-Medicaid enrollees in the United States.” [4] While historically it may have been far less common for a workers’ compensation claimant to be entitled to both Medicare and Medicaid, it was not completely impossible.  Now, based on the public data, it is clear that due to the changes implemented under ACA, with its increased income threshold amounts, many individuals are in fact dual beneficiaries and collecting both benefits simultaneously.  Therefore, it is possible for both Medicare and Medicaid to assert a full recovery demand from the settlement proceeds of any claim, if either program has made medical payments when there is third party liability.

Moreover, with the expansion of Medicaid data matching and the ability for full recovery, we believe many of our clients will begin to see an influx of Medicaid recovery letters, as are being seen currently with the Medicare conditional payment recovery process.  We also question whether Medicaid data sharing will become more like Section 111 Mandatory Insurer Reporting for Medicare in the near future.  Ultimately, these are state specific determinations and distinctions that will become apparent.

Best Practice Tips

With the Medicaid recovery process evolving, we would recommend the following best practice tips in order to protect all parties:

  1. Determine how the Medicaid system in your jurisdiction works.  Because Medicaid is a state administered program, each state administers the program differently.  If any jurisdictional questions arise, our lien resolution team is well versed and able to assist with any questions regarding potential recoveries.
  2. Do not ignore any correspondence from a Medicaid agency.  All correspondence must be addressed timely so that settlement is not adversely effected.
  3. Review Medicaid agency correspondence carefully. Some jurisdictions require participation in a settlement negotiation, including mediations and arbitrations; pay specific attention to any noted requests.
  4. Once you are alerted to a Medicaid lien, do not settle your claim without obtaining a final lien amount.  Similar to other recoveries, a Medicaid lien amount may change pending the submission of additional medical bills.  It is imperative that the correct lien amount be obtained prior to settlement.

With October 1st just days away, we would expect additional guidance to be issued as Medicaid begins to assert full recovery on claims.  In the meantime, we stand ready to assist you with any questions, concerns or Medicaid liens for which you require assistance.


[1] Non-group health plans (NGHPs) include liability insurers (including self-insured entities), no-fault insurers, and workers’ compensation entities.

[2] In Arkansas Department of Health and Human Services v. Ahlborn, states were given the ability to recover Medicaid payments from the portion of a settlement or award that was allocated for only medical expenses; and not the entire settlement amount. (Ark. HHS v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752, 164 L. Ed. 2d 459, 2006 U.S. LEXIS 3455, 74 U.S.L.W. 4214, 19 Fla. L. Weekly Fed. S 169.)

[3] This change occurred through the Bipartisan Budget Act of 2013.  Specifically, Section 202 (b), which in part states that (b) RECOVERY OF MEDICAID EXPENDITURES FROM BENEFICIARY LIABILITY SETTLEMENTS.— (1) STATE PLAN REQUIREMENTS.—Section 1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended— (A) in subparagraph (B), by striking ‘‘to the extent of such legal liability’’; and (B) in subparagraph (H), by striking ‘‘payment by any other party for such health care items or services’’ and inserting ‘‘any payments by such third party.”  https://www.congress.gov/113/plaws/publ67/PLAW-113publ67.pdf

[4] https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/StateProfiles.html