CMS Quietly Proposing Adjustments to Future Medicaid Recovery Processes

CMS, Medicaid, Medicare Set-Aside Blog, News and Events, Work Comp on June 4, 2015
Posted by Erin O'Neill, PA-C, JD

As noted in our previous post entitled “Medicaid Recoveries and Workers’ Compensation” it appears that Medicaid recovery efforts in workers’ compensation claims have begun in certain states. While it was uncommon in the past for worker’s compensation claimants to also be entitled to Medicaid, with the Medicaid expansion provided by the Affordable Care Act, greater numbers of workers will qualify for Medicaid, making this possibility more likely in the future. It appears that CMS may be quietly proposing adjustments to future Medicaid recovery processes that will likely refine these procedures and could improve the process of identifying third party liability situations.

On 06/01/15, the Centers for Medicare and Medicaid Services proposed a rule entitled: Medicaid and Children’s Health Insurance Program (CHIP) Programs; Medicaid Managed Care, CHIP Delivered in Managed Care, Medicaid and CHIP Comprehensive Quality Strategies, and Revisions Related to Third Party Liability. The identified purpose of CMS-2390-P is to modernize the Medicaid managed care regulations to reflect changes in the usage of managed care delivery systems. Section III of the proposed rule (available at the link below), entitled Third Party Liability, outlines proposed changes to the current procedures utilized to identify liable third parties as primary payers before Medicaid.

42 CFR 433.138 established the requirement for State Medicaid agencies to obtain information regarding potential third party liability via data matching with state workers’ compensation files and/or motor vehicle accident reports.  Section 433.138(e) referenced the specific ICD-9 codes series, 800-999 (Injury and Poisoning). This procedure was found to be over burdensome on the State Medicaid agencies and required them to collect data on too many codes. Section 433.138 was amended to allow states to submit waivers to cease editing codes proven to be unproductive in identifying liable third parties. The regulation was then amended to allow states to request adjustments to any of several non-statutory requirements, including the code edit requirement, if the activity was determined not to be cost effective. It was noted that the majority of states had aggressive and comprehensive programs to identify third party liability situations, utilizing federally required data matches with state workers’ compensation programs and state motor vehicle accident files. Additionally, it is now noted that in the twenty years that has passed since the last amendment, states have refined their procedures to identify potential third party liability situations as technology systems continue to improve.

The proposed rule recommends removal of the ICD-9 codes from the regulation and as opposed to just replacing with ICD-10 codes, to instead reference general descriptions of the types of medical diagnoses indicative of trauma that would be anticipated in third party liability situations. It is believed this change will allow states greater flexibility to focus on claims likely to have third party liability and provide states the opportunity to revise their code editing processes in the future, if necessary. Additionally, use of the general descriptions instead of a specific coding system will provide greater longevity since the rule will not need to be amended if a different coding system is adopted in the future.

It is very interesting that it’s noted that the majority of states already have aggressive and comprehensive programs to identify third party liability situations in Medicaid claims. As mentioned above, the use of general descriptions of medical diagnoses, as opposed to ICD-9 codes, will likely refine these procedures even further and could improve the process of identifying third party liability situations. As noted in the above referenced post, in the past  it was assumed that the state Medicaid agencies lacked access to the data and did not possess the manpower necessary to pursue recovery in these situations; however, it appears efforts are being focused to facilitate and improve this process.

Comments regarding this proposed rule are being accepted at